Global primary insurance premiums will grow 2.8% this year and 3.2% next thanks to economic recoveries and stronger growth in life insurance, according to Munich Re.

“After three years of relatively low growth rates, global premium growth is slowly picking up once again,” Chief Economist Michael Menhart says in the annual Insurance Market Outlook.

“Above all, this is due to economic recovery in the industrial nations.”

On the back of this primary market growth, the reinsurance sector should grow at slightly above 2% a year to 2020, Munich Re says. This is despite cyclical price pressures in the property and casualty (P&C) sector that are curbing premium growth.

The report says natural hazard cover in emerging countries will drive demand for reinsurance in the medium to long term.

Last year P&C primary insurance premiums grew 2.8%, with rate rises in Australia and Japan making an impact. By comparison, life insurance grew only 1.8% amid regulatory impacts and subdued growth in many industrial countries.

Munich Re says global insurance markets will grow at the same pace as the world economy in the medium term.

Emerging markets face economic slowdown in the short term, due to a cooling of economies after instability and currency devaluations, but they will carry much greater weight in the insurance market by 2020.

At the same time Asian countries will increase their share of global premium income to 14% from 9% last year.

China was the fourth-largest primary insurance market last year, with premium volume of about €210 billion ($309.6 billion).

This is forecast to more than double by 2020, to make it the third-largest market.

The US is still the largest insurance market, and its premium volume will increase to more than €1.2 trillion ($1.77 trillion) by 2020, the report says. This will make it more than twice the size of the second-largest market, Japan.

By 2020 the largest growth in P&C premiums will be in the US, followed by China.

China will record the largest absolute growth in life premiums, ahead of the US.

“In life reinsurance, the use of reinsurance as a capital substitute is one of the options offering additional potential,” the report says.