sigma 3 / 2014 – World insurance 2013: steering towards recovery

This annual edition of sigma reviews growth developments in life and non-life insurance in 2013.

Profitability in the insurance sector improved in 2013, with life insurers benefiting from stronger equity markets and non-life insurers from rising insurance rates. However, investment returns, an important component of insurers' earnings, have remained low for many years now. This is because of the low interest rate environment that has prevailed since the 2008 financial crisis.

On the road to recovery

In 2013, interest rates started to rise, particularly in the US and UK, and are expected to trend up through to 2017 as global economic recovery accelerates. Rising interest rates will benefit insurers, but only in a few years' time. In fact, the average yield on the bond portfolio of a typical life insurer will continue to fall for two to three years because only around 10% of the portfolio is rolled over each year, and the bonds issued 10 years ago have a higher coupon than those issued today.

Also the market value of the portfolio, which had been inflated by low interest rates, will continue to fall as rates rise.

Direct premiums written in the global insurance industry grew by 1.4% in 2013 to USD 4,641 billion, down from 2.5% growth in 2012. The slowdown was largely a reflection of still-fragile economic growth rates in the advanced markets.  While Western Europe returned to slow economic growth of 0.3% from -0.2% in 2012, in the US, gross domestic product growth slowed to 1.9% from 2.8%. With respect to insurance premiums in the advanced markets, growth stalled at 0.3% in 2013. Emerging market premiums, on the other hand, were up 7.4% in 2013, slightly stronger than in 2012 and in spite of slower GDP growth.

It's about the economy

These aggregate 2013 outcomes mirror longer-term trends. The emerging markets have held up but premium growth in advanced markets has been slowing since 2000. While there has been divergence on a sector and country level, the absence of sustained recovery in the advanced economies has taken a toll on the insurance sector over the past five years.

The impact of world economic developments on the insurance industry is an "evergreen" theme for sigma, and this edition continues the tradition with a forward-looking view for the sector in the context of expected macro developments. Economic growth in the advanced markets is expected to accelerate in 2014, as increased global demand boosts trade and many countries ease fiscal policy. Emerging market economies will experience moderate-to-weak growth as global monetary policy is tightened this year and next.

To find out more, download World Insurance in 2013: steering towards recovery. You can also explore 34 years of insurance market data with the sigma explorer.

Published 24 June 2014

2014 sigma event: containing the...

Average insurance losses from natural and man-made catastrophes were lower in 2013 than in previous years. But floods and storms in Europe and Asia showed us the heavy toll that disasters can take on...

Read the whole story

Term life insurance in Germany...

A unique Swiss Re study – in partnership with the University of St Gallen – analyses why German consumers choose one term life insurance product over another. The findings reveal useful insights for insurers...

Read the whole story