1、No 6/2022Economic stress reprices risk:global economic and insurance market outlook 2023/2402 Executive summary03 Key takeaways06 Macroeconomic environment and outlook12 A policy tug of war:financial stability and debt sustainability risks19 Insurance market outlook 2023/2434 Alternative economic&in

2、surance scenarios40 Appendix2 Swiss Re Institute sigma No 6/2022 Despite relatively resilient growth this year,we expect the world economy to grow by just 1.7%in real terms next year as inflationary recessions approach major economies.Having last year flagged inflation as the number one immediate ma

3、cro concern,we continue to see upside risk in the next two years and expect it to prove sticky.With it,we see downside risks to growth from higher central bank interest rates.In advanced markets we forecast real GDP growth of just 0.4%in 2023,the lowest since the 1980s outside of the global financia

4、l and COVID-19 crises.In emerging markets,we anticipate substantially lower growth rates than pre-pandemic that will likely feel akin to recession.The higher interest rate environment is repricing risk in financial markets and we see this continuing.We anticipate significant insurance market rate ha

5、rdening in 2023 and potentially some years after.This should ease pressure on the global insurance industry from inflation,natural catastrophe losses and weaker investment results this year.This year we add a fourth dimension to the“3D”set of long-term economic drivers we identified last year:to the

6、 structural trends of divergence,digitalisation and decarbonisation we add debt,and its related risks.The withdrawal of market liquidity as central banks unwind unconventional monetary policies is exposing financial vulnerabilities that have built up over the past decade.Debt is a key concern,specif

7、ically whether governments can sustain public spending commitments in the face of higher interest rates.We see a risk that market shocks accumulate and fuse into financial instability.Central banks face competing priorities of price stability,financial stability and enabling governments to pursue lo

8、oser fiscal policy.This creates a risk of real interest rates being repressed in the longer term,either through higher inflation or eventually lower nominal interest rates,to manage debt sustainability or financial stability concerns.If so,we see inflation likely being higher and more volatile.Addre

9、ssing demand-side drivers of inflation with supply-side or productivity-enhancing policies and investments would help ease this tension.The global insurance industry faces multiple pressures this year but we expect rate hardening to regain momentum in response.Higher interest rates should be a silve

10、r lining as inflation pressure abates in 2023 and 2024,supporting investment results and profitability.Inflation remains the number one industry concern.We forecast high inflation in cost components relevant for insurers,such as construction and healthcare that suggests insurers claims and costs cou

11、ld rise markedly in 2022 and 2023,even without considering changes in claims frequency and natural catastrophe activity.We expect total global insurance premiums to decline slightly in 2022,with a gradual recovery but still below-trend real premium growth for the next two years.In non-life insurance

12、,slowing global growth and inflation will likely cut real premium growth to below 1%this year,with a recovery as inflation eases and the hard market goes on.Global non-life insurance return on equity(ROE)is expected to halve to just 3.4%in 2022 as underwriting performance and investment results are

13、weaker,but rebound to a 10-year high in 2024 as the interest rate tailwind and potential rate hardening take effect.In life insurance,we forecast a 1.9%contraction in global premiums in real terms in 2022 as consumers face cost-of-living pressure,but a return to trend growth in 2023 and 2024,carried

14、 by emerging markets.Life profitability is improving due to rising interest rates and normalising COVID-19 mortality claims.To prepare as new risks emerge,we monitor three alternative scenarios to our baseline outlook.Two scenarios are pessimistic:“1970s-style structural stagflation”and“severe globa

15、l recession”,with the former envisaged to be worse for insurers than the latter due to the impact of prolonged severe inflation on balance sheets.A severe global recession would reduce premiums,investment performance and underwriting results in most lines of business in the near term.With inflation

16、anticipated to be persistent and volatile,and macroeconomic risks overall skewed towards our downside scenarios,we see strong capital and risk management as essential to mitigate risks,alongside underwriting rigour,portfolio steering,reinsurance,asset allocation and hedging.We forecast global real G

17、DP growth of only 1.7%in 2023 as inflationary recessions approach major economies.This year we add a new“D”,for debt and related risks,to our“3D”structural economic drivers.The insurance industry faces pressure from high inflation this year,but higher interest rates will be a silver lining from 2023

18、.Alternative scenarios enable us to prepare for new risks as they emerge.Executive summary sigma No 6/2022 Swiss Re Institute 3Inflationary recessions are materialising,led by advanced economiesReal GDP growth,inflation and interest rates for select regions,2021 to 2024Note:E=estimates,F=forecasts.T

19、he 10-year euro area bond yield is proxied by the German government bond yield.Data as of 10 November 2022.Source:Bloomberg,Swiss Re Institute20212022E2023F2024FActualSRIConsensusSRIConsensusSRIConsensusReal GDP growth,annual average,%US5.71.81.80.10.41.61.4Euro area5.23.13.10.20.11.31.5China8.13.43

20、.34.14.84.95.0Inflation,all-items CPI,annual average,%US4.78.18.13.74.22.82.4Euro area2.68.68.36.25.63.02.1China0.92.32.22.62.42.42.1Yield,10-year government bond,year-end,%US1.53.93.93.63.43.43.2Euro area0.22.62.22.62.02.32.1Emerging markets will no longer be such a strong engine of global GDP grow

21、thNominal world GDP growth(current prices,international dollars,purchasing-power parity),contribution by regionNote:E=estimates,F=forecasts.Source:IMF World Economic Outlook Database,October 2022,Swiss Re Institute4%2%0%2%4%6%8%10%12%200120022004200620082010201220142016201820202022E20002003200520072

22、0092011201320152017201920212023F2024FWorldAdvanced economiesEmerging market and developing economiesKey takeaways4 Swiss Re Institute sigma No 6/2022 Key takeawaysFinancial stability risks are beginning to emerge in the US as well as elsewhereKey higher-frequency metrics of financial stability risks

