The insurance industry is set to “overcome” this year’s Covid-19-induced global economic recession, according to the latest Swiss Re Institute’s sigma.
It said that the “sharpest economic contraction since the 1930s” will lead to a slump in demand for insurance in 2020, more so for life products, with global premiums expected to contract by 6%, than for non-life covers (-0.1%).
However, total premium volumes will return to pre-crisis levels in 2021 already, alongside more protracted recovery in the global economy. It added there will be sector divergence, with non-life premium volumes above pre-crisis levels, and life below. The emerging economies, led by China, will underpin the insurance market comeback.
It suggests this year’s recession will be the deepest since the Great Depression of the 1930s, but it will also be “short-lived”. It predicts that the recession will lead to a steep fall in demand for insurance. After growing by 2.2% in 2019, global life premiums are forecast to contract by 6% in 2020.
Due to prevailing and lower interest rates, savings products will be more affected, while mortality related covers will be “more stable”. It also said that the non-life sector will fare better, with global premiums forecast to be broadly flat (-0.1%) after growing by 3.5% in 2019.
A main reason for the better showing in non-life is suggested that the Covid-19 crisis has hit at a time of rate hardening in the sector, which has supported premium growth. Premiums in trade and travel-related insurance business such as marine, aviation and credit will be hit the hardest. Property and medical business will be more stable.
Jerome Jean Haegeli, group chief economist at Swiss Re, said: “The insurance industry is showing resilience in face of the COVID-19-led economic downturn. 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% 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.”