Swiss Re believes insurance markets in emerging economies, led by China, will pave the way for the global industry's V-shaped recovery from Covid-19
Global reinsurance giant Swiss Re has predicted the world’s insurance market will rebound in a V-shaped recovery after a slump in premium volumes caused by Covid-19.
The Swiss Re Institute’s latest research paper, or “sigma”, said the world is currently experiencing the sharpest economic contraction since the 1930s, which will lead to a slump in demand for insurance in 2020.
But by 2021, the paper’s authors expect premium volumes to rise to the level they were at before the coronavirus pandemic took hold.
Swiss Re group chief economist Jerome Jean Haegeli said: “The insurance industry is showing resilience in the face of the Covid-19-led economic downturn.
“The magnitude of premium losses will be similar to that seen during the global financial crisis in 2008-09, even though this year’s economic contraction of around 4% will be much more severe.
“Unlike for the global economy, we expect a strong V-shaped recovery in insurance premiums, a remarkable showing considering that the world is currently in the throes of the deepest recession ever.”
Swiss Re believes China will lead the post-Covid-19 recovery
The Swiss Re Institute’s latest sigma report stated that emerging economies, which typically have lower insurance penetration than those of advanced countries, will lead the way in this recovery, with China the frontrunner.
It estimated that total premium volumes in advanced markets, both life and non-life, will shrink by 4% this year, before returning to positive growth of more than 2% in 2021.
By contrast, the Institute said in the emerging markets premium growth will remain in positive territory in both years, up 1% in 2020 and 7% in 2021.
NS Insurance reported in February that analysts from GlobalData and AM Best expected China’s private health insurance penetration rates to grow as Covid-19 increased its population’s awareness of medical protection products.
The Swiss Re Institute also cited the awareness of risk – along with a more liberalised regulatory environment – but included life insurance in the areas it expects significant growth, predicting premium growth will average around 2% this year, and grow close to 10% in 2021.
In the non-life coverage market, researchers expect to see premium growth to fall from the 11.8% seen in 2019 to 8% in 2020.
Although the Institute said this represents the slowest growth since 1998, it’s still higher than the -1% combined figure expected for advanced markets.
Global industry can withstand Covid-19, but needs state backing if it is to cover future pandemics
There’s considerable uncertainty about what the ultimate claims burden from the pandemic will be.
According to Swiss Re, the mid-point in the range of current estimates from various external and public sources sits at around $55bn.
But according to Haegeli, the insurance industry is very well capitalised to absorb losses.
“The industry’s capital position means it should be able to handle the Covid-19 shock,” he said.
“The upper end of the range of total property and casualty claims estimates by most external insurance analysis is $100bn, similar in scale to losses caused by Hurricanes Harvey, Irma and Maria in 2017, which the industry also absorbed.
“The Covid-19 experience highlights the importance of insurance provision for pandemics.
“It is a lesson for insurers and policymakers alike who, in the interest of long-term societal and economic stability, should look to develop more public-private partnership solutions for pandemic risks.”