Insurance sector growth expected to remain stable

China's insurance sector is expected to see stable growth in the next two years as the country's inflation risks are well under control and the overall economic fundamentals remain solid, experts from global reinsurer Swiss Re said.

"China has been one of the most important markets for Swiss Re, and we believe the insurance sector has a big role to play in fueling the sustainable development and enhancing the resilience of society in the future, given the opportunities brought by the 14th Five-Year Plan (2021-25) and the country's commitment to reduce carbon emissions," said Ivan Gonzalez, country president of Swiss Re China.

According to Xing Li, head of insurance market analysis at Swiss Re Institute, 2022 marks the transformation of the country's insurance sector after slower growth in both life and non-life insurance in 2021.

"Given the potential of elderly care services and the industry's commitment to innovation and digitization, China's insurance sector has a strong resilience in the future," Xing said.

However, economic slowdown and the high-inflation environment globally will weigh on insurance markets. Slowing growth typically leads to lower demand for insurance. The main inflation impact will show in rising claims costs, more in non-life than life insurance in which policy benefits are defined at inception, according to Swiss Re's research.

"We expect property and motor to be most impacted in the near term," said Jerome Haegeli, chief economist of Swiss Re Group. "We estimate strong 6.1 percent nominal growth in total premiums (non-life and life) in 2022. In real terms, that translates into near flat growth (+0.4 percent). Further, we forecast in nominal terms, global premium volumes will surpass $7 trillion by the end of this year for the first time ever. "

This is based on the research team's expectation of more rate hardening in non-life to counter high inflation and strong premium growth in emerging markets. At this level, volumes will be 17 percent higher than at the onset of the COVID-19 crisis, reflecting the resilience of insurance markets over the course of the pandemic.

In the non-life sector, the research team expects inflation of exposure values and rate hardening will boost premium growth, notably in North America and Europe. In real terms and globally, however, they estimate premiums will rise by 0.8 percent this year.

"For 2023, we forecast global non-life premiums will grow by 2.2 percent, based mostly on ongoing rate hardening, notably in commercial lines of insurance business. Premium growth in emerging markets will likely outstrip that of advanced economies this year and next, with estimated real growth of 3 percent in 2022 and 4.2 percent in 2023," Haegeli said. "A main driver will likely be strong demand for short-term health insurance on the back of increased awareness of health security in the wake of the pandemic."