Executive Summary

• Strong economic tailwinds, rising risk awareness and record-high savings buoyed by booming markets made 2021 a good year for the insurance industry. Insurers worldwide collected almost EUR4.2trn in premiums, 5.1% more than the year before (life: +4.4%; p&c: +6.3%). But what made 2021 really remarkable is the composition of premium growth: More than two-thirds were generated in Western Europe and North America, with the US market alone accounting for half of the increase. This is testament to the extraordinary recovery of the US economy after the Covid-19 crisis. Thus, 2021 represents an unusual end to the past decade in which global premium growth was much lower (+3.6% per year on average) and driven by Asia, which accounted for 40% of all additional premiums, more than half of them written in China. As a consequence, China’s global market share doubled to 12%.
• 2022 was expected to be another bumper year for the insurance industry, but the invasion of Ukraine has dashed those hopes. Premium income is likely to grow by roughly 1pp slower than originally assumed as the war takes its toll on economic activity and confidence, even as inflation supports the top line. Overall, we now expect global premium income to grow by +4.8% in 2022, with life and p&c developing almost in step (+4.9% and +4.6% respectively). This figure must be considered against the backdrop of a global inflation rate of 6.2% this year.
• The Ukraine war will have far-reaching consequences for the global risk landscape. As the global division of labor is reorganized, the role of emerging markets is likely to shrink: The era of the emerging global middle class as a reliable growth driver might be over. On the other hand, the reconfiguration of international supply chains offers new opportunities as this process, at its core, is nothing but “applied risk management” – the core competence of insurers. It will accelerate the shift from a pure product logic to a more service-oriented business model.
• Despite the great uncertainties today, we are not too pessimistic about the more distant future. After all, these uncertainties are precisely the breeding ground for rising risk awareness; they reinforce the impact of the two megatrends of climate and demographic change, which will continue to be the main drivers of demand for risk protection. Overall, we expect annual growth of +4.8% over the next 10 years (life: +4.9%; p&c: +4.6%). This corresponds to an increase in premium income by +67% or EUR2.8trn by 2032, of which just under EUR1.8trn will be generated by the life segment (+69%) and just over EUR1trn by the p&c segment (+63%).
• In the life business, demographic change is likely to be the decisive growth driver. This applies for both advanced and emerging markets: Unrelenting aging and social change combined with rising public debt and often inadequate social security systems speak loudly for the need to increase individual provisions. This development is likely to benefit from two crisis-related developments in the coming years: increased risk awareness in the wake of the Covid 19 crisis, and the inflation-triggered end of zero interest rates, which should make many savings and pension products more attractive again.
• In the p&c business, climate change is the main topic in two respects. First, extreme weather events will increase in the coming years, driving claims and premiums higher. On the other hand, climate-mitigation efforts will intensify, first and foremost the decarbonization of energy supply, even more important now amid the Ukraine war and the resulting quest for energy independence. This requires major investments from both the private and public sectors and creates a high need for risk protection as new risks will emerge with this radical transformation of our economy.
• Although the growth gaps between emerging and advanced markets will narrow – reflecting the moderate recovery of life markets in Western Europe and Japan as well as diminished growth prospects in China – the global insurance market will continue to shift in favor of the former. For example, China’s share will increase from 12% to 15%, while the rest of Asia (excluding Japan) is expected to reach a share of just under 17% (2021: 12.2%). Around 42% of new premiums will be written in Asia (excluding Japan), half of which is likely to come from China alone. As a result, anyone looking for growth in the 2020s will still have to turn to Asia.
• All in all, does this mean good prospects lie ahead for the insurance industry? Yes, but with one important caveat: only if it succeeds in maintaining its economic and social relevance. The upcoming upheavals will give birth to new risks, for instance risks related to data protection, new green technologies or AI and climate liability. So there will hardly be a lack of demand for protection and prevention. However, the industry is called upon to offer solutions for these risks so that they do not remain uninsurable or have to be assumed willy-nilly by the state. The question of insurability – and closely related: affordability – is likely to become increasingly urgent in the coming years, not least with regard to natural hazards. This requires a level of creativity and collaboration with customers and governments that goes beyond previous efforts.
• The insurance industry is facing radical transformation. To paraphrase Giuseppe Tomasi di Lampedusa: The industry has to change if it wants to stay relevant. For this, the industry must move beyond pricing and transferring risk to changing outcomes. It needs to actively reduce risk in the system by impact underwriting and investing, and thus leading the pivot to sustainability.