Sigma 4/2022 - Global insurance premium volumes to reach new high in 2022
The global economy is slowing sharply and inflation is at multi-decades highs: we anticipate what we call "inflationary recessions" in many major economies over the next 12-18 months. Central banks are hiking interest rates, targeting price stability over economic growth. In our view, this is a notable positive to the current challenging conditions, on two fronts. It will help ward off 1970s-style stagflation. It also signals the end of the era of financial repression. For insurers, rising interest rates are a silver lining with investment returns set to improve.
We expect high inflation to remain for longer, and forecast higher rates of inflation for the 2020s decade than in the previous 10 years. In the case of China, we believe structural factors such as increased productivity and rising digitalisation, among others, will lead to lower trend inflation. For insurers, the main inflation impact will show in rising claims costs, more in non-life than life insurance in which policy benefits are defined at inception. Motor and liability lines of business will likely be most immediately impacted. Accident, and motor and general liability will also be impacted, with inflation feeding into bodily injury claims.
"Insurance remains a growing industry – and reaching the USD 7 trillion mark for global premiums shows is a major milestone. However, these are not easy times and the insurers will need to keep a close eye on inflation and economic growth." Jerome Jean Haegeli, Group Chief Economist, Swiss Re