23、 for the USNote:The data for each variable are transformed into percentile ranks,based on the distribution of its values since 2007.The heatmap presents the distribution of the percentile ranks.Red indicates high percentile ranks(bad)and green indicates low percentile ranks(good).Source:Bloomberg,Fe

24、deral Reserve Economic Data,OECD,Swiss Re Institute2019 2020 2021 20222013 2014 2015 2016 2017 20182007 2008 2009 2010 20112012S&P 500 Price-to-Earning RatioS&P 500 Volatility(VIX Index)10-Year Treasury Bond Yield Volatility10-Year Treasury Bond Real Yield3-Month Swaption Volatility(Source:BofA)Gove

25、rnment Liquidity IndexJPY/USD 3-Month OIS Swap Basis(Reverse Ranks)EUR/USD 3-Month OIS Swap Basis(Reverse Ranks)5-Year Sovereign CDS spread5-Year IG Corporate CDS Spread5-Year HY Corporate CDS SpreadAAA BBB Corporate SpreadCredit Managers Composite Index(Reverse Ranks)3-Month LIBOR-OIS Spread 10-Yea

26、r Treasury Bond Bid-Ask Spread3 Month Treasury LIBOR Spread(TED Spread)Treasury Holdings Growth(yoy)Real House Price Growth(yoy)House Price-to-Income Ratio30-Year Fixed Mortgage RateBankingHousingFinancial marketsCreditCyclical and structural factors point to continued insurance market rate hardenin

27、gMacro and market dynamics facing the insurance industrySource:Swiss Re Institute Economic recession Prolonged and more volatile inflation Rising interest rates Financial stability risksMacroeconomic dynamicsMarket landscape Hardening market New risk pools(eg cyber)Consumer and government risk aware

28、ness Huge losses from natural catastrophe events Declining capacity in re/insurance market Reduction in shareholder equity The inflationary shock has varying impacts on claims in different lines of businessSource:Swiss Re InstituteLine of businessClaims impact 2022Claims impact 2023ReasonNon-lifePro

29、pertyHighAbove averagePrice of materials peaked in 2022,but wage growth to continue in 2023Motor,physical damageHighAverageHigh car part prices related to supply chain imbalances,and wage growthMotor,bodily injuryBelow averageAbove averageWage growth and medical cost inflation to exceed general infl

30、ationLiabilityAverageAbove averageWage growth,medical,and social inflationHealthBelow averageAbove averageMedical cost inflationLifeLifeNoneNoneBenefits are set at policy issueKey takeaways sigma No 6/2022 Swiss Re Institute 5A challenging 2022 for insurers will be followed by a gradual recovery in

31、2023 and 2024Real insurance market forecasts,key marketsNote:figure shows insurance premium forecasts,in real terms.Total insurance premium forecasts are for life and non-life combined.Icons show direction of deviation from long-term trend(20062021)for each region.EMEA refers to Europe,Middle East a

32、nd Africa.Source:Swiss Re InstituteTotalNon-lifeLifePast 20172021Growth rate 2022Outlook 20232024Past 20172021Growth rate 2022Outlook 20232024Past 20172021Growth rate 2022Outlook 20232024World2.6%=0.2%2.1%3.5%0.9%2.3%1.5%=1.9%1.7%=Advanced markets2.2%0.8%1.6%=3.2%0.6%1.9%0.7%=2.8%0.8%North America2.

33、9%1.2%1.5%3.4%1.0%1.9%1.3%1.5%0.0%EMEA2.4%2.9%1.6%2.6%1.2%1.9%1.8%4.2%0.7%Asia Pacific0.5%3.9%2.2%3.1%2.1%2.3%1.7%6.0%2.0%Emerging markets4.4%2.1%4.2%5.4%2.7%4.1%4.4%0.9%4.3%Excluding China2.5%1.5%4.0%2.2%1.4%3.2%3.1%2.0%5.1%China6.2%2.6%4.3%8.5%3.6%4.7%5.3%0.2%3.7%Non-life insurance profitability i

34、s set to rebound in 2023 and 2024 after a downturn in 2022Aggregated performance of eight of the largest non-life insurance markets,%of net premiums earnedNote:E=estimates,F=forecasts.The eight markets are the US,Canada,France,Italy,Germany,the UK,Australia and Japan.ROE is expressed in%of sharehold

35、er equity.Source:Swiss Re Institute5%10%0%5%10%15%20%200620082010201220142016201820202022E2024F200720092011201320152017201920212023FOperating resultROE after taxUnderwriting resultInvestment result6 Swiss Re Institute sigma No 6/2022 Inflationary recessions on the horizonAs a tumultuous 2022 comes t

36、o a volatile close,we see major economies like the US and Europe moving towards“inflationary recessions”in the next 12 to 18 months and facing increasing concerns about financial instability(see Chapter 2).We forecast global GDP growth in real terms to drop from 2.8%this year to 1.7%in 2023(see Tabl

37、e 1).As a general rule,global real GDP growth of about 12%or less is considered a global recession.1 Higher interest rates in this elevated inflation environment are likely to be a key driver of the forthcoming global growth slowdown.We project real GDP growth in advanced markets to decline from 2.4

38、%this year to 0.4%in 2023,the largest annual slowdown since the 1980s outside of the global financial crisis(0.3%/3.4%in 2008/2009)and the COVID pandemic(4.5%in 2020).2 Emerging market growth rates will also weaken:excluding China,we forecast emerging market real GDP growth of 2.8%in 2023.However,in

39、 terms of contribution to world GDP growth(in USD,purchasing power parity),emerging markets may have a growing share in the near-term if our US and European recession baselines play out(see Figure 1).The combination of slowing global demand,rising debt levels,higher interest rates and a strong US do

40、llar is increasing emerging market debt burdens(see Chapter 2),shrinking their exports and limiting room for fiscal policy to support the economy.In Asia,we do not forecast real GDP contraction in 2023,but we expect growth rates to be substantially lower than their pre-COVID trend,which will be akin

