The global economy is expected to strengthen “modestly” next year, according to Swiss Re.

Non-life insurance premiums will grow 2.8%, supported by strong economic activity in emerging markets, it predicts in its global insurance outlook for 2015/16.

The life insurance sector will be “notably stronger” in all markets, with global inforce premiums forecast to rise 4.8% this year and 4% in the next two.

Economic growth is expected to improve in the US, much of Europe and many emerging markets, but the UK, Japan and China will slow.

Swiss Re says the UK and US are “very likely” to tighten monetary policy and raise policy rates next year.

The combination of growth and rising rates will push government bonds higher.

However, Swiss Re Chief Economist Kurt Karl says (re)insurers’ investment returns will continue to weaken because companies are expected to roll over maturing fixed-income paper into lower-yielding, more recently released bonds.

“Stronger economic activity will improve insurance premium growth, particularly in the emerging markets, but profitability will still be challenging because of the low investment yields,” he said.

Non-life premium growth in emerging markets is forecast to return to 8% next year and higher in 2016, with emerging Asia in the lead. Premium growth in advanced markets slowed to 1.7% this year and will remain at that level into 2016.

For reinsurers, premium growth is expected to be lower than in the primary non-life sector, mostly due to reduced reinsurance buying in China and softening property catastrophe reinsurance rates.

Catastrophe reinsurance pricing will likely remain under pressure at next year’s renewals.

Swiss Re expects demand for natural catastrophe capacity will continue to increase in the long term. For casualty and special lines, differences in pricing developments by market and line of business are expected.