Apac insurance premiums set to rise 2.2% in 2023 and 2024: Swiss Re

INSURANCE premiums in the Asia-Pacific (Apac) region are set to increase in 2023 and 2024 as interest rates and inflation rise, reversing contractions in 2022, according to reinsurer Swiss Re.

In an outlook report, Swiss Re projected annual premium growth of 2.2 per cent for the region, slightly above its global estimate of 2.1 per cent.

Slowing growth and rising inflation has led to global premiums contracting 0.2 per cent in real terms in 2022.

Apac was the worst-hit market flagged in the report, with premiums shrinking 3.9 per cent. Life insurance premiums fared particularly poorly, with an estimated decline of 6 per cent in 2022, led by South Korea, Taiwan, Hong Kong, and Australia. Swiss Re said that life insurance real premiums in Apac are expected to reverse this decline and grow 2 per cent in the next two years. This will also reverse the five-year average decline of 1.7 per cent. Globally, Swiss Re expects premiums to grow 1.7 per cent in 2023 and 2024.

Shrinking consumer demand for individual savings products in advanced markets was attributed to inflation. Conversely, a growing middle class and a pool of younger, more digitally-savvy consumers have driven up demand for life insurance in emerging markets, Swiss Re noted.

Meanwhile, it estimates that non-life real premiums in Apac will recover to 2.3 per cent in 2023 and 2024, up from 2.1 per cent in 2022, but below the average of 3.1 per cent growth between 2017 and 2021.

A similar trend was predicted for global growth, with Swiss Re noting that recovery will take time as economic conditions normalise.

Globally, commercial lines are expected to increase 3.3 per cent in 2023, while personal lines will see more modest growth of about 1.8 per cent, the reinsurer said.

Health insurance in emerging markets was pointed to as a boon for the industry, with risk awareness and a stronger market in China rising. However, motor insurance is expected to pose a challenge to insurers as the frequency and severity of claims increase.

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Inflation is expected to remain a concern for the insurance industry, said Swiss Re, adding that insurers’ claims and costs could rise through to 2023.

However, it noted that this is set to ease in the coming years, estimating that lower commodity prices amid slowing global growth will drive global consumer price index (CPI) inflation to 5.4 percent in 2023 and 3.5 per cent in 2024.

CPI is a metric that measures price changes in a basket of goods and services over time.

Swiss Re also highlighted that rising interest rates should be a “silver lining” for the insurance industry in 2023 and 2024, helping to offset inflationary pressures. The reinsurer said that, while recessions may be on the horizon, these are unlikely to curb interest rate growth. It added that lower inflation in Apac, excluding Australia, also makes for “more favourable” real growth than in other advanced markets.

In Swiss Re’s view, the higher interest rate environment is repricing risk in financial markets, and the company sees this trend continuing. Group chief economist Jerome Haegeli sees this as “healthy and a long-term positive” amid the expected cooling of the global economy “under the weight of inflation and interest rate shocks”.

“We anticipate significant insurance market rate hardening in 2023 and potentially some years after. This should ease pressure on the global insurance industry from inflation, natural catastrophe losses and weaker investment results this year,” added Swiss Re.