41、 to recession in terms of the impact on consumers and businesses.1 A.Kose,M.Terrones,“Collapse and Revival:Understanding Global Recessions and Recoveries”,IMF,2015.2 sigma database,based on national and international data sources.Major economies are facing inflationary recessions in the next 12-18 m

42、onths,we forecast,and we see risks to the growth outlook as skewed to the downside.In Europe,leading indicators suggest that due to the additional pressure of the energy crisis,the downturn may have already begun.Global inflation momentum is likely to decelerate over the next two years but,still,we

43、anticipate inflation being stickier and more volatile than in past decades.The pace of monetary policy tightening may slow,but we believe central banks are unlikely to pivot to interest rate cuts immediately,and will continue to prioritise price stability even as recessions materialise unless financ

44、ial stability risks become systemic.In advanced economies,we see the low nominal sovereign bond yield environment as largely over.GDP growth has been resilient this year but inflationary recessions are approaching in the next 1218 months.Emerging markets will no longer be a strong engine of global g

45、rowth as advanced economies suffer.Figure 1 Nominal world GDP growth(current prices,international dollars,PPP),contribution by region Note:E=estimates,F=forecasts.Source:IMF World Economic Outlook Database October 2022,Swiss Re Institute4%2%0%2%4%6%8%10%12%2000200220042006200820102012201420162018202

46、02022E 2024FWorldAdvanced economiesEmerging market and developing economiesMacroeconomic environment and outlookMacroeconomic environment and outlook sigma No 6/2022 Swiss Re Institute 7The nature of the coming recessionsWithout considering the additional spillover risks of financial instability,the

47、 euro area is likely to face a deeper recession than the US due to the energy and cost-of-living crisis,with leading indicators already in recessionary territory.In the US,it will likely be the aggressive monetary policy tightening from the Federal Reserve(Fed)that tips the economy into recession,al

48、though this will likely materialise later and be more moderate than in the euro area(see Table 2).However,the risk of financial instability could make the downturns deeper in both regions(see Chapters 2 and 4).Table 1 Real GDP growth,inflation and interest rates in select regions,2021 to 2024Note:E=

49、estimates,F=forecasts.US policy rate is taken as the mid-point of the range;euro area policy rate refers to the interest rate on the main refinancing operations;10-year euro area yield is proxied by the German government bond yield.Data and forecasts as of 10 November 2022.Source:Bloomberg,Swiss Re

50、Institute20212022E2023F2024FActualSRIConsensusSRIConsensusSRIConsensusReal GDP growth,annual average,%US5.71.81.80.10.41.61.4UK7.44.34.21.00.50.91.1Euro area5.23.13.10.20.11.31.5Japan1.71.31.61.31.41.01.1China8.13.43.34.14.84.95.0Switzerland4.22.22.20.90.81.51.6Global5.82.82.91.72.32.82.9Inflation,a

51、ll-items CPI,annual average,%US4.78.18.13.74.22.82.4UK2.69.19.07.06.33.72.6Euro area2.68.68.36.25.63.02.1Japan0.22.32.31.51.60.90.9China0.92.32.22.62.42.42.1Switzerland0.62.92.92.02.01.51.3Global3.68.17.45.44.93.53.3Policy interest rate,year-end,%US*0.14.64.45.14.23.62.9UK0.33.53.74.04.23.33.4Euro a

52、rea0.02.82.53.52.83.32.5Japan0.00.00.00.00.00.00.0Yield,10-year government bond,year-end,%US1.53.93.93.63.43.43.2UK1.03.54.03.53.73.53.7Euro area0.22.62.22.62.02.32.1Japan0.10.20.20.20.20.30.2The euro area is likely to face an earlier and deeper contraction than the US.8 Swiss Re Institute sigma No

53、6/2022 Macroeconomic environment and outlookA slow recovery after the coming recession Economic recoveries are likely to be slow and protracted,stretching beyond 2023.We expect the rebound to be much weaker than the exceptional post-COVID bounceback in 2021,which was boosted by large-scale monetary

54、and fiscal stimulus in economies worldwide,and pent-up household demand and savings.We see no central bank pivot into monetary easing unless severe downside(systemic)risks materialise.However,we expect advanced market governments,principally in Europe,to maintain inflationary fiscal stimulus such as

55、 income support,despite high inflation.By the end of 2023,we forecast US real output to still be USD 2.2 trillion below our pre-Ukraine invasion forecasts,and the euro area economy to be USD 1.7 trillion smaller than the pre-war forecast.For the US,this shortfall would be more than twice as large as

56、 that caused by the 2020 COVID-19 crisis(and 1.2x for the euro area,with Germany most exposed with a 1.4x greater shortfall).The recessions will weaken consumer balance sheets,and consumer spending is unlikely to support the next recovery as strongly as prior ones.Inflation is not conqueredGlobal in

57、flation is anticipated to stay volatile and persistent above historical averages in 2023 with price pressures more persistent across a larger share of the consumer price index(CPI)basket.Still,we expect headline CPI inflation to decline year-on-year in 2023,due to reverse base-effects from broadly l

58、ower(albeit volatile)global commodity prices amid slowing global growth.We forecast 5.4%average annual global inflation in 2023 and 3.5%in 2024,down from 8.1%this year.Upside risks to our CPI forecasts include a milder global economic slowdown,the loosening of Chinas COVID-19 restrictions,if produce

59、rs are able to pass on higher costs more easily to stronger consumers,or if there are further supply-side shocks(eg,the energy crisis worsens).The fall in inflation momentum may also be slower if central banks are forced to prioritise addressing financial instability and increasing fiscal stresses a

60、t the expense of fighting against inflation(see Chapter 2).Table 2 Depth,diffusion and duration:the three dimensions of inflationary recessions expected in the euro area and US Source:Swiss Re InstituteEuro areaUSDepth Deeper contraction than the US;nations like Germany and those in eastern Europe v

