Emerging Asia is set to become the primary driver of global economic growth in the coming years, according to the latest sigma report by Swiss Re Institute.
With China’s economy reopening and experiencing a recovery in demand, Swiss Re forecasts emerging Asia to achieve a growth rate of 5.4% in 2023 and 2024. This growth surge is expected to outpace the average of the past two decades.
However, Swiss Re emphasises that the recovery in China will have a limited “spillover impact” on the global economy.
Despite concerns over inflation, the global insurance industry is projected to demonstrate continued resilience.
“With inflation pressures still persistent, hard market conditions in non-life business are set to continue as insurers offset elevated claims costs with higher premium prices. Once disinflation takes hold with prices decreasing, less expensive claims and greater returns from interest rate-sensitive investments should further support industry profitability,” said Jérôme Haegeli, Swiss Re’s Group Chief Economist.
Swiss Re Institute estimates that global insurance premiums, encompassing both non-life and life insurance, will experience growth of 1.1% in 2023 and 1.7% in 2024, even amid an economic slowdown.
Several factors contribute to the profitability of the insurance industry, including rate hardening in property and casualty insurance, improved combined ratios, and stronger investment returns resulting from higher interest rates. These elements, along with the adjustment of premium prices to offset elevated claims costs, are expected to support industry profitability.
Emerging Asian markets, including India, Thailand, Indonesia, and Malaysia, are anticipated to experience substantial growth in the coming years.
The report highlights that the US remains the largest insurance market globally, with close to $3 trillion in total premiums in 2022. China follows as the second-largest market, with premiums of $698 billion, and the United Kingdom has risen to third place, surpassing Japan.
The non-life insurance sector is expected to benefit from improved pricing, with a growth rate of 1.4% projected for this year. The motor insurance market, in particular, is anticipated to rebound after three years of contraction, driven by rising premium prices.
Conversely, health premiums may decline due to the conclusion of pandemic support policies in the US.
In the life insurance segment, global premiums are forecast to rise by 1.5% in 2024, surpassing the 10-year trend of 1.3%. Emerging Asia, led by India, is expected to experience favourable growth and profitability, with a 5.0% real growth forecast for life premiums in 2023.
The report also highlights a significant real growth forecast of 7.3% for life premiums in Hong Kong following the border opening with China.
Recently, Jonathan Rake, CEO of APAC, Swiss Re Corporate Solutions, suggested that the Asia Pacific region was wide open for innovation, as it is not bound by legacy challenges, with firms embracing the new digital age.
