In 5 charts: world insurance outlook post-COVID-19
5 charts that show the economic recovery and growth momentum for insurance.
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The world economy is recovering strongly from the COVID-19 crisis. The rapid distribution of vaccines and unprecedented fiscal stimulus are driving a bigger bounce-back in 2021 than we forecast last year.
Swiss Re Institute's latest sigma publication forecasts that insurance demand will benefit from this growth momentum, but inflation is a concern. As governments reopen their economies, optimal policy responses should address long-term risks to promote sustainable recovery.
These 5 graphs summarise our world insurance outlook:
1. Economies are recovering and the growth outlook is bright
The post-pandemic economic recovery is fuelling historically high global growth, but it will be far from equally distributed. After contracting 3.7% in 2020, we forecast the global economy to grow 5.8% in 2021, well above the 3.0% average of the preceding decade. In emerging markets, we expect real gross domestic product (GDP) growth of 6.6% in 2021, higher than the 4.8% average of 2010-2019. China is charging ahead with 8.3% growth after quickly returning to normal economic activity last year. However, emerging and developing markets harder-hit by the pandemic and without extensive vaccination or fiscal stimulus will see slower recoveries, such as Latin America & the Caribbean (5.6%), Emerging Europe & Central Asia (4.1%) and the Middle East & Africa (3.7%).
2. Insurance markets will rebound faster from the pandemic than the global financial crisis
The insurance industry saw a milder dip in premiums during the COVID-19 crisis than during the global financial crisis (GFC) of 2008-09. We expect total global direct premiums written in 2021 to be 10% higher than their pre-crisis 2019 levels. This is a faster rebound at this point than in the GFC recovery, when premiums had barely exceeded their pre-crisis level.
We forecast that global insurance demand will grow by an above-trend 3.3% in 2021 and 3.9% in 2022, which is a much faster rebound than from prior recessions. The rapid global economic recovery, the strongest rate hardening for 20 years in non-life insurance commercial lines and increasing risk awareness will fuel rising demand for risk protection insurance. The life savings business should benefit from stronger financial markets and a steady recovery in consumer incomes.
4. Rate hardening is the key growth driver of non-life insurance
The strongest rate hardening for two decades in commercial lines continues to be the principal driver of non-life insurance premium growth. The strongest gains were in financial and professional liability lines (+39% on average in 2020) in Australia, the UK, Latin America and the US. Property (+19%) was strong in all regions, and casualty (+6%) lagged in comparison. We expect rate hardening to continue this year and next, though price rises should moderate.
5. Rankings: consolidation and the growing role of emerging markets
In the top 20 ranking by global premium volume, the US, China and Japan were again the world's three largest insurance markets in 2020, together accounting for almost 58% of the global market, higher than in 2019 when it was 56%. The market share of the top 20 countries also rose slightly to 90.7% in 2020 from 90.5% in 2019. China continues to take a growing share, reaching 10.5% of the global insurance market last year. The rapidly growing Asia region is becoming increasingly dominant, with six markets in our top 20 ranking and a 25% market share in 2020.
We expect emerging markets to continue to outpace advanced markets and Asia to outperform other regions, as reflected in the source of global premium growth that's shifting with the economic power from west to east.