Property and casualty (P&C) insurance is set to undergo a fundamental transformation over the next 20 years, with sector business becoming both riskier and more complex, according to Swiss Re’s sigma 4/2021 study.
Motor will decline and the fastest-growing lines of business will be property and liability, both of which inherently carry more risk than motor. The report also signals strong growth opportunities, with total sector premiums forecast to more than double to $4.3tn by 2040. Emerging markets will lead global sector growth, with their share of premiums rising to 33% by 2040.
“With a riskier and more complex business landscape, (re)insurers can play an increasingly important role in facilitating sustainable long-term growth. Importantly, more collective action with the public sector is needed,” said Swiss Re group chief economist Jerome Jean Haegeli.
Economic development will be the main factor driving growth across all lines of business. The declining share of motor will be driven by advances in technology. As safety technology permeates car fleets, accident frequency, claims costs and premiums will decline.
Property will be the fastest-growing segment, with global premiums forecast to rise 5.3% annually to 2040. Climate risks will be the main driver of the growth in property. Climate risks will grow the global property risk pool by 33% to 41%, generating $149?183bn of new premiums by 2040.
By 2040, global liability premiums will triple to $583bn, accounting for 13% of the P&C total. With a 4.7% annual raise, there will be exposure opportunities from artificial intelligence, social inflation, climate change litigation and collective redress in Europe.
With P&C business becoming more risky and complex, capital requirements and the need for reinsurance will rise. Collective public/private sector action is needed to promote conditions for sustainable growth. Investment in green infrastructure will help keep property risks insurable in the face of climate change. M