Non-life insurers need higher prices and interest rates claims Swiss Re

However underlying underwriting results in the non-life sector are a concern and turned negative last year despite good loss records, the reinsurer warned. And in its Sigma study World insurance in 2009, Swiss Re reported that as a whole the insurance industry’s profitability and capital levels recovered significantly during last year, as credit and stock markets recovered, but have not yet reached pre-crisis levels. Whilst this is set to continue in 2010 profitability in the non-life sector will be more difficult to come by and needs a rise in premium rates and interest rates to bring about adequate profit levels, said Daniel Staib, one of the authors of the new Sigma study. Non-life business premium development was ‘flat’ in 2009, Swiss Re said, and was only marginally impacted upon by the global recession.hideDown 0.1% to $1735bn, this was mainly due to ‘sluggish’ demand for cover and softening rates, noted the reinsurer. Premium growth in the emerging markets slowed, but remained positive at 2.9%, whilst the industrialised countries saw a dip of 0.6%, according to figures from the study. Talking specifically about the non-life sector, Mr. Staib said that ‘Stable premiums and the recovery of profitability and capital are good results given the economic environment in 2009. What concerns us, however, is that underlying technical results tended to weaken’. The study shows that in eight major markets, which represent 70% of the global premium volume, underwriting results turned negative in 2009, despite lower natural catastrophe losses and lower losses related to the U.S. financial guarantee business. Overall premium growth in both life and non-life will turn positive in 2010 and profitability and capital should continue to improve, said Mr. Staib. Life business, which saw premium volume fall last year by 2% to $2332bn, is in particular set to reap benefits. Non-life premium growth in the industrialised countries is also expected to resume in 2010, according to the study, but significant profits in the non-life sector may be hard to come by. “Given the strong competitive pressures in the insurance industry, it will be difficult to improve profitability significantly. We have also already seen some costly natural catastrophes this year, which will impact upon technical results. Besides the rise in premium rates, what is needed to bring the primary non-life insurance industry back to adequate profitability levels is the expected rise in interest rates in the medium term,” said Mr. Staib. The Sigma study is based on results and estimates from 159 insurance markets. According to the study, in 2009, the U.K., U.S. and Japanese markets witnessed premium volume decreases of 3.1%, 1.8% and 2% respectively. However two other leading industrialised countries, Germany and France, saw premium volume up by 1% and 0.9%, respectively. Of the emerging markets China saw the biggest increase, with volume up 18.6%. As a whole the Middle East and Central Asian countries saw a rise of 4.7% and the Latin America and Caribbean region saw volume rise by 4.3%. However, Central and Eastern Europe saw it fall by 7.5%.

Non-life insurers need higher prices and interest rates claims Swiss Re

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