$7 Trillion by 2022? Yep, That’s the Global Insurance Premium Haul, According to Swiss Re
Good news: The world economy is on the path to a strong recovery following the COVID-19 crisis.
That’s what Swiss Re concluded in its latest World Insurance Sigma report, which ultimately forecasted that global insurance premiums will be approaching the $7 trillion mark by the end of 2022.
In its findings, the report also noted the pandemic had a significant impact on the insurance industry as a whole.
Risk awareness is up. Global health and protection-type insurance premiums grew by 1.9% and 1.7% respectively in 2020, the report found, despite social distancing’s effect on distribution. Insurance demand is estimated to grow by 3.3% by year’s end.
Here are just a few more insights from the report and the factors driving a steady recovery.
What’s Pushing Growth
Acc0rding to the researchers behind Swiss Re’s sigma, the swift deployment of vaccines coupled with large-scale fiscal stimulus are behind the global economy’s recovery.
Together these factors “are fueling unprecedented bounceback in 2021 than we had projected last year,” the report said.
After 2020’s 3.7% contraction of global gross domestic product (GDP), the sigma forecasts a historically high global real GDP growth of 5.8% in 2021. This comes after robust growth reported in the U.S. (6.5%) and China (8.3%).
“Whether it is private medical insurance or supply chain interruption for businesses, the pandemic experience has made people much more aware of the need for insurance protection.” — Irina Fan, head insurance market analysis, Swiss Re Institute
That does not mean we are completely in the clear, however. The report also noted that COVID-19 variants and vaccine viability against them could be a potential setback for recovery.
Not all countries have had access to the vaccine like the U.S.
The World Bank reported “recovery is expected to be strongest in East Asia and the Pacific, largely due to the strength of China’s recovery. In South Asia, recovery has been hampered by serious renewed outbreaks of the virus in India and Nepal.”
Further, places like the Middle East, North Africa, Latin America and the Caribbean are not expected to see much growth that will offset the contractions they faced in 2020.
“Sub-Saharan Africa’s recovery, while helped by spillovers from the global recovery, is expected to remain fragile given the slow pace of vaccination and delays to major investments in infrastructure and the extractives sector,” World Bank concluded.
All that is to say, overall growth is projected, but it is wise to remain vigilant regionally where the virus is still raging.
A Positive Place for Insurance
Still, despite the uncertainty surrounding regional recovery, the Swiss Re sigma remained positive when looking at the insurance market globally.
The pandemic caused a paradigm shift in terms of insurance and risk awareness. More organizations and their constituents across the globe are reviewing vulnerabilities and working to curb their risk exposures thanks to the unprecedented shutdowns and disruptions we saw last year.
COVID-19 heightened consumer demand for preparedness-related products as well.
“Whether it is private medical insurance or supply chain interruption for businesses, the pandemic experience has made people much more aware of the need for insurance protection,” saidhead insurance market analysis, Swiss Re Institute, and an author on the report.
Global life insurance premiums are expected to recover to above-trend growth of 3.8% in 2021 and 4.0% in 2022. Further, the report found that in 2021, key market insurance premium growth is forecast at 6.3% for China, 1.7% for the U.S., 2.8% for Western Europe and 5.6% for emerging markets.
Another key item to note for the insurance industry is the drive for more digitally-based transactions. Online business was the norm in 2020; global broadband traffic rose by 51%. Telework, telemedicine, streaming and e-commerce boomed.
The report has found that consumers and companies are interested in continuing such digital engagement, adding that such habits are only going to change how the economy operates moving forward.
“Quicker than anticipated, new infrastructure investments will require compatibility with advanced broadband cellular networks such as 5G, an industrial use of the Internet of Things and artificial intelligence (AI), large-scale data centers, and … access to renewable energy sources. Building new sustainable infrastructure and upgrading the old can have GDP multipliers of up to 3x, according to estimates from the U.S. Congressional Budget Office and the IMF,” said the report.
To continue down this path of growth, the report noted sustainability must be part of the overall conversation. That includes investing in infrastructure designed for the digital world and prepping financially for future unforeseen crises.
Further, an added focus on climate change can contribute to sustainable growth.
“Climate risk is a global risk, requiring coordinated global policy action,” said the report. “As per our research, if the 2050 net-zero emissions and Paris Agreement targets on climate change are not met, the global economy stands to be 10% smaller. Our estimates show that emerging markets, particularly in southeast Asia, will likely lose the most.”
Ultimately, Swiss Re recommends that in the coming year, the industry should prioritize consumer health awareness and increasingly leverage digital resources as the world emerges from COVID-19. &