Re/insurance premium growth returns in 2014, profitability down
Thursday, 06 25 2015, Category: Insurance and Reinsurance, Country: World
Global insurance premiums returned to growth in 2014, as the insurance and reinsurance industry continued to recover from the economic crisis, with premiums increasing by 3.7% to $4,778 billion.
Advanced markets saw premium growth of 2.9%, which remains below the pre-crisis growth rate of 3.4%. Emerging market premium growth was faster at 7.4% in 2014.
Following five years where premium growth stagnated it will be encouraging to insurance and reinsurance firms to see that premiums are increasing once again. However these growth rates are not spectacular by any means.
Swiss Re’s latest sigma report highlights that while premiums may have been growing, the profitability of the business underwritten is declining.
Profitability of the global insurance sector has been weak since 2008, Swiss Re notes, due to the investment climate and negative underwriting results from 2008 to 2012.
Underwriting profitability across eight major insurance and reinsurance markets worsened as the combined ratio rose to 98.1% in 2014 from 97.5% in 2013, Swiss Re notes.
Exacerbating the deterioration in underwriting results, the average total investment income as a share of net premiums earned in the eight markets also fell, by 1 percentage point to 8.6%.
Profitability will remain under pressure as flat rate development at best and lower contributions from reserve releases begin to bite. On top of the lower underwriting profits, investment returns are expected to wane for several years due to depressed investment returns.