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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The mix of Property & Casualty insurance will fundamentally change over the next 20 years. While motor will remain dominant, its share of total sector premiums will be smaller. Meanwhile, the property and liability segments will increase, making the P&C market mix riskier and more complex. This shift will more than double the premiums, which we forecast will rise to USD 4.3 trillion by 2040.
New premiums: nearly half from emerging markets
By 2040, we expect USD 2.5 trillion in new global P&C premiums, 43% of which will originate from emerging markets, with China the source of 20% of the new additional premiums. We forecast that the share of global P&C premiums in emerging markets, including China, will rise from 20% in 2020 to 33% in 2040. But most new global P&C premiums, USD 1.4 trillion or 57%, will come from advanced markets.
Economic development will remain the main driver of premium growth across all lines of business. Climate change risks will boost premiums in property, mostly in advanced markets. In the emerging markets, urbanisation will be a bigger factor in raising property premiums. For motor, we expect safe driving technologies and sustainability promotions to dent premium growth. Economic development in niche areas, such as artificial intelligence, will expand the scope of liability insurance.
Motor: technology a driver for change
Motor remains the largest line of P&C business, with premiums doubling to up to USD 1.4 trillion by 2040. In emerging economies, rising car ownership will increase motor's stake from today's 26% to 46% in two decades. In the total risk pool, however, motor will shrink from 42% to 32%.
Safer cars and growth in shared mobility and public transport – in promotion of sustainability goals – will curb premiums, particularly in advanced markets. This will shift premium growth to commercial motor, which we forecast will increase from 23% in 2020 to 27% in 2040. It will take longer for claims-reducing safety features, such as Advanced Driver Assistance Systems (ADAS), and at a later stage, the autonomous car, to spread in emerging markets, where people tend to drive their cars for more years.
New safety technologies will make motor more complex. While their aim is to reduce accidents – and claims – driver behaviour may dampen this promise. Data generated from modern cars will become increasingly important in risk selection and pricing. Advanced technologies in cars will also expose insurers to new liabilities, particularly product liability and cyber risks.
Property: climate change raising risk
Climate risk could worsen weather-related insured catastrophe losses, such as floods and wildfires. For China, the UK, France and Germany, the increase could be as much as 90-120%. Property premiums will reflect this augmented risk from climate change. We expect climate risks to raise global property premiums by 33-41% between 2020 and 2040.
Urbanisation will also drive property premium growth, primarily in emerging markets. The urban population in emerging markets is forecast to increase from 54% in 2020 to 63% in 2040, creating an additional 1.5 billion urbanites. Urbanisation will contribute about 10% of additional property premiums in the emerging markets by 2040. Globally, the contribution will be an estimated 3%.
Liability: demand bigger than economic growth
Technological, social and legal changes will drive demand for liability insurance, which will outpace economic growth. Areas fueling this demand include climate change litigation, cyber risks, the liability of emerging technologies such as artificial intelligence, autonomous cars, hydrofracking and social inflation, especially in the US.
We forecast that liability premiums will increase nearly threefold to USD 583 billion by 2040, representing 13% of the total P&C market. In emerging markets, liability premiums will grow almost twice as fast as in advanced markets. By 2040, we expect emerging markets will make up 18% of the global liability market, up from 10% in 2020.