“In 2023 we expect improving profitability for most non-life business, as underwriting measures adjust to claims trends and higher portfolio yields boost net investment income,” Swiss Re analysts said. Yet, while expecting the underwriting gap to visibly narrow, they believe “the global profitability level as still too low and so supportive of more rate hardening.”
Moreover, narrowing the protection gaps requires insurance industry resources to grow more strongly than the evolving risks, such as losses from natural catastrophes. Swiss Re’s analysis indicates that just to narrow the global natural catastrophe protection gap, non-life insurance capital needs to outgrow natural catastrophe losses, which are increasing at a growth rate globally of 5 to 7% per year in real terms since 1992.”We project that insured losses will continue to grow strongly, irrespective of year-on-year volatility and even when current cyclical factors such as high inflation subside. Development and asset accumulation in high-risk areas are key factors for exposure growth. Changes in construction costs are a further factor, as ageing infrastructure vulnerabilities and inflationary pressures have boosted repair costs in recent years. Finally, hazard intensification will likely also play a bigger contributory role to rising losses in the coming decade as the world warms. Findings from scientific research infer that climate change effects on loss frequency and severity will intensify,” the analysis concludes.
The full sigma issue no.4/2023 is available online here.