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Swiss Re sees global premiums back to pre-COVID levels

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Swiss Re says non-life insurance premiums will be 10% above pre-COVID-19 levels by the end of this year and will continue to rise due to increased exposures and risk awareness, as well as evolving cover requirements.

Premiums are expected to reach $US6.9 trillion ($9.4 trillion) this year and surpass $US7 trillion ($9.5 trillion) for the first time next year.

The reinsurer says heightened risk trends will increase the need for insurance protection, but also require a greater focus on evaluating and modelling, and ensuring pricing is adequate for the risks taken.

“There is a clear recognition that claims frequency and severity is rising as demonstrated by recent natural catastrophes or cyber incidents,” CEO Reinsurance Moses Ojeisekhoba said at a presentation ahead of the annual Rendez-Vous de Septembre.

“This means the need for protection is growing, and the industry has important work to do in offering insurance and closing the protection gap.”

Swiss Re Institute says climate change poses the biggest long-term threat to the global economy, and up to 18% of gross domestic product could be lost by 2050 if no mitigating actions are taken.

Risks from secondary perils, such as floods or wildfires, are growing as urbanisation increases community and asset exposures, while digitalisation and interconnectedness are adding to the risk landscape and driving demand in areas such as cyber protection.

Swiss Re says pricing must reflect inflationary trends as well as anticipated higher claims activity.

Consumer price inflation pressure is expected to remain high in the near term, medical and wage inflationary pressures are expected to build up in the medium term, and social inflation trends in the US are likely to continue in a litigious environment.

Chief Underwriting Officer Thierry Leger says a focus on contract clarity is among key themes for the industry in the short to medium term, with COVID leading to court battles and revealing some “not-so-well drafted clauses” in policy wordings.

“This is very unsatisfactory, because we are here as an industry to pay for what is due and not to pay for what is not due,” he said last week

“We view it as absolutely crucial for the entire industry to have a strong focus on wordings. Be very clear about what is covered and what is not covered. Phrase it in simple terms, and I am sure it is going to help the image of the industry as a whole, but also it will help our relationships with our clients.”