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.