Turbulence after lift-off: global economic and insurance market outlook 2022/23

Turbulence after lift-off: global economic and insurance market outlook 2022/23


sigma 4/2021 – More risk: the changing nature of P&C insurance opportunities to 2040


sigma 3/2021 – World insurance: the recovery gains pace


The world economy is making a strong cyclical recovery from the COVID-19 pandemic, but it is not a smooth one.


Our latest sigma research forecasts real economic growth of 5.6% this year, but growth will slow to 4.1% in 2022 and 3.0% in 2023 as global supply chain issues, labour shortages and high energy prices persist. Our number one near-term macro risk is inflation, which stems from these same factors.

The key takeaways of this sigma are

  • The cyclical recovery in global economic growth will slow as supply-side shocks persist, and monetary policy becomes less accommodative. Our GDP growth forecasts are below-consensus.
  • We forecast above-consensus average annual inflation globally in 2022, including 5.0% in the US, 2.6% in the euro area and 3.8% in the UK, above central banks’ targets of 2%. Cost pressures are starting to feed into harder to reverse prices such as rent and wages.
  • We estimate global real insurance premiums to grow by 3.4% in 2021, taking total global direct premiums written to 8% above the 2019 level.
  • Insurance profitability should improve in 2022 after a challenging 2021 as the industry absorbs COVID-19-related claims, above-average catastrophe losses and high inflation.
  • Non-life underwriting profitability should recover from 2022 as insurers internalise expectations of higher inflation, and rates in commercial lines rise again.
  • For life insurers, advances in COVID-19 vaccinations should also strengthen profitability from 2022, after a year of high mortality in 2021. In Brazil for instance, the life insurance benefit ratio in April 2021 was more than double that of April 2020.
  • Investment returns will likely be challenged by ongoing low interest rates that do not fully compensate for inflation, making underwriting discipline crucial.

Insurance market recovery to gain pace: Swiss Re


The swift deployment of vaccines and large-scale fiscal stimulus, including unprecedented direct transfers to households and businesses, are fuelling a strong economic bounce back in 2021. We forecast historically high global real GDP growth of 5.8 percent in 2021 after a 3.7 percent contraction in 2020. Insurance demand will benefit from this growth momentum, but inflation brings growing concerns. We expect major central banks to remain dovish on inflation for at least this year and next as policymakers prioritize a robust recovery in the labour market.

In the near term, the rollout of vaccines is the main driver of economic growth and normalisation, and in general, the advanced world is vaccinating faster than emerging markets. For example, the US and UK, with vaccination rates of 46.6 percent and 49.0 percent respectively as of 1 July, have pushed ahead with rolling back mobility restrictions. China, at the current pace of vaccination, is expected to vaccinate 70 percent of its total population by September 2021. However, vaccination is far slower in other markets – both advanced and emerging – which we expect to delay their return to full economic activity. There is a lack of synchronisation in countries’ return to normal life, creating a high likelihood of an unequal global recovery with diverging growth trajectories. Poorly prepared countries face the risk that a combination of perceived herd immunity, lockdown fatigue and economic necessity incites new waves of contagion that delay the return to normal. The robustness of individual countries’ recoveries will set the tone of growth for the rest of the decade, highlighting policymakers’ limited room for error.