Inflation and rising claims cost pressure will continue to drive up property and casualty premium rates globally, Swiss Re says in a new report.

The reinsurer’s Swiss Re Institute predicts higher prices for personal lines while commercial classes of businesses are expected to see a slower pace of rate increases.

“For commercial lines, though still positive, rate increases have decelerated with some markets starting to soften,” Swiss Re said.

Non-life premium volume globally is forecast to build on the 3.9% growth achieved last year, reaching $US4.6 trillion ($6.9 trillion) this year and $US4.8 trillion ($7.2 trillion) next year.

“Commercial insurance accounts for almost half of the total property and casualty market,” Swiss Re Corporate Solutions chief underwriting officer Kera McDonald said. “We expect commercial P&C carriers to maintain profitability in 2024, as rate trends have enabled lines like property to stay sustainably priced.”

Swiss Re says the profitability of non-life sector remains on an upward trend. After rising to 6% in 2023, it estimates that insurers’ return on equity will improve to about 10% this year and 10.7% next year, with progress on both the underwriting and investment fronts.

“We see underwriting results turning positive, supported by high premium rates, rising exposures and easing claims growth as inflation moderates,” it said. “Investment returns will continue to benefit from the higher interest rates, while the cost of capital will remain broadly stable.”

The report mentions the Australian market has seen signs of social inflation in Australia and that personal property and motor insurance premium growth has significantly outpaced CPI inflation and disposable income growth over the past three years.

Click here for the report.