Global insurance review 2016 and outlook 2017/18

The latest publication from Swiss Re Economic Research & Consulting is our annual review of developments in the world economy and re/insurance markets in 2016, and a first take on the outlook for the coming two years. The key messages of the report are:

• The global economy will grow moderately over 2017 and 2018, with US real GDP rising slightly faster than 2%, the Euro area by about 1.5%, the UK by 1.0-1.5%, and Japan by less than 1%.
• China will grow by about 6.5%, and most emerging markets by 2-4%, with Asia performing well.
• Key risks to the global outlook are a potential hard landing in China, US Federal Reserve tightening on higher inflation, and ongoing political issues in Europe (eg, Brexit, Ukraine).
• The election of Donald Trump as president-elect in the US raises many uncertainties, but the impact on the US economy will be slow moving and will likely be felt in 2018-2019 at the earliest.
• Global primary non-life premium growth will be modest, and improve by 2018. The emerging markets will be the main driver, with premiums there growing by 5.7% in 2017 and 6.7% in 2018.
• The pricing environment in non-life remains challenging. Pricing in commercial lines continues to deteriorate, but at a slower pace. Profits remain dependent on low cat losses and reserve releases.
• Life premiums will grow at a faster pace than non-life, sustained by the emerging markets. Global premiums are forecast to grow by 5.4%, 4.8% and 4.2% in 2016, 2017 and 2018, respectively.
• The return-on-equity for life insurers has declined from 13% in early 2015 to 10% recently due to still-weak investment returns and ongoing pricing pressures.
• Premium growth in the emerging markets is expected to be robust as commodity prices improve and demand for insurance continues to increase, particularly in Emerging Asia.