A newly published Swiss Re sigma study found that “the direct insurance industry is on the road to recovery with further progress expected this year.”
Worldwide premiums for life and non-life insurance grew by an inflation-adjusted 2 percent to $2.941 billion in 2003. Swiss Re’s annual review of developments in world insurance “shows premiums and results in non-life business increased markedly in 2003,” while “life insurers reported improved profitability despite a slight decline in premium income. The recovery is set to continue in 2004.”
Thomas Hess, Swiss Re’s Head of Economic Research & Consulting, commented: “Both the direct life and non-life insurance industries are experiencing a turn-around following the turbulent financial markets and extreme loss events of past years. The expected growth in premiums and profits this year should speed up this process.”
The study noted that “as in past years, the life and non-life sectors showed conflicting trends.” In 2003 non-life insurance premiums rose 6 percent to $1.268 billion while life insurance premiums fell 0.8 percent to $1.673 billion. Industrialized countries generated just under 90percent of the premium volume, with emerging markets accounting for around 10 percent.”
It also found that although non-life direct insurers’ premium growth in 2003 slowed from the torrid pace of 2002, the 6 percent average “was twice as high as the ten-year average, with price increases in virtually all regions. Following the increases in property rates of previous years, substantial rate rises were registered, particularly in third party liability. Since 2000 non-life premium income has grown at a cumulative real rate of 22 percent, mainly on the back of an increase in premium rates.”
The rate increases “together with more stringent underwriting standards, and comparatively few extreme losses resulted in a marked improvement in non-life underwriting results in 2003,” said Swiss Re. “However, investment results remained poor and overall profits are likely to be average. Although insurers’ equity capital bases improved, capital remained scarce.”
The study concluded that the recovery of the global economy and the expected rise in both interest rates and stock markets “are set to further improve conditions for life insurers and spur demand in life and non-life business.” It predicted that “price-driven growth in non-life insurance will slow as rates gradually stabilize. Premium growth for direct insurers will consequently be less pronounced than in 2003. Assuming average claims levels in 2004, results may well improve further. Life insurers’ equity capital and profits should witness some sustained recovery given the improved conditions.”
The study, “World insurance in 2003” examines the insurance markets of 152 countries, making explicit reference to 88. For further information, or to download a copy consult the company’s Web site at: swissre.com.
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