61、ulnerable Moderate contractionDiffusion Energy crisis:pushing inflation up and growth down;winter will worsen supply-demand imbalances.Consumer and business confidence weakened Energy rationing/forced savings:output of energy-intensive industrial sectors most exposed(particularly in Germany).Diffusi

62、on to other European economies Labour market impact:softening due to lower production in energy-intensive sectors;unclear if furlough schemes will be re-introduced Consumer impact:excess savings decline given persistent real income squeeze Loss of global momentum:slowing external demand will once ag

63、ain most impact countries like Germany Monetary tightening:to continue as the ECB raises interest rates in the coming months,also weighing on growth Restrictive monetary policy:rate hikes are exposing:Corporates under pressure:household excess savings continue to erode,while low and deteriorating co

64、nsumer confidence will likely cut spending.Company revenue to come under pressure while companies also face higher borrowing costs Housing market stress:affordability is worse than before the financial crisis and mortgage rates are rising.Demand and prices expected to fall Strong US dollar weakens e

65、xports:the significant appreciation in the dollar against trading partners risks weighing on exports and weakening the trade balance Labour markets loosen:rising unemployment rate will be a headwind to sentiment and drag on demand Duration Downturn lasting two or more quarters Risks for winter next

66、year are under-appreciated(risks that next winters energy crisis could be worse)Shorter recession than in Europe The downturn will likely take place early in 2023Triggers that could deepen the recession Further deterioration in energy crisis(see Chapter 4)EU solidarity cracks(leads to fragmented or

67、more constrained policy responses,bringing less support)Feedback loop from global recessionary conditions Worsening labour markets Policymakers constrained in offering support to cushion the recession/accelerate the recovery Feedback loop from global recessionary conditions Recoveries after the comi

68、ng recession will be slow and protracted,stretching beyond 2023.Falling energy prices point to lower CPI inflation rates next year,yet still above historic averages.Macroeconomic environment and outlook sigma No 6/2022 Swiss Re Institute 9Inflationary risk is highest in Europe,we believe,as governme

69、nt measures to address the energy crisis(eg,cuts to taxes on energy,energy price caps),though lowering inflation in the near term,shift price pressures into 2023 and beyond.Income support via cash handouts and lower income tax rates are also inflationary,keeping aggregate demand higher than would ot

70、herwise be the case in the recessions we forecast.In the US,we forecast CPI inflation of 3.7%for 2023 and 2.8%for 2024 and believe only an economic downturn is likely to slow demand,and inflation in turn.In the meantime,excess demand will continue to fuel broadening inflation pressure with pass-thro

71、ugh into wages a key risk.For emerging markets excluding China,we expect headline CPI inflation rates to trend down and forecast an aggregate decline to 10.8%in 2023 from 15.3%this year.In our view,commodity-importing emerging markets will continue to be vulnerable to imported inflation,as commoditi

72、es are typically priced in US dollars.China is the exception,and we expect CPI inflation there to trend up next year to 2.6%from 2.3%in 2022,due to pass-through from producers to consumers.“True”growth and inflation momentum in our forecastsThe interpretation of economic growth and inflation forecas

73、ts are affected by“carry-over effects”,meaning the prior years dynamics impact the current years forecasts.3 As per convention,we forecast real GDP growth and CPI inflation as annual average growth rates:the year-on-year percentage change of average real GDP or the headline consumer price index,resp

74、ectively,over the four quarters or 12 months of each year.This means the growth rate is determined by the dynamics in the underlying series within the previous year(carry-over effects)as well as those in the current year(“true”growth).4 The“true”growth captures solely the current year momentum in th

75、e forecast key to watch in volatile periods like today(see Figure 2).Last years exceptional post-COVID growth rebound creates strong positive carry-over effects in 2022,masking the underlying weakening momentum in our 2022 forecasts(see Table 3).This results in a true growth estimate that is negativ

76、e in the US,and weak in Europe,Japan and China.We expect much lower or even negative carry-over effects on real GDP growth in Europe and the US in 2023,while true growth will also remain low or negative.In inflation,strong momentum in 2021 meant most major economies entered 2022 with positive carry-

77、over effects,largest in the US and UK.This years inflation surge will bring even larger carry-over effects in 2023,especially in Europe.At the same time“true”inflation momentum is very strong this year,but we expect it to moderate in 2023 as monetary tightening takes effect.3 See Beneath the surface

78、:uncovering“true”growth and inflation,Swiss Re Institute,2 September 20224 For inflation we forecast the year-on-year percentage change of the average headline consumer price index over the 12 months of each year.Inflation risks are highest in Europe and emerging markets.Carry-over effects mean the

79、prior years dynamics impact the current years forecasts.Figure 2 Illustration of carry-over effects from year 1 to year 2,which can be either positive(left)or negative(right)Source:Swiss Re InstituteQ1Q2Q3Q4Q1Q2Q3Q4Year 1Year 2GDP levelPositivecarry-overeffectTrue growthAverage level Year 2Average l

80、evelYear 1Q1Q2Q3Q4Q1Q2Q3Q4Year 1Year 2GDP levelAverage level Year 2Average level Year 1Negativecarry-overeffectTrue growthOur 2023 forecasts contain very weak true growth,while true inflation momentum is strong but expected to moderate.10 Swiss Re Institute sigma No 6/2022 Macroeconomic environment

81、and outlookInterest rate outlook The zero-interest rate environment is largely over.Recessions alone are unlikely to deter central banks from keeping interest rates at restrictive levels unless:1)there are also substantial,sustainable declines in inflation;2)financial stability or debt sustainabilit

82、y concerns take priority(see Chapter 2);or 3)a severe global recession scenario emerges(see Chapter 4).The pace of tightening may slow,but we see policy interest rates staying higher.A key question for central banks seeking to tame inflation is to determine where the“neutral interest rate”lies.This

83、is the estimated equilibrium rate at which interest rates neither stimulate nor restrain economic growth,and is important as it could dictate where interest rates settle in the longer term.Some economists have questioned whether the neutral rate may now need to be structurally higher to counter the

