Savings products to drive global premiyums to $4t by 2034

Swiss Re Insitute says this is all thanks to escalating interest rates.

The world’s life insurance industry’s profitability is seen to surge, propelled by increasing interest rates, Swiss Re Institute forecasts.

Swiss Re Institute's new sigma study, "Life insurance in the higher interest rate era: asset-savvy is the new asset-light," predicts an additional $1.5t in global insurance savings premiums over the next decade. This shift is expected as consumers seek life-savings products that offer higher retirement incomes, driving total global premiums to $4t by 2034. 

Savings products are now more attractive to consumers after a decade of low demand and returns. Swiss Re Institute anticipates a new high for US fixed annuity sales this year, following record sales in 2022 and 2023.

 "Higher interest rates are a game changer, providing life insurance and pension products a tailwind to much better tackle the retirement savings challenges of ageing demographics. Savings products are attractive again as a direct consequence of normalising interest rates. Higher investment yields also benefit long-duration protection products,” Jérôme Jean Haegeli, Swiss Re's Group Chief Economist, stated in a media release.

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By comparison, global life insurance premiums grew by only $300b from 2010 to 2019.

"Higher interest rates give consumers more attractive options to secure their retirement income and we are seeing very positive market growth for life insurance to meet this need. Higher interest rates also allow insurers to meet their cost of capital. Reinsurers can furthermore support life insurers by freeing up capital, boosting underwriting capacity and focusing on product innovation for capital-light growth." Paul Murray, Swiss Re's CEO of Life & Health Reinsurance, also said.

Significantly higher government bond yields are improving life insurers' investment returns and margins for fixed annuities. Swiss Re Institute forecasts that between 2022 and 2027, the operating result for insurers in the largest eight life markets—including the US, UK, Germany, and Japan—will rise by more than 60% as investment income increases by 40%. 

This growth in life insurance products is crucial for closing the retirement savings gap, which was estimated at $106t in 2022 for six advanced economies plus China and India.

Advanced markets are expected to lead growth, generating about 61% ($900b) of additional premiums over the next decade, while emerging markets will contribute 39% ($578b). 

China alone is projected to generate 17% of the overall global additional premiums, adding $256b between 2025 and 2034.