New Swiss Re Study Finds Lowest Growth in Premiums Since 1980’s

December 5, 2002

A new Swiss Re Sigma report released yesterday concluded that overall global premium income reached $2.408 trillion in 2001; while that’s a lot, it’s only a “modest 1 percent growth over 2000,” according to the report – ” the lowest growth rate recorded since the beginning of the 1980s.”

The study cited the combination of “continuing turbulence in the financial markets and a high claims burden” as the main causes for the relative decrease in growth last year.

The life insurance sector recorded premiums of $1.439 trillion, while the P/C sector accounted for $969 billion. “Adjusted for inflation, the life markets, which had performed well in recent years, suffered a rare decline in premium income of 1.8% in 2001 compared with 2000,” said the bulletin. “In contrast, non-life insurance premiums rose by 5.4% in 2001, a higher growth rate than the previous 10 years had delivered.”

“The recent boom in the life insurance market came to an abrupt end, with business progress considerably stymied by the stock market downturn in 2001 which, in turn, hindered demand for unit-linked insurance products,” said Swiss Re. “The decline in the sale of these policies was only partially offset by increased demand for life insurance with guaranteed returns and pension provisions.” The report’s authors do foresee some increase in life premium volume this year.

They found a different picture in the non-life insurance market, where they noted that “the recovery seen in 2000 accelerated through 2001 in terms of premium income. In particular, rate increases were achieved in the highly competitive commercial insurance and motor lines, where premiums saw a considerable boost.” The trend is continuing this year. The report also noted that “in the industrialised countries, premium growth in 2001 was clearly above the long-term average. In the emerging markets, too, premiums overall were up on previous years.”

This didn’t mean, however, that a lot of money was being made. The report found that “despite clear price increases, non-life insurers’ profitability suffered significantly in 2001.” It cited claims from the Sept. 11 attacks, “reserve-strengthening from the days of the soft-market and falling investment returns on the back of share price collapses” as taking their toll on earnings. “As in the life insurance business, these factors considerably depleted equity in the non-life markets, thereby weakening insurers’ balance sheets.”

The full report is available on the company’s Web site at: http://www.swissre.com.

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