84、accomodative effect of the ample liquidity regime of the past decade.5However,10-year sovereign bond yields could reflect recession fears later next year,which is why in the US we expect yields to end 2023 slightly lower than at present(see Table 1).Still,we think it would be difficult for nominal y

85、ields to revert to the extremely low levels of the past decade.We also see a limit to how high yields can rise if central banks intervene on financial instability concerns(see Chapter 2).Interest rate volatility in 2022 is at levels generally only seen in crises.For example,US interest rate volatili

86、ty6 is currently as high as last witnessed during the global financial crisis or during the peak bond market disruptions of March 2020.Based on the volatility in 2022,using a 95%confidence interval implies that US 10-year yields could range anywhere between 2.95%and 5.5%around our point forecasts.Ap

87、plying the same analysis for German yields suggests a 10-year Bund yield range between roughly 1%and 3.7%.This highlights the significant uncertainty in bond yield forecasts today.Quantitative tightening(QT)is also becoming an important tool to combat inflation,in our view.The central bank balance s

88、heet run-off is well under way in the US and the UK,and QT is also under discussion at the European Central Bank(ECB).This could lead the ECB to also start passively reducing its balance sheet next year by not(fully)reinvesting redemptions.A policy of QT by the ECB could be tricky given the signific

89、ant fragmentation across euro area debt profiles(maturity structure,debt servicing costs,etc).For the Fed,we expect a constant USD 80 billion monthly runoff(USD 60 billion in Treasuries,USD 20 billion in mortgage-backed securities)through year-end 2023.As a 5 A monetary policymaker faces uncertainty

90、 speech by Catherine L Mann,Bank of England,21 April 2022.6 As measured by the MOVE Index.Table 3 Decomposition of SRIs annual average real GDP and CPI inflation forecasts Note:Carry-over effects are calculated assuming zero growth in quarterly real GDP from Q4 of the previous year(for GDP growth)an

91、d zero growth in monthly CPI from M12 of the previous year(for CPI inflation).“True”growth or inflation is the difference between the annual average growth/inflation forecast and carry-over effects.Source:Swiss Re Institute20222023SRI forecastCarry-over effect“True”growthSRI forecastCarry-over effec

92、t“True”growthAverage annual change in real GDPUS1.80%2.02%0.22%0.10%0.37%0.27%Euro area 3.10%1.93%1.17%0.20%0.66%0.46%UK4.30%3.66%0.64%1.00%0.49%0.51%Japan1.30%0.58%0.72%1.30%0.31%0.99%China3.40%1.52%1.88%4.10%2.05%2.05%Average annual change in consumer price indexUS8.10%2.89%5.21%3.70%2.07%1.63%Eur

93、o area 8.60%2.40%6.20%6.20%3.69%2.51%UK9.10%3.14%5.96%7.00%4.57%2.43%Japan2.30%0.44%1.86%1.50%1.14%0.36%China2.30%0.32%1.98%2.60%1.31%1.29%We expect central bank policy interest rates to stay at higher levels next year in our inflationary recession baseline outlook.Long-term sovereign bond yields co

94、uld reflect recession fears next year.Interest rate volatility in 2022 is at levels only generally seen in crises.Quantitative tightening is becoming an important tool to combat inflation,especially in the US.Macroeconomic environment and outlook sigma No 6/2022 Swiss Re Institute 11result,we expect

95、 the Fed balance sheet to be at around USD 8.6 trillion by year-end 2022 and around USD 7.6 trillion by year-end 2023.Decomposing the drivers of longer-term interest ratesNominal and real interest rates have increased substantially since one year ago.As the Fed has become more hawkish,longer-term US

96、 inflation expectations measured as the yield on 10-year breakevens peaked in the first half of 2022 at around 3%and have declined since.Nominal yields have repriced higher,resulting in higher real yields adjusted for inflation expectations which have risen significantly since the start of 2022(see

97、Figure 3).The 10-year US Treasury real yield touched around 1.7%in early November,the highest level since just after the global financial crisis.The US yield curve is inverted across most maturities and the US term premium has not repriced much so far,perhaps due to the still very large Fed balance

98、sheet.In Europe,German sovereign bond yields have also increased significantly since the start of the year,similar to the US.Nominal yields rose from roughly 0%at the start of the year to about 2.3%as of early November.Longer-term inflation expectations also topped in the first half of this year and

99、 have retraced slightly since.Compared to the US,however,10-year German real yields are hovering just around 0%.In essence,this means that the most fundamental cost of capital the inflation-adjusted risk free interest rate in Germany is still zero.In our view this is not an adequate level to fight i

100、nflation and is one reason we expect German yields to rise further in the near term.This could cause a further repricing of risk.Only in the medium term do we see a risk of real interest rates on government debt being held lower(see Chapter 2).10-year real yields the most fundamental cost of capital

101、 have increased substantially this year,especially in the US.German yields have also increased significantly since the start of the year.Figure 3 Left:US 10-year interest rates and inflation expectations.Right:German 10-year interest rates and inflation expectationsSource:Bloomberg,Swiss Re Institut

102、e2%1%0%1%2%3%4%5%01.01.202201.01.202101.01.202001.01.201901.01.201801.01.201701.01.201601.01.20153%2%1%0%1%2%3%4%01.01.202201.01.202101.01.202001.01.201901.01.201801.01.201701.01.201601.01.201510y US nominal yield10y US inflation expectations10y US real yield10y German nominal yield10y German inflat

103、ion expectations10y German real yield12 Swiss Re Institute sigma No 6/2022 Last year we identified the“three Ds”divergence,digitalisation and decarbonisation three structural trends that would shape the long-term path of the world economy.These still do matter,but the accumulation of risk is now exp

104、osing a fourth“D”:debt sustainability and related financial stability risks.As central banks rapidly raise interest rates to bring down inflation,it is calling into question government finances and exposing latent vulnerabilities built up among financial markets participants(eg,pension funds in the

