Global Insurance Premium Volume To Recover Sharply in 2021: Report

After a sharp decrease in demand for insurance this year due to the impact of the COVID-19 pandemic, the insurance industry's premium volume will recover to prepandemic levels in 2021, according to a new sigma report from the Swiss Re Institute.

The sharpest economic contraction since the 1930s will prompt a slump in demand for insurance in 2020, more so for life products, with global premiums expected to contract by 6 percent, than for non-life insurance, which will experience a 0.1 percent decrease in premium, according to the report.

Total premium volumes will return to precrisis levels in 2021 alongside a more protracted global economic recovery, the Swiss Re Institute said. There will, however, be a divergence between sectors, with non-life premiums rising above precrisis levels and life insurance premiums remaining below.

The report suggested that the main reason for the better showing by non-life insurers is that the COVID-19 crisis hit at a time of rate hardening in the sector, which has supported premium growth. Premiums for trade and travel-related insurance business such as marine, aviation, and credit will be hit the hardest, the sigma report said, with premiums for property and medical business remaining more stable.

Emerging economies, led by China, will contribute significantly to the insurance market recovery, according to the report, with total premiums increasing 1 percent this year and 7 percent in 2021. The Swiss Re Institute estimated that total premiums in advanced markets will shrink by 4 percent this year and return to growth of more than 2 percent in 2021.

"The insurance industry is showing resilience in the face of the COVID-19-led economic downturn," Jerome Jean Haegeli, group chief economist at Swiss Re, said in a statement. "The magnitude of premium losses will be similar to that seen during the global financial crisis in 2008–09, even though this year's economic contraction of around 4 percent will be much more severe. Unlike for the global economy, we expect a strong V-shaped recovery in insurance premiums, a remarkable showing considering that the world is currently in the throes of the deepest recession ever."

The sigma report, World Insurance Riding Out the 2020 Pandemic Storm, can be found at Swiss Re's website.