Canadian Underwriter

Real growth of direct premiums written in non-life insurance forecast at 1.7% for Canada in 2017 and 2.6% in 2018: Swiss Re

November 22, 2016   by Canadian Underwriter

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Real growth of direct premiums written in non-life insurance in Canada is expected to be 0.8% this year, but up to 1.7% in 2017 and 2.6% in 2018, according to Swiss Re’s Global insurance review and outlook for 2017/18.

Abstract financial backgroundThe report, released on Tuesday, said that growth in global non-life premiums is forecast to fall slightly from 2.4% in 2016 in real terms to 2.2% in 2017, and accelerate to 3.0% in 2018. “The emerging markets, in particular emerging Asia, will be the main driver of premium growth in both the non-life and life sectors,” Swiss Re said in a statement. In the life sector, global premiums are expected to grow by 4.8% in 2017 and 4.2% in 2018.

Premium growth in the emerging markets is forecast to increase steadily from an estimated 5.3% in 2016 to 5.7% in 2017 and 6.7% in 2018, according to the report. An improvement in commodity prices and strengthening economic activity will stimulate increased demand for insurance from the emerging regions. Emerging Asia will likely have the strongest growth in non-life premiums, forecast to be nearly 8% in 2017 and 9% in 2018, the statement noted.

In non-life reinsurance, global premium growth is expected to be 2.7% in 2017 and 2.9% in 2018, based on increasing cessions from emerging markets.

Overall, the pricing environment in the global non-life sector remains challenging, Swiss Re noted. “Pricing in commercial lines continues to deteriorate across all regions, but at a slower pace,” the statement said. “In contrast to many other commercial lines, however, rates in cyber insurance continue to harden but at a slowing pace and could level out soon.”

Consider that, according to the report, worldwide cyber premiums have reportedly grown by between 30%-40% per year since 2010. This increased the overall size of the market to an estimated US$2 billion in 2015, “with the majority of the business written against U.S. risks or by U.S. insurers,” the report said.

Increased awareness of the risks associated with cyberattacks and data breaches is boosting demand for related insurance solutions, and represents a significant growth opportunity for the non-life sector, the report went on to say. To date, profitability in non-life has been sustained by low natural catastrophe losses and reserve releases. Assuming average natural catastrophe losses and shrinking reserve releases, return on equity is forecast to decline from 8% in 2015 to around 6% in 2016-18.

Of the major economies, the U.S. is expected to grow by slightly more than 2% in inflation-adjusted (real) terms annually over the next two years. The Euro area and the United Kingdom are forecast to grow by about 1% and 1.5%, respectively, while Japan should grow by less than 1.0%. China is expected to grow by around 6.5%, the statement said.

“The insurance industry faces headwinds, with moderate economic growth, and still ample capacity in the markets creating a challenging pricing environment,” said Kurt Karl, Swiss Re’s chief economist, in the statement. “Nevertheless, premium volumes continue to grow, in both the advanced and emerging markets along with economic activity and an increase in the insurance penetration rate, particularly in emerging markets.”