105、UK)that added leverage in the low-yield,low-volatility regime.Central banks could be forced off their tightening course if price stability becomes dominated by financial stability concerns in the short term,and debt sustainability concerns in the medium term.Due to this,we see the prospect of furthe

106、r volatility in financial markets(eg,interest rates,currencies)and higher inflation in the medium term key for insurers to watch.Financial stability risks are risingThe fastest pace of interest rate rises for several decades is fine so long as it leads to the desired tightening in financial conditio

107、ns and“benign”market volatility.However,if fluctuations in asset prices or deteriorations in asset quality become so large as to threaten the solvency of systemically important institutions,we would expect central banks to prioritise addressing financial stability,immediately and forcefully.For exam

108、ple,the Bank of England(BoE)recently became gilt market-maker of last resort for UK pension funds.Financial instability can manifest its either in the fragility of financial intermediaries or in excessive volatility in the prices of financial assets both could be legitimate triggers for a central ba

109、nk policy pivot if the anticipated impact on growth and inflation were large enough.A sharp repricing in interest rates is exposing latent vulnerabilities built up by financial market participants over the past decade of ultra-low interest rates in our view.Central banks must juggle competing object

110、ives of maintaining price stability,financial stability,and pressure to enable government spending by keeping interests rates lower than they should be(debt sustainability).We see growing risk of real interest rates being repressed in the longer term,either through lower nominal interest rates or to

111、lerance of higher inflation,which would be negative for long-term investors.However,if policymakers address the demand-side causes of inflation and implement supply-enhancing investments,this tension could ease.Productivity-driven growth could bring welcome benefits to the real economy and to the in

112、surance industry.The accumulation of risk is exposing a new“D”,debt,to add to the structural“3Ds”we flagged last year.Suddenly imposed financial market discipline can amplify financial instability risk.Figure 4 ECB composite indicator of systemic stress Source:Composite Indicator of Systemic Stress,

113、ECB Statistical Data Warehousekein AI-Chartda zu komplex0.40.10.61.1199920012003200520072009201120132015201720192021Systemic stress composite indicatorBond marketEquity marketForeign exchange marketsCorrelationFinancial sectorMoney marketA policy tug of war:financial stability and debt sustainabilit

114、y risksA policy tug of war:financial stability and debt sustainability risks sigma No 6/2022 Swiss Re Institute 13There are signs that strain in financial markets has risen substantially on the back of central bank tightening(with more expected,including QT).The ECB systemic risk indicator for the e

115、uro area is already at its highest since the regions sovereign debt crisis of 20102012,with the biggest contribution from the financial sector and bond markets(see Figure 4).In emerging markets,higher interest rates increase debt sustainability concerns,which could become self-reinforcing.Front-load

116、ed tightening in the US has driven the US dollar to a 20-year high,requiring emerging market central banks to act to contain interest-rate differentials and currency depreciation.Countries with high levels of USD-denominated debt are most at risk from a stronger dollar and higher interest rates(see

117、Figure 5).The US has no such worries over currency mismatches,but liquidity in the US Treasury bond market possibly the most globally systemically important asset market has deteriorated to spring 2020 levels(see Figure 6).We consider this due to thinning demand from investors ranging from global pe

118、nsion funds to domestic commercial banks and the Fed(which is selling as part of QT).The tightening of monetary policy and coming recessions raise liquidity and solvency risks.Figure 5 US dollar-denominated debt and currency depreciation Note:countries listed as follows:AR Argentina;TR Turkey;PL Pol

119、and;KR:South Korea;CO Colombia;ZA South Africa;TH Thailand;CN China;MY Malaysia;CL Chile;IN India;ID Indonesia;SA Saudi Arabia;MX Mexico;BR Brazil;RU Russia.Source:IIF,BloombergARTRPLKRCOZATHCNMYCLINIDSAMXBRRUHigher repayment burdens for USD-denominated debtYTD currency depreciation against USD30201

120、00102030405060010203040506070USD-denominated debt to GDP ratioEmerging markets face spillover effects from US dollar strength and interest rate tightening.14 Swiss Re Institute sigma No 6/2022 A policy tug of war:financial stability and debt sustainability risksIn the private sector,a key“known unkn

121、own”is fragility in non-bank financial intermediaries(NBFIs),where regulators and policymakers have less visibility.The sector had optimised for the low-volatility and low-rates-for-longer regime of the past decade by taking greater risk and leverage,increasing their vulnerability to volatility,as s

122、een this autumn among UK pension funds.7 Credit spreads are also wider since the start of this year,and elevated input costs are pressuring profit margins.8 We see relatively lower risks in the banking sector,due to regulation since the global financial crisis.In the US,the interest-sensitive housin

123、g sector has rapidly entered a recession this year with demand falling amid rising mortgage rates.9 We do not believe US housing market stresses will become systemic as in 2008.10 In China,we expect the real estate sector,about a quarter of Chinas GDP,to remain a drag on the real economy,though rece

124、nt data suggests government stimulus measures have eased the stress somewhat.11 Real interest rate repression in the mid to longer termThe other potential trigger of central bank U-turns on interest rates could be debt sustainability concerns.The legacy of crisis responses of past decades is a large

125、 stock of public debt.Higher interest rates mean larger fiscal deficits due to higher costs of new borrowing and lower tax revenues(due to lower growth).Normally when supply-side shocks are being treated by governments by boosting demand further in an already inflationary environment,an independent

126、central bank should raise interest rates to offset fiscal inflation(see Box:Competing policy objectives).7 The financial assets of the NBFI sector accounted for 48.3%of the global financial system in 2020,compared to 42%in 2008,according to the Financial Stability Board.8 Rising defaults:“zombie fir

127、ms”will be the first to fall,Swiss Re Institute,27 October 2022.9 Mortgage Applications Decrease in Latest MBA Weekly Survey,Mortgage Bankers Association,2 November 2022.10 Global house prices:the road back to earth,Swiss Re Institute,4 November 2022.11 According to National Bureau of Statistics of

