Swiss Re expects higher investment returns and better underwriting results will lift global non-life insurance profitability to around 10% return on equity (ROE) for the next two years, but it says “claim dynamics” are a major concern in property and casualty. 

The forecast improved underwriting performance reflects premium moves in commercial and personal lines, and terms and conditions that are expected to help offset the effects of inflation on claims costs, Swiss Re Institute says in the Sigma report. 

Investment returns in the non-life segment have surpassed 3.3% this year and are expected to rise to around 3.7% next year and 3.9% in 2025. 

The projected ROE compares with the 10-year average of 6.8%. 

Canada and Australia were the only two countries to exceed their ROE targets last year, and Swiss Re expects continued performance in those countries “to revert towards target”, while the US, the UK, Germany, France and Italy are expected to improve significantly. 

Swiss Re says claim development dynamics are a concern for the property and casualty sector, with significant increases occurring across lines in virtually all major non-life insurance markets over the past five years. 

The economic inflation impact on claims growth has eased, but remains elevated, while rising wages and healthcare expenses have driven increasing casualty line costs. 

Structural trends such as social inflation and increasing natural catastrophe exposure are likely to return to the heart of claims dynamics as economic inflation impacts ease further over the next two years, according to the report. 

“Property insurance is still experiencing a strong upward trend in claims, fuelled by much higher replacement costs today than two years ago,” it says. 

Construction material cost pressures have generally eased, but higher wages and financing costs due to tighter monetary policy are keeping the expense elevated and the global loss burden from natural catastrophes continues to grow. 

The report, titled Risks on the rise as headwinds blow stronger: global economic and insurance market outlook 2024‒25, notes that liability lines comprise the majority of property and casualty reserves, and their adequacy is emerging as a key risk after the inflation surge.  

Swiss Re anticipates further hard market conditions next year “at least”. In property and casualty, it estimates 3.4% real premium growth globally this year due to a significant repricing of risk, especially in claims-impacted lines, with increases of 6.3% in property and 3.9% in motor.  

Global economic growth is expected to slow next year, after this year was more resilient than expected, but the outbreak of war in the Middle East heightens the risk to the outlook, the report says. 

The report is available here.