Emerging Asia to Drive Global Economic Growth, says Swiss Re

Emerging Asia is expected to be the main contributor to 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. Inflation remains the top global macroeconomic concern.

• Swiss Re estimates a 3.3x emerging‑to‑advanced market economic growth multiplier in 2023, above the average of the past two decades (2.2x)
• Global insurance premiums (non‑life and life) forecast to grow by 1.1% in 2023 and by 1.7% in 2024 despite economic slowdown
• Main drivers for supporting industry profitability are rate hardening in property & casualty, improved combined ratios and stronger investment returns due to higher interest rates

"With inflation pressures still persistent, hard market conditions in non‑life business are set to continue as insurers offset elevated claims costs with higher premium prices. Once disinflation takes hold with prices decreasing, less expensive claims and greater returns from interest rate‑sensitive investments should further support industry profitability," said Jérôme Haegeli, Swiss Re's Group Chief Economist.

Swiss Re's global economic growth forecasts are below consensus at 2.3% this year and 2.3% in 2024. The cumulative effect of over 18 months of rising interest rates, deteriorating credit conditions and further central balance sheet reductions will continue to dampen growth prospects. The risks to growth remain skewed to the downside.

Global economic growth is largely supported by emerging Asian markets, including countries such as India, Thailand, Indonesia and Malaysia, which are set to boom in the coming years. Given the reopening of China's economy from lockdowns in December last year, China is forecast to be one of the few countries to register stronger growth this year than in 2022, estimated at 5.4%.

"In prior episodes of recovery in China, growth was mostly investment-led but we expect it to be driven by domestic consumption this year, especially from the service sector. Hence, higher demand in China does not reverse our baseline outlook of global disinflation. This year's recovery in China will have limited spill over impact on the global economy," said Li Xing, Head of Insurance Market Analysis at Swiss Re.

Insurance industry's profitability set to improve

The global insurance industry is expected to demonstrate continued resilience over the next two years. According to Swiss Re Institute, global insurance premiums, both in non‑life and life, are estimated to grow by 1.1% in 2023 and by 1.7% in 2024. Premium volumes are expected to total a new peak of USD 7.1 trillion in 2023, compared to USD 6.8 trillion in 2022.

Non‑life premiums in emerging Asia are forecast to expand by 6.7% and 6.2% over 2023 and 2024, while life premiums are set to grow by 5.0% and 5.4%.

The US is, and remains, the largest insurance market in the world, with total premiums of close to USD 3 trillion in 2022, according to sigma data. Its global market share rose from 40% to 44%, driven by strong premium growth in nominal terms (8.6%) and US dollar appreciation against virtually all major currencies. China is the second largest market with premium volumes of USD 698 billion. The UK moved up to third place last year with premiums of USD 363 billion, switching position with Japan, which is now in fourth place.

Non‑life business supported by better pricing

Non‑life premium growth is set to strengthen to 1.4% this year. According to the report, the motor market is returning to growth after three years of contraction, also based on rising premium prices, while there is a decline in health premiums due to the end of pandemic support policies in the US. 

Advanced economies are expected to grow by 0.8% this year. For emerging economies overall, premium growth is forecast at 4.5%. Non-life premiums for China and emerging Asia are forecast to expand by 6.8% and 6.6% respectively.

Life insurance: favourable growth and profitability tailwinds

In life insurance, global premiums are expected to rise by 1.5% in 2024, above the 10-year trend of 1.3%.

Life premiums in emerging Asia are expected to grow by 5.0% in real terms in 2023. The border opening in China underpins a 7.3% real growth forecast for life premiums in Hong Kong, while premiums in China are expected to grow by 3.8% in 2023 and 4.7% in 2024. Led by India, Swiss Re Institute expects 6.9% life premium real growth in other emerging Asian markets (excluding China) in 2023 and 2024, above the long-term trend of 4.5%.

How to order this sigma study:

The English version of the sigma 3/2023, "World Insurance 2023: Stirred, and not shaken", is available in electronic format. You can download it here.