Global insurance premium growth will be flat “at best” as nearly every country in the world experiences economic recession or decline caused by the COVID-19 pandemic, the New York-based Insurance Information Institute (III) says.

It says lower economic activity worldwide is hindering premium growth in property, workers’ compensation and auto, and has also led to a reduction in life premium earnings.

The III says assessments by the International Monetary Fund and the Organisation for Economic Co-operation and Development are “excessively optimistic”, and predicts the global economy will contract by 5-8% this year and 1.5-3% in 2021 – assuming a vaccine becomes available in the first half of next year in advanced economies.

“It is too early to determine whether increasing take-up rates for warranty and indemnity, cyber and a surge of interest in captive [insurers] will make up for the downward pressure of lower GDP growth and COVID-19 on premium growth across the industry,” the III says.

The top 10 insurance markets by total premium written are the US, China, Japan, the UK, France, Germany, South Korea, Italy, Canada and Taiwan, which combined will see gross domestic product drop 7% in 2020.

“Early indicators point to flat premium growth in 2020 across the world and to significant differences in how the pandemic, monetary policy and the recession are impacting carriers and insurance lines in the U.S. versus abroad.”

US carriers tend to hold more fixed income and less equity than their counterparts in other advanced or emerging economies and face significantly lower domestic interest rates than in emerging economies.

The full impact of the pandemic and recession on the insurance industry will not be fully understood until 2021-22, the III says.