According to the latest Beinsure Media property and casualty insurance companies report, 2024 was expected to be another bumper year for the insurance industry, but the invasion of Ukraine has dashed those hopes.
Premium income is likely to grow by roughly 1pp slower than originally assumed as the war takes its toll on economic activity and confidence, even as inflation supports the top line.
Global premium income will grow by 4.7% in 2023, with life and P&C sectors growing at 4.9% and 4.6% respectively. This growth must be viewed against a global inflation rate of 6.2% this year.
Despite current uncertainties, the future outlook remains optimistic. These uncertainties heighten risk awareness and strengthen the impact of climate and demographic changes, which will drive demand for risk protection.
The P&C insurance industry in the U.S. is regulated primarily at the state level, with each state having its own insurance department responsible for oversight. This decentralized regulatory framework means that insurers must navigate a patchwork of regulations, which can vary significantly from one state to another. Key regulatory concerns include solvency requirements, rate setting, policy form approval, and consumer protection.
The P&C insurance sector has long struggled with challenging fundamentals. Intense price competition erodes value across the board, and globally, only a small number of sector leaders turn a profit. Commoditization of both personal and commercial lines products, particularly in the small commercial segment, continues unabated.
US insurance industry net premiums written totaled $1.28 trillion in 2023, with premiums recorded by property/casualty insurers accounting for 51% and premiums by health/life insurers accounting for 49%, according to Beinsure research.
P&C insurance includes auto, homeowners and commercial insurance. Net premiums written for the sector totaled $652.8 bn last year. Meanwhile, the life/annuity insurance sector includes annuities, accident and health, and life insurance with net premiums for the sector totaling $240 bn.
In 2023, global premiums grew by 5.1% (life: 4.4%; P&C: 6.3%) due to economic tailwinds, increased risk awareness, and high savings from booming markets. Total premium income reached EUR 4.2trn (life: EUR 2.5trn; P&C: EUR 1.7trn). Western Europe and North America generated over two-thirds of this growth, with the US alone contributing half.
The pandemic and the Ukraine war highlight the need for better risk management and increased demand for protection. The industry must maintain its relevance by offering innovative solutions for emerging risks. Insurability and affordability will become more urgent issues, requiring creativity and collaboration among stakeholders, customers, carriers, and policymakers.
2023 marks a significant shift from the past decade, which saw lower growth at 3.6% annually, driven mainly by Asia. China doubled its global market share to 12% during this period.
Looking ahead, annual growth is expected to be 4.8% over the next decade (life: 4.9%; P&C: 4.6%), resulting in a 67% increase in premium income, reaching EUR 2.8trn by 2032. The life segment will contribute nearly EUR 1.8trn (69%), and P&C will add just over EUR 1trn (63%).
Western Europe saw a 3.6% increase in total premium income in 2022 (life: 3.8%; P&C: 3.3%), exceeding EUR 1.1trn. Due to the Ukraine war, growth may decline to 2.9% in 2023 (life: 2.8%; P&C: 3.1%). However, Europe is expected to see an acceleration, with average growth over the next decade projected at 3.3% (life: 3.3%; P&C: 3.3%), surpassing the 1.6% growth of the previous decade, which was affected by the euro crisis and COVID-19.
In the P&C insurance business, climate change is the main topic in two respects. First, extreme weather events will increase in the coming years, driving claims and premiums higher.
On the other hand, climate-mitigation efforts will intensify, first and foremost the decarbonization of energy supply, even more important now amid the Ukraine war and the resulting quest for energy independence.
This requires major investments from both the private and public sectors and creates a high need for risk protection as new risks will emerge with this radical transformation of our economy.
Although the growth gaps between emerging and advanced markets will narrow – reflecting the moderate recovery of life markets in Western Europe and Japan as well as diminished growth prospects in China – the global insurance market will continue to shift in favor of the former.
China’s share will increase from 12% to 15%, while the rest of Asia (excluding Japan) is expected to reach a share of just under 17% (2022: 12.2%).
Around 42% of new premiums will be written in Asia (excluding Japan), half of which is likely to come from China alone. As a result, anyone looking for growth in the 2020s will still have to turn to Asia.
However, the industry is called upon to offer solutions for these risks so that they do not remain uninsurable or have to be assumed willy-nilly by the state, according to Beinsure Media.
The question of insurability – and closely related: affordability – is likely to become increasingly urgent in the coming years, not least with regard to natural hazards. This requires a level of creativity and collaboration with customers and governments that goes beyond previous efforts.
The insurance industry is facing radical transformation.
The industry has to change if it wants to stay relevant. For this, the industry must move beyond pricing and transferring risk to changing outcomes. It needs to actively reduce risk in the system by impact underwriting and investing, and thus leading the pivot to sustainability.