128、China,the contraction in real estate investment narrowed to 12%in September(August:14%)and contraction in sales narrowed to 16%(August:23%).Figure 6 Overview of key higher-frequency metrics of financial stability risks for the USNote:The data for each variable are transformed into percentile ranks,b

129、ased on the distribution of its values since 2007.The heatmap presents the distribution of the percentile ranks.Red indicates high percentile ranks(bad)and green indicates low percentile ranks(good).Source:Bloomberg,Federal Reserve Economic Data,OECD2019 2020 2021 20222013 2014 2015 2016 2017 201820

130、07 2008 2009 2010 20112012S&P 500 Price-to-Earning RatioS&P 500 Volatility(VIX Index)10-Year Treasury Bond Yield Volatility10-Year Treasury Bond Real Yield3-Month Swaption Volatility(Source:BofA)Government Liquidity IndexJPY/USD 3-Month OIS Swap Basis(Reverse Ranks)EUR/USD 3-Month OIS Swap Basis(Rev

131、erse Ranks)5-Year Sovereign CDS spread5-Year IG Corporate CDS Spread5-Year HY Corporate CDS SpreadAAA BBB Corporate SpreadCredit Managers Composite Index(Reverse Ranks)3-Month LIBOR-OIS Spread 10-Year Treasury Bond Bid-Ask Spread3 Month Treasury LIBOR Spread(TED Spread)Treasury Holdings Growth(yoy)R

132、eal House Price Growth(yoy)House Price-to-Income Ratio30-Year Fixed Mortgage RateBankingHousingFinancial marketsCreditUnlike in the financial crisis,risks today are seen in non-bank financial intermediaries.Real estate markets are coming under pressure,but we do not see a repeat of the global financ

133、ial crisis.Inflation objectives may conflict with debt sustainability concerns,leading to a tug of war over interest rate policy.A policy tug of war:financial stability and debt sustainability risks sigma No 6/2022 Swiss Re Institute 15We see a risk of debt sustainability concerns becoming a constra

134、int on central banks independence,potentially derailing their inflation goals to enable fiscal policy.12 The result is“fiscal dominance”when central banks keep interest rates low to prevent government borrowing costs ballooning,and allow higher inflation to reduce the real value of the debt.We see g

135、reatest likelihood of such policy alignment if there is an escalation or prolongation of the war in Ukraine,or a new global conflict,that makes it easier to justify central bank support for exceptional fiscal spending in a so-called“wartime economy”,as in the pandemic(and in wars throughout history)

136、.Competing policy objectivesRaising interest rates to tackle inflation is consistent with central banks price stability objective,and accepts that the rises may eventually cause recessions.However,this mandate can create tension with governments objectives,as seen in Europe,where fiscal and monetary

137、 authorities policies are undermining one another.Fiscal outlays to tackle the“cost of living”crisis,notably energy subsidies and price caps13,are expected to add to medium-term inflation,especially when expenditure is funded by debt issuance rather than tax revenue.But by continuing to raise intere

138、st rates to counter such inflation pressure,central banks make government borrowing more costly and bring debt sustainability concerns into the spotlight.This can impose greater fiscal discipline(as seen in the UK fiscal U-turns this autumn),but also means less fiscal relief than governments would i

139、deally like to provide.Meanwhile central bank losses on their quantitative easing portfolios could become a significant fiscal issue(eg in the UK),with potential ramifications for central bank independence.We see the global economy experiencing more volatile inflation with more frequent spikes and s

140、urprise deviations from the recent trend,exacerbated by more frequent supply shocks in an increasingly multipolar world economy(see Figure 7).14 In such an environment of inelastic and scarce supply,aggregate(fiscal)demand swings,eg,due to government interventions like subsidies/price caps and their

141、 subsequent unwinding,would in our view have bigger inflationary effects than in the previous decades of supply abundance associated with globalisation prior to 2008.The biggest losers from fiscal dominance could be sovereign debt investors and private sector savers of which insurers are both who fa

142、ce the prospect of higher and more volatile inflation resulting from lower central bank policy rates.Bond investors would demand higher yields to compensate for higher inflation risks.It would be a challenge to keep long-term real borrowing costs preferentially low for governments unless fiscal domi

143、nance is coupled with financial repression through official regulations such as capital controls or interest rate caps(eg,yield curve control)despite high inflation.1512 Some Thoughts on Monetary Policy in Japan,Remarks by Ben Bernanke,May 2003.13 Fiscal responses to shield households and businesses

144、 from the energy crisis in Europe has been estimated to cost as much as 7.4%of GDP in Germany(as of 20 October 2022)for example.Source:https:/www.bruegel.org/dataset/national-policies-shield-consumers-rising-energy-prices14 Maintaining resilience as a new world order takes shape sigma 05/2022()15 Re

145、inhart,Kirkegaard and Sbrancia,“Financial Repression Redux”,Finance&Development,June 2011We see a risk of debt sustainability concerns becoming a constraint on central bank independence.Policymakers face competing policy objectives,and measures can undermine each other.We are entering a structurally

146、 higher and more volatile global inflation backdrop.Real interest rate repression is a key medium-term risk.16 Swiss Re Institute sigma No 6/2022 A policy tug of war:financial stability and debt sustainability risksBoosting productivity and the revival of industrial policyWhile current monetary and

147、fiscal policies are affecting the demand-side of the economy(see Box:Competing policy objectives),alleviating the tension between addressing inflation and supporting fiscal sustainability will require long-term investment in productive supply capacity.Global labour productivity has been on a decline

148、 the past years(see Figure 8).Ramping up investment into R&D to commercialise innovation would help improve productivity.A key example is in the energy transition to address climate change and energy security.We estimate that USD 271 trillion of new investment is needed to meet the Paris Agreement t

149、arget16 and net-zero carbon emissions by 2050.17 Increasing public investment is a significant challenge for governments,especially those facing binding 16 Limiting global warming to well below 2C relative to pre-industrial levels,see The Paris Agreement,United Nations Framework Convention on Climat

