Swiss Re’s latest outlook for the global insurance market offers hope for stronger premium growth following a tough year ahead, but some curve balls may yet dent the recovery.

On the positive side, while pricing in commercial lines is still deteriorating, the declines are at a slower pace, and moderate global economic growth is expected to help support the insurance industry over the next two years.

In Australia premiums are estimated to decline 0.4% this year after rising 0.5% last year. Swiss Re says growth will return next year with a 0.6% gain, rising to 1.4% in 2018.

“Underwriting performance in Australia improved,” the report says. “By line of business, deteriorating liability and motor segment profitability was offset by improvement in property risk (homeowners, fire and industrial special risks).”

Swiss Re says the pricing outlook in non-life insurance “remains challenging due to abundant capital and benign claims development”.

“Even so, an inflection point seems to have been reached and the momentum of rate softening has slowed recently.”

Global non-life premiums are forecast to drop from 3% growth last year to 2.4% this year before reaching a nadir of 2.2% next year and returning to 3% in 2018.

But that rosier outlook may require a leap of faith on the economic growth side, as political uncertainties add to recent challenges in predicting the global situation.

In 2011 the International Monetary Fund forecast world GDP growth for 2015 of about 4.7%, but last year’s outcome was actually about 3.1%.

“Growth forecasts have been revised downward for many years running recently, and actual outcomes have almost always been weaker than expected,” Swiss Re says in its Global Insurance Review 2016 and Outlook 2017/18.

As a starting point this year, Swiss Re says risks to the global economic outlook have skewed to the downside.

The UK’s vote to leave the European Union has added to uncertainty in that region, while policy implications from Donald Trump’s election as US President are unclear.

“Given the many uncertainties regarding Trump’s policy proposals, it is very hard to estimate the extent of impact on the economy and its timing,” Swiss Re says. “Our view is that most of the impact will be slow-moving and occur in 2018/19 at the earliest.”

China is still overly dependent on government stimulus and credit expansion, while some emerging markets are viewed as vulnerable to rising interest rates in the US.

In advanced markets premiums are forecast to rise 1.7% this year before the pace of growth slows to 1.3% next year and recovers to 1.9% in 2018.

Premium growth in emerging markets – a key driver of global growth – is forecast to be 5.7% next year, accelerating to 6.7% in 2018 as improving commodity prices and strengthening economic activity stimulate demand for insurance.

In speciality lines Swiss Re says a slowdown in world trade volumes represents a significant headwind for marine insurers, cutting demand from shippers that are already under pressure from overcapacity’s impact on freight rates.

World trade grew at more than double the pace of global GDP from 1985-2007, but the two measures are now more likely to expand at about the same rate.

“Over the long term marine insurance premiums tend to echo developments in world trade growth, so the implication is that marine insurers may have to adjust to an environment of lower premium growth,” Swiss Re says.

In contrast to many other commercial lines, cyber insurance has continued to harden this year, although at a slower rate than last year.

According to insurance broker Willis, renewal rates typically grew by 5-15% early this year, but more recent signals suggest rates may be starting to stabilise, according to Swiss Re.

“Premium growth for cyber risk is expected to grow from a low base over the next decade,” it says.

Despite the expected rise in overall premiums, the outlook for insurer profitability remains subdued for the next few years.

Swiss Re says global profitability among non-life insurers has been sustained by low natural catastrophe losses and reserve releases.

But assuming average losses and shrinking reserve releases, return on equity is forecast to decline from 8% last year to about 6% in 2016-18. Investment income, which has been weak for a while due to low interest rates, is not expected to recover any time soon.

Insurers, while looking forward to improved premium growth, will hope no new political or economic shocks arise that could dampen the outlook.