APAC’s insurance premiums to rise 2.3% in the next two years: Swiss Re

The region’s insurance premium growth is slightly higher than the world estimate of 2.2%.

Asia Pacific’s (APAC) insurance premiums are forecasted to climb 2.3% in 2024 and 2025, higher than the global average of 2.2%, the Swiss Re Institute reported.

In its sigma report titled “Risks on the rise as headwinds blow stronger: Economic and insurance market outlook 2024-25”, the region is estimated to inch up 0.7% in its premiums for 2023

This, however, is smaller compared to the world's estimated growth of 1.5%.

In the property and casualty insurance sector, a significant repricing of insurance risk in 2023 is expected to lead to 3.4% global premium growth, forecasted to soften to 2.6% in 2024 and 2025. 

Improved profitability is anticipated, with around 10% return on equity (ROE) in both 2024 and 2025, driven by higher investment returns and better underwriting results.

The global life insurance industry is expected to benefit from higher interest rates, with strong growth in savings products anticipated in the next two years. 

Premium growth is on a recovery path, with 1.5% total real-term global growth in premiums in 2023. 

The Swiss Re Institute forecasts an increase in savings premiums from $2.3t in 2022 to $4.0t in 2033, driven by a growing global middle class and increased reliance on insurers for retirement planning. Emerging markets contribute significantly to this growth.

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World economy’s standing

In 2023, the global economy is expected to slow to 2.2% real GDP growth after a resilient year fueled by strong US economic growth. 

The US continues to grow, Europe stagnates, and China faces domestic growth challenges. The Middle East conflict adds risks to the macroeconomic outlook. 

The global insurance industry's strengthened financial position is seen as a welcome reinforcement against elevated macroeconomic and geopolitical risks.

Jérôme Jean Haegeli, Swiss Re's Group Chief Economist, notes fading economic tailwinds and geopolitical uncertainties, emphasising the insurance industry's crucial role in risk transfer. 

Despite expected profitability improvements, the industry may not reach its cost of capital in 2024 or 2025 due to the negative impact of economic inflation on claims costs.

Labour market strength, particularly in the US and Euro area, has supported resilience in 2023, with low unemployment rates. 

However, the sigma report warns that this is not a sign of re-acceleration but a result of the uneven lags of monetary policy. 

Europe faces a higher risk of recession than the US, with the recent conflict in the Middle East adding to global economic risks.