Global non-life premium growth is likely to improve over the next two years following a weak 0.9% increase this year, Swiss Re says.

Premium growth is forecast at 1.8% next year in real terms and 2.8% in 2024, with commercial lines expected to benefit most from rate hardening, the latest Sigma report says.

Swiss Re Institute estimates 3.3% growth in commercial premiums this year and a 3.7% increase next year, while global personal lines premiums are expected to shrink 0.7%, primarily due to underperformance in motor in advanced markets, and then recover to 1.8% growth next year.

“We see weak real premium growth this year, strengthening in 2023 and 2024 from anticipated lower inflation and a hard market for commercial lines,” Swiss Re says. “The Florida landfall of Hurricane Ian adds profitability pressure to non-life insurers already feeling the effect of higher claims severity this year.”

Global insurance industry premiums overall, including life, are estimated to have contracted 0.2% in real terms this year, but are expected to return to growth in the next two years.

“We are cautious on the outlook for global insurance premiums given the elevated downside risks over the next two years,” the report says. “A negative macroeconomic backdrop, persistent albeit easing inflation pressures and volatile financial markets are weighing on premium growth and profitability.”

Inflation remains the key concern for insurers, with average annual global consumer price index inflation forecast at 5.4% next year and 3.5% in 2024.

“In our view, the global economy will cool down noticeably under the weight of inflation and interest rate shocks,” Chief Economist Jerome Haegeli said.

“The repricing of risk in the real economy and financial markets is actually healthy and a long-term positive. Higher risk-free rates should mean higher returns for investing into the real economy.”