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Swiss Re: Climate risks threaten global economy

A division of global reinsurer Swiss Re, has projected a jump in the world’s property & casualty insurance premiums over the next two decades.

In a report entitled “More risk: the changing nature of p&c insurance opportunities to 2040”, Swiss Re Institute said the premium total could rise from $1.8 trillion to reach around $4.3 trillion as p&c business becomes riskier and more complex.

Property, they say, will be the fastest growing p&c line, with premiums set to almost triple from $450 billion last year to $1.3 trillion in 2040, driven by the effects of economic development and climate change.

Motor remains the largest line of p&c business, and premiums are projected to rise to $1.4 trillion.

Economic development will remain the key driver of rising property premiums, contributing 75 per cent, or up to $616 billion of new premiums.

Climate-related risks are expected to result in a 22 per cent increase in global property premiums, or up to $183 billion, over the next 20 years as weather-related catastrophes will likely become both more intense and frequent.

Jerome Haegeli, Swiss Re’s group chief economist, said: "Promoting the conditions for long-term sustainable growth is particularly important in the face of climate change, which poses the biggest long-term threat to the global economy.

“If we are to build a sustainable insurance system that allows society to manage and absorb future risks, we need to make risks and opportunities quantifiable. Our work is also vital for policy makers with whom we share the aim of making economic growth insurable."

Social inflation is expected to drive up the frequency of large verdicts and settlements, especially in the US.

Liability premiums could grow on average by 4.7 per cent per year, from $214 billion in 2020 to $583 billion.

Additional areas of long-term growth potential in liability come from climate change effects, artificial intelligence, and social and legal changes.

As the more volatile property and liability segments are gaining in significance, the share of motor insurance, traditionally a lower-risk and high volume mainstay segment of p&c, will shrink due to safety improvements from automation and smart technology and a drop in associated claims.

While the share in the p&c risk pool is expected to shrink to 32 per cent of sector premiums by 2040 from 42 percent in 2020, motor will remain the largest line of business, with premiums forecast to almost double from $766 billion to $1.4 trillion.

Gianfranco Lot, head global reinsurance at Swiss Re, said: “With the global portfolio shifting from lower risk motor insurance to higher risk lines, P&C insurance business will become more volatile.

“At the same time, risk modelling will become more complex, which will lead to higher capital requirements and an increased demand for reinsurance.

“In this fundamentally different risk environment, reinsurers will play a crucial role in keeping risks insurable.“

Swiss Re: Property will be the fastest growing global p&c line

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Published September 07, 2021 at 8:00 am (Updated September 06, 2021 at 12:17 pm)

Swiss Re: Climate risks threaten global economy

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