While insurers are enjoying a positive outlook due to rising investment income, Swiss Re's Chief Economist, Jerome Haegeli, warns that the imposition of tariffs could decelerate global GDP growth, subsequently impacting insurance demand. In the long run, US tariffs may lead to increased market fragmentation, potentially lowering the affordability and availability of insurance, which could harm global risk resilience.
In the context of Australia, the report foresees profitability growth, primarily led by improvements in underwriting results. Return on equity for Australia, along with six other advanced economies, including France, Germany, Italy, Japan, the UK, and the US, is projected to climb to 9.7% this year, maintaining stability through 2027. This outlook is supported by stable underwriting and enhanced investment outcomes.
Despite facing potential headwinds from tariff-induced growth slowdowns and financial market volatility, the insurance industry is expected to remain profitable. However, the immediate future for advanced markets indicates a significant deceleration in premium growth due to weakening price strength.
In Australia specifically, the property and casualty market reported reaching a premium volume of $98.38 billion last year, a jump from $89.5 billion in 2023. Although the report refrains from predicting the country's premium growth, it anticipates a moderation to 2.1% this year across developed Asia-Pacific economies, down from 2.9% in 2024.
The global non-life insurance sector is witnessing a slowdown in premium growth driven by softer pricing and policy-related uncertainties affecting economic momentum. A real growth rate of 2.6% in premiums is forecasted for this year, which is a decline from last year's 4.7% increase. Nevertheless, improved reinvestment yields are expected to bolster profitability.
