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Rising interest rates are not enough to compensate for claims inflation: Swiss Re



Non-life inflation is the main exposure as continued inflation and rising interest rates provide an overall headwind for the property / non-life insurance sector, according to a report on Thursday from Swiss Reinsurance Co. Ltd.

Despite rising interest rates that could potentially provide insurers and reinsurers with increased investment income, “we believe that any gains in return on investment from inflation-induced higher interest rates will not be enough to offset higher claims, and that the overall effect on non-life insurance will be negative.” , in Swiss Re.

The reinsurer noted that claims on car and property insurance are likely to be most affected in the short term due to “particularly high costs for construction and car parts.”

; Rising labor costs are further contributing to injury inflation, which is not expected to decline significantly soon due to further problems with the automotive supply chain, which should then be resolved after the “medium term”, said Swiss Re.

Furthermore, although rising interest rates are a positive outlook for the industry as a whole and are likely to benefit investment performance, “volatile financial markets and rising bond spreads are expected to create accounting losses by 2022,” said Swiss Re.

Demand for insurance products can also be affected as “rising inflation and slowing economies … lower demand for both life and non-life insurance this year,” said Swiss Re.

In the conflict between Ukraine and Russia, the direct impact of losses triggered by the conflict is expected to be “limited and manageable”, said Swiss Re, with potentially “significant” claims on niche markets such as air wars, trade credits, political risk. or naval warfare, including “concerns about hundreds of aircraft still in Russia leased from international companies,” Swiss Re said.


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