Boost in property/casualty profitability forecast: Swiss Re

Profitability in the property/casualty sector is forecast to improve through 2025, driven by dual tailwinds of higher premiums and better investment returns, according to a report Tuesday from Swiss Re Ltd.

After a significant repricing of insurance risk in 2023, property/casualty global premium growth is estimated at 3.4% this year and then forecast to soften to 2.6% growth in 2024 and 2025, Swiss Re said.

Improvements in profitability are also being driven by higher investment returns, given the higher interest rate environment. Investment returns in the property/casualty have topped 3.3% in 2023 and are forecast to rise further to approximately 3.7% in 2024 and 3.9% in 2025, according to the report.

On the claims side, “the impact of economic inflation on claims is forecast to ease further over the course of 2024 and 2025,” as tighter underwriting improved terms and conditions for insurers are expected to further mitigate the effects of inflation on claims costs.

Total premium growth across all insurance sectors including life is forecast at 2.2% annually on average for the next two years, higher than the average of 1.6% over the past five years, 2018-2022, the report said.

Jérôme Jean Haegeli, Swiss Re’s group chief economist, said in the report that the insurance sector will continue to strengthen its profitability, mainly driven by improved risk-adjusted pricing as well as higher investment returns.