Global P / C premiums set to double by 2040, but engine growth will slow: Swiss Re

According to Swiss Re’s latest sigma study, global non-life insurance premiums are expected to more than double to reach US $ 4.3 trillion in 2040, from US $ 1.8 trillion in 2020 - growth driven by economic development, urbanization and climate change.

The study found that substantial growth is expected over the next 20 years for the asset and liability lines. However, the engine’s share of P / C premiums is expected to drop by around 25%, as automation makes cars safer and lowers claims and premiums, explained Jerome Haegeli, chief economist at Swiss Re Group. during a press briefing to discuss the report.

Indeed, Haegeli said the technology is likely to cause auto premiums to drop nearly $ 600 billion by 2040.

“[A]As safety technology further permeates car fleets, the frequency of accidents and the cost of claims per vehicle will decrease and premium growth will slow, ”which will have a dampening effect on premium growth, the report, titled“ More of risk: the changing nature of property and casualty insurance opportunities up to 2040.

Property insurance is expected to grow 5.3% annually, with global insurance premiums reaching US $ 1.3 trillion in 2040, from US $ 450 billion in 2020, Swiss Re said, noting that economic development will remain the main driver of the rise in real estate premiums, contributing 75%. or up to US $ 616 billion in new premiums.

“Climate-related risks are expected to lead to a 22% increase in global real estate premiums, or up to US $ 183 billion, over the next 20 years, as weather-related disasters are likely to become both more intense and more frequent, ”the report continues.

During his presentation, Haegeli delved into the drivers of P / C growth: economic development and climate change / urbanization.

Economic development is the most important driver of P / C market growth across all industries, he said. “But to put that figure, economic development will add up, plus $ 2.9 trillion in new premiums by 2040.”

On the other hand, climate risk will add around $ 183 billion in new premiums, while urbanization, which is more important for emerging markets, will add around $ 24 billion in new premiums by 2040, Haegeli said. .

The share of real estate premiums will increase to around 29% of P / C premiums in 2040, from 25% in 2020, while civil liability will rise to 13% in 2040 from 12% in 2020, the report continues.

Liability growth

Faced with the expected growth in the responsibility side of the business, Swiss Re has forecast that premiums will increase by 4.7% per year on average to reach 583 billion US dollars until 2040, compared to 214 billion US dollars in 2020. “We see potential for long-term growth in liability insurance for the effects of climate change, artificial intelligence and social / legal changes. In the short to medium term, social inflation will increase the frequency of major verdicts / settlements, especially in the United States, ”the sigma report said.

As the more volatile asset and liability segments gain in importance, the share of auto insurance - traditionally a low-risk, high-volume primary segment of P / C - will decline due to the safety improvements through automation and smart technology and lower claims associated with it, he continued.

“While the share of the property and casualty risk portfolio should decrease to 32% of the sector’s premiums by 2040, against 42% in 2020, the automobile sector will remain the most important sector of activity, with premiums which should almost double to reach $ 1,400 billion by 2040 against $ 766 billion in 2020, ”the report confirmed.

“With the shift from the global low risk auto insurance portfolio to higher risk lines, the property and casualty insurance business will become more volatile,” said Gianfranco Lot, head of global reinsurance at Swiss Re, in a statement. press release accompanying the report.

“At the same time, risk modeling will become more complex, leading to higher capital requirements and increased demand for reinsurance. In this fundamentally different risk environment, reinsurers will play a critical role in maintaining insurable risks, ”Lot added.

As the title of the sigma report suggests, Haegeli noted, there will be more risk ahead with the changing nature of P&C insurance, “but with more risk there will also be more opportunity.”

The subjects
Property & Casualty Price Trends Swiss Re Trends