Property and casualty premiums in Australia and globally are set for a strong rebound in the next two years, underpinned by a continued hardening of commercial rates, Swiss Re says in its latest Sigma report.

The report, released overnight in Zurich, says the business fallout from the pandemic on the industry “has been less than initially feared”, especially in advanced markets like Australia where insurers and brokers moved quickly to deploy digital channels in response to restrictions on mobility.

As a result Swiss Re has moved to revise its forecast, with global non-life premium growth now projected at 1.1% in real terms this year and 3.6% next year and in 2022. The reinsurer had in June predicted stagnant premium growth for this year.

For advanced markets in Asia, which includes Australia, non-life premium growth is forecast at 0.6% for this year and around 2.7% for the next two years.

“Non-life premium growth in the advanced regions has been unexpectedly resilient so far this year, due to rate hardening in commercial lines,” the Sigma report, Rebuilding better: global economic and insurance market outlook 2021/22, said.

Swiss Re describes the rise in commercial rates as “stronger than expected”, pushing prices to a degree not seen since 2002 and 2003.

“Rate hardening in commercial rates was core to this year’s resilience in non-life business,” the report said. “We expect positive rate momentum to continue through 2021, given strong demand amidst rising risk awareness and rising claims.

“Volumes are expected to already be back above pre-pandemic levels by the end of next year. Advanced market non-life premiums are forecast to grow by close to 3% in both 2021 and 2022, led by advanced Asia and the US, where a hard market in commercial insurance will boost premiums.”

Commercial rates in Australia, which the Sigma study classifies as the largest advanced market in Asia along with Japan, rose more than 30% in the third quarter, outpacing the global increase of 20%.

In Australia, higher business interruption (BI) impact, natural catastrophe and liability claims drove combined ratios higher in the first-half of the year and worsened underwriting results by five percentage points.

Looking ahead Swiss Re says insurers in Australia are potentially exposed to BI claims.

The Sigma report, which also took stock of the state of the global economy, predicts the world’s gross domestic product will contract 4.1% this year because of the business devastation of the pandemic.

But there will be a “protracted recovery” next year with growth of 4.7% on the cards.

Click here to access the report.