Global property and casualty (P&C) premiums are expected to more than double to $US4.3 trillion ($5.7 trillion) in 2040 compared to levels last year, with economic growth and climate impacts driving increases, Swiss Re says in its latest Sigma report.

Property is forecast to be the fastest growing line amid rising catastrophe exposures in regions including Australia while technological advances will contribute to a slowing in motor premiums.

“With the global portfolio shifting from lower risk motor insurance to higher risk lines, P&C insurance business will become more volatile,” Swiss Re Head Globals Reinsurance Gianfranco Lot said.

“At the same time, risk modelling will become more complex, which will lead to higher capital requirements and an increased demand for reinsurance.”

Property insurance is forecast to grow 5.3% annually to reach $US1.3 trillion ($1.7 trillion) in 2040 from $US450 billion ($599 billion) last year, with economic development contributing 75% of new premiums.

Climate-related risks are expected to result in a 22% increase in property premiums, or up to $US183 billion ($244 billion), over the next two decades as weather-related catastrophes become more intense and frequent.

Urbanisation, particularly in emerging markets will also contribute to growth, according to the Swiss Re Institute report, titled More risk: the changing nature of P&C insurance opportunities to 2040.

Climate risks could increase average weather-related property catastrophe losses in advanced markets by 30–63%, Swiss Re estimates, with increases of as much as 90-120% in China, the UK, France and Germany. For Australia the increase could reach around 50%.

The estimates factor in tropical cyclones, winter storms, floods and wildfires, which are the biggest risks facing insurers and the most likely to be affected by climate change.

In Australia, losses from wildfires, which have historically contributed 17% of total insured losses from natural catastrophes, could increase an estimated 100%.

Swiss Re says globally the extent of climate change impacts on losses is difficult to predict, with other factors such as economic development, urbanisation and land-use changes also playing a big role and potentially amplifying effects.

At the same time, risk-reduction and adaptation measures may reduce losses in the future.

“Promoting the conditions for long-term sustainable growth is particularly important in the face of climate change, which poses the biggest long-term threat to the global economy,” Swiss Re Chief Economist Jerome Haegeli said.

“If we are to build a sustainable insurance system that allows society to manage and absorb future risks, we need to make risks and opportunities quantifiable.”

The report forecasts liability premiums will grow 4.7% per year on average to $US583 billion ($776 billion) from $US214 billion ($285 billion) as social inflation drives up the frequency of large verdicts and settlements, especially in the US.

Motor will remain the largest business line and will continue to grow as car ownership rises, especially in emerging markets, with premiums forecast to almost double to $US1.4 trillion ($1.9 trillion).

But motor’s share of the total risk pool will decline to 32% from 42% as safety technologies reduce accident frequency, lower claims costs and slow premium growth.

Shared economy models of mobility will also gain traction, given a focus on sustainability, dampening premium growth and likely leading to a shift from personal to commercial business within motor portfolios.