Robust commercial insurance growth forecast for emerging Asia

The profitability of commercial insurance operations in emerging Asia will improve this year and next as the region’s economy is forecast to be the main driver of global economic growth, according to a report Monday from Swiss Re Ltd.

Commercial insurance premiums in emerging Asia are forecast to increase by 6.7% and 6.2%, respectively, this year and next. The return on equity for commercial insurance business will rise to 7.8% this year, from 3.4% last year, and to 9.3% in 2024, as investment improves and inflation slows, Swiss Re said.

Global commercial premium volumes are expected to hit $7.1 trillion this year, compared with $6.8 trillion in 2022.

Contributing to the growth are rate hardening in property/casualty, improved combined ratios and stronger investment returns due to higher interest rates, the report said. “Persistent inflation remains the top risk for insurers. Rate hardening in commercial lines will support nominal premium growth, but higher claims on the back of rising wage and medical expense costs could weigh on sector profitability,” Swiss Re said.

Concerns remain, as the pace of industry reserve releases has slowed as high economic and social inflation push claims settlements higher, particularly in the U.S., Swiss Re said. The macro shift of inflation from goods to services could impact liability exposures, the report added.

Emerging Asia is expected to be the driver of global economic growth in the coming years, according to Swiss Re Institute’s latest sigma report. With the reopening of China’s economy this year leading to a recovery in demand, Swiss Re forecasts emerging Asia to grow by 5.4% in 2023/24.

Meanwhile, Inflation remains the top global macroeconomic concern, according to the report.