Swiss Re: P&C insurance premiums to reach $4.3T by 2040
A new sigma report notes that P&C business will become more volatile as portfolios shift to higher risk lines.
Over the next 20 years, property and casualty (P&C) insurance is poised to undergo “fundamental transformation” as the market becomes riskier and more complex, according to the Swiss Re Institute’s most recent sigma report, “More risk: the changing nature of P&C insurance opportunities to 2040.” As a result of changing conditions, Swiss Re predicts global P&C premiums will more than double from $1.8 trillion in 2020 to $4.3 trillion in 2040, with property insurance becoming the fastest-growing business line and motor insurance remaining the largest market.
“With the global portfolio shifting from lower risk motor insurance to higher risk lines, P&C insurance business will become more volatile. At the same time, risk modeling will become more complex, which will lead to higher capital requirements and an increased demand for reinsurance. In this fundamentally different risk environment, reinsurers will play a crucial role in keeping risks insurable,” said Swiss Re’s Head of Global Reinsurance Gianfranco Lot in a release.
According to Swiss Re, economic development will contribute to 75% of new property premiums over the next two decades. Additionally, climate-related risks are expected to cause a 22% increase in global property premiums as natural disasters increase in frequency and severity.
Noting the key role climate change will continue to play in the insurance industry, Jérôme Haegeli, global chief economist at Swiss Re, said in a statement: ”Promoting the conditions for long-term sustainable growth is particularly important in the face of climate change, which poses the biggest long-term threat to the global economy. If we are to build a sustainable insurance system that allows society to manage and absorb future risks, we need to make risks and opportunities quantifiable. Our work is also vital for policymakers with whom we share the aim of making economic growth insurable.”
Liability insurance lines could experience a 4.7% average annual growth in premiums due to social inflation, especially in the U.S., where large verdicts and settlements are becoming increasingly common. Overall, Swiss Re noted that global liability premiums are set to triple by 2040 to $583 billion, accounting for 13% of total P&C business.
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