Insurer’s investment returns lift amidst strong equity market

Investment performance rebounded in 2023 after a weak 2022.

In 2024, investors anticipated rate cuts in the insurance industry amidst high inflation and interest rate environment in recent years.

Rising claims costs and a tightening reinsurance market led to higher premiums in non-life insurance, particularly in motor, health, and property segments, according to OECD’s 2024 edition of the Global Insurance Market Trends report. 

Premiums written grew by 12.4% in nominal terms and 6.2% in real terms in 2023, double the real growth rate of 2022. Most jurisdictions reported positive underwriting performance.  

Higher interest rates had mixed effects on the life insurance sector. 

Demand for annuity and guaranteed life investment products increased in several jurisdictions, whilst some policyholders surrendered their policies in favour of alternative investments or home purchases. 

Mortgage rate increases also indirectly impacted life insurance sales in markets where credit institutions require coverage. Gross written premiums in the life sector grew in nominal terms in most reporting jurisdictions.  

Investment performance rebounded in 2023 after a weak 2022, with insurers reporting positive real returns in about two-thirds of jurisdictions. 

Falling government bond yields and strong equity market performance contributed to gains. 

Improved underwriting results and investment returns boosted overall insurer profitability, reversing prior losses in many jurisdictions. 

The implementation of new accounting standards, particularly IFRS 17 in Europe, influenced insurers' reported liabilities and shareholder equity.

Insurance penetration, measured as premiums written as a percentage of GDP, remained higher in wealthier economies, exceeding 10% in France, the United Kingdom, and the United States.

The report examines the industry's overall performance in 2023, including sector penetration, premium and claims trends, investment returns, and profitability. 

In contrast, many Latin American and some European countries recorded lower penetration levels. 

Non-life insurance remained the dominant sector globally, primarily due to mandatory motor vehicle coverage, whilst life insurance saw stronger demand in high-income jurisdictions.