sigma 4/2021 - More risk: the changing nature of P&C insurance opportunities to 2040

Property & Casualty (P&C) insurance is set to undergo fundamental transformation over the next 20 years, with sector business becoming both riskier and more complex.

The share of motor, for many years the low-risk, high volume mainstay of P&C portfolios, in global sector premiums will decline. The fastest growing lines of business will be property and liability, both of which inherently carry more risk than motor. This sigma is an industry-first quantification of market developments over the next 20 years. Amid fundamental shifts in the composition of P&C business, the report also signals strong growth opportunities, with total sector premiums forecast to more than double to
USD 4.3 trillion by 2040. Emerging markets will lead global sector growth, with their share of premiums rising to 33% by 2040.

With a riskier and more complex business landscape, re/insurers can play an increasingly important role in facilitating the sustainable long-term growth. Importantly, more collective action with the public sector is needed.
Jerome Jean Haegeli, Group Chief Economist, Swiss Re

Economic development will be the main factor driving growth across all lines of business. The declining share of motor in total P&C sector premiums will be driven by advances in technology. As safety technology further permeates car fleets, accident frequency, claims costs and also premiums will decline.

Property will be the fastest growing segment, with global premiums forecast to increase by 5.3% annually to 2040. Climate risks will be a main driver of the growth in property. We estimate that climate risks will grow the global property risk pool by 33‒41%, generating USD 149‒183 billion of new premiums by 2040.

Global liability premiums are set to triple to by 2040 to USD 583 billion, accounting for 13% of the P&C total. Growing by 4.7% annually, we see exposure opportunities emanating from artificial intelligence, social inflation, climate change litigation and collective redress in Europe.

With P&C business becoming more risky and complex, capital requirements and need for reinsurance will rise. Collective public/private sector action is needed to promote conditions for sustainable growth. Investment in green infrastructure will help keep property risks insurable in the face of climate change. And with fewer restrictions on allocating capital across jurisdictions, re/insurers can support the world economy will more risk transfer capacity.

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The changing nature of P&C insurance opportunities to 2040

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In 5 charts: more risk and opportunities in P&C insurance

We forecast that Property & Casualty insurance premiums will more than double by 2040. Motor will remain the largest line of business. Growth will come from property and liability, and emerging markets.

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