Asia-Pacific insurance premiums to grow 2.3% annually in 2024-2025: Swiss Re
Tan Nai Lun
INSURANCE premiums in the Asia-Pacific region are expected to grow 2.3 per cent annually in 2024 and 2025, said Swiss Re Institute.
This is compared to the region’s estimated growth of 0.7 per cent in 2023, as profitability in the insurance industry improves in the next two years, the reinsurer said in a report on Tuesday (Nov 21).
Globally, insurance premiums are expected to grow 2.2 per cent annually on average for 2024 and 2025 – higher than the 1.5 per cent estimated growth in 2023, and the average of 1.6 per cent in the past five years.
While heightened geopolitical and macroeconomic instability ahead should dampen the overall growth outlook, it reinforces the insurance industry’s essential role in risk transfer, said Swiss Re.
Furthermore, underwriting gaps are closing as investment yields increase in the higher interest rate environment.
Premiums in the non-life insurance sector globally will likely grow 2.1 per cent annually in 2024 and 2025, compared to 1.4 per cent in 2023. In Asia-Pacific, such premiums are expected to grow 2.8 per cent on average in the next two years, up from 1.9 per cent in 2023.
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Pricing in personal lines is accelerating compared with 2022, while premium growth in commercial property insurance is supported by the hard market.
In 2023 and 2024, a repricing of risk should also more than offset pressures on insurance demand from the global economic slowdown. In 2025, headwinds from slow economic growth should dissipate and support demand as well.
Meanwhile, global premiums for the life insurance sector will likely grow 2.3 per cent annually for 2024 and 2025, from 1.5 per cent in 2023. In Asia-Pacific, life insurance premiums should grow 2.2 per cent annually in the next two years, from 0.2 per cent in 2023.
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Higher interest rates continue to improve the pricing environment for sales of savings products, and are expected to boost profitability in 2024 and 2025, given higher investment yields and reserve releases.
A growing global middle class should also boost growth in savings products in the next two years as individuals increasingly look to insurers for their retirement planning, Swiss Re said.
But the reinsurer expects the industry will not earn its cost of capital in 2024 or 2025 in most markets.
For the non-life sector, claims development is the top concern, with claims having risen significantly across lines of business in almost all major non-life insurance markets over the past five years.
While the impact of economic inflation on claims will ease in 2024 and 2025, more structural trends such as social inflation and increasing natural catastrophe exposure should return to the heart of claims dynamics.
The pace of growth in liability claims is challenging the insurability of those risks, the reinsurer noted.
For the life insurance sector, tighter credit conditions can also create emerging risks. Insurers can face higher risk of lapses in saving policies, which can crystallise previously unrealised losses if insurers are forced to sell assets to fund outflows.
Nevertheless, Swiss Re expects profitability of the insurance industry will still grow, even as headwinds slow the pace of recovery.
Profitability of the non-life sector will likely improve to about 10 per cent return on equity in both 2024 and 2025, above the 10-year average of 6.8 per cent. This is driven by higher investment returns amid the higher interest rate environment, and better underwriting results from more commensurate premium rates.
The average return on operating revenues for primary life insurers should also improve to over 8 per cent in 2024 and 2025, from around 6.5 per cent this year, as investment income continues to improve.
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