Global economic growth will continue to strengthen in 2014, according to a new Swiss Re report entitled ‘Global insurance review 2013 and outlook 2014/15’, which assesses the risks and premiums likely to be force next year.
The prediction of general economic growth outlined by the Swiss Re in its report goes alongside a sector-specific analysis that is predicting insurance premium growth in the non-life primary market, particularly in emerging markets, with reinsurance premiums following suit. Global premiums in the life market are expected to grow by around 4% in real terms in 2014 and 2015, says Swiss Re. However, life reinsurance premiums are expected to continue to decline in advanced markets, while rising by about 6% annually in emerging markets.
Alternative capital has increased in recent years, putting pressure on prices and margins, particularly in the US catastrophe business, which many treasuries and corporates, uninterested in the life segment outside of pensions, use as cover against dramatic weather events or natural disasters.
Other key findings from the 2014 outlook report include:
• Global economic strengthening will continue in 2014.
• Real primary market non-life premium growth is projected to be 2% in the advanced and 8% in emerging markets in 2014.
• Alternative capital will remain focused on transparent, well-modelled domestic Nat Cat business.
The momentum in global economic growth achieved this year will continue into 2014, concludes Swiss Re in its outlook report. The US economy is still growing, it says, and the euro area has returned to slow growth after a period of retraction. The weaker yen has boosted growth and increased inflation in Japan, but the sustainability of this recent economic strength is uncertain, believes the insurer, while China’s growth trend is close to 7.5%, down from 10% previously, but the recovery of western markets should cover this tail-off.
According to Kurt Karl, Swiss Re’s chief economist: “A return to economic growth in the mature markets is a good sign for insurance and we see a positive outlook for the next two years. Emerging markets, especially in Africa and Asia, will definitely provide some of the more spectacular growth figures in non-life business as cities grow and the need for financial protection expands.”
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