150、e Change(UNFCCC),202217 Decarbonisation tracker Progress to net zero through the lens of investment,Swiss Re Institute,7 October 2022.Figure 7 Average inflation and inflation volatility (standard deviation of monthly headline CPI inflation)Note:10-year forecast is the average of SRI annual inflation

151、 forecasts for 20222031.Source:Bloomberg,Swiss Re Institute1%0%1%2%3%4%5%S.D.AverageS.D.AverageS.D.AverageS.D.AverageS.D.AverageChinaJapanUKEmerging AsiaUS200009201019202010Y forecastA boost to productivity could improve the longer-term economic outlook.Figure 8 Evolution of productivity growth (out

152、put per worker)Note:GDP-weighted aggregate growth rates.Output per worker and GDP in 2010 US dollars.Source:Conference Board;Penn World Table;World Development Indicators,World Bank.2%1%0%1%2%3%4%2%0%2%4%6%8%10%2017201520132011200920072005200320011999199719951993199119891987198519831981Emerging mark

153、et and developing countries(right axis)Advanced economies(left axis)Investment and innovation could boost growth and support higher productivity.A policy tug of war:financial stability and debt sustainability risks sigma No 6/2022 Swiss Re Institute 17budget constraints and with high debt.18 One sol

154、ution would be to pool more private capital investments.To do so,policymakers can lower barriers to private investors into long-term and net-zero investment assets and support the establishment of sustainable infrastructure assets in becoming a tradable asset class by encouraging standardisation.19

155、The remaking of industrial policy to promote long-run supply chain resilience and security could also help reduce vulnerabilities to future shocks and reduce the need for future government intervention.In the energy sector,this could mean using investment,incentives or regulation to lead the shift t

156、o green technologies like hydrogen,electricity storage and carbon capture.The semiconductor industry is also undergoing extraordinary investment as countries pursue technological decoupling.20 Other sectors likely to be shaped by industrial policy focused on national security include aerospace,steel

157、 and aluminium production,as well as medical devices and pharmaceuticals.Insurance implications of the new policy backdropDivergence in fiscal and monetary policies and the potential for fiscal dominance have implications for the insurance industry.In the near term,fiscal relief that alleviates cost

158、-of-living pressures would sustain normal insurance demand.Without sufficient relief measures for consumers and businesses,insurers could see demand headwinds as disposable incomes decline.Consumers and companies could delay purchases of(or investments in)goods and projects requiring new compulsory

159、policy take-ups,and delay purchases of(or lapse)non-mandatory insurance products(eg,motor first-party liability or term life insurance coverages).21 However,for first-necessity and compulsory non-life insurance(eg,basic health,compulsory motor third-party liability)demand is inelastic and the demand

160、 would be expected to remain resilient.For life insurers,effective fiscal support could reduce lapse rates on in-force saving business,while any unplanned saving buffers created by mistargeted stimulus could underpin new demand.In the medium term,the potential for fiscal dominance risks keeping infl

161、ation higher and on a more volatile basis.This would be negative for non-life insurers but have a more mixed impact on life insurers through the monetary policy channel(see Chapter 3).First,higher and more volatile inflation impacts claims and repricing.When non-life insurers ability to reprice is c

162、onstrained by market competition or political headwinds,underwriting margins would be expected to come under pressure.There,those insurers with the greatest reserve buffers would be more resilient.22 Next,the exposure to property versus casualty business matters.In Europe,non-life insurers with a hi

163、gher share of property business are more exposed to supply-driven inflation,while those tilted towards casualty lines are more exposed to wage-driven inflation,except for health covers exposed to both sources of inflation.23 Insurers with a business mix more exposed to the shape of medium-term infla

164、tion will thus experience higher profitability pressures.Navigating industrial policy shake-ups in EuropeGeopolitical events and the energy crisis are creating an urgency for governments to strengthen energy security and safeguard strategic industries(eg,semiconductors).Closing the climate investmen

165、t gap to protect energy security would create positive spill overs for commercial insurers,as would reshoring of critical industries.2418 See also Z.Darvas,G.Wolff,“A green fiscal pact:climate investment in times of budget consolidation”,Policy Contribution 18/2021,Bruegel,2021.19 Swiss Re Institute

166、,2022,op.cit.20 See for example the US CHIPS and Science Act,the European Chips Act,and Chinas State Council Notice of Several Policies to Promote the High Quality Development of the Integrated Circuit(IC)and Software Industries in the New Era,Guofa,August 2020.21 For instance,car registration in th

167、e EU requires third-party liability coverage but first-party liability is not mandatory,see Car insurance validity in the EU Your Europe.22 For example in France,domestic insurers will implement price alleviation measures targeted at vulnerable groups to contain purchasing power squeezes caused by i

168、nsurance costs.G.Dauvergne,“Pouvoir dachat:un compromis indit entre Bercy et les assureurs”,LArgus de lassurance,28 September 2022.23 Impact of rising interest rate and inflation on European insurers,FitchRatings,5 September 2022.24 sigma 5/2022 Maintaining resilience:the role of P&C insurers in a n

169、ew world order,Swiss Re Institute,9 September 2022.Industrial policy is set to take on a new prominence by governments.Fiscal relief that cushions consumers income squeeze would sustain insurance demand in the near-term.Fiscal policy-driven inflation would impact non-life insurers through claims cos

170、ts.Governments are incentivised to strengthen energy security and safeguard critical industries.18 Swiss Re Institute sigma No 6/2022 A policy tug of war:financial stability and debt sustainability risksInsurance supports the expansion of renewable energy by providing risk protection covers for the

171、construction and operations phases of new projects.We estimate that global renewable energy investments would generate cumulative premiums of USD 237 billion between 2022 and 2035,with major contributions from Europe(33%),Asia Pacific(25%)and North America(20%)(see Figure 9 left).25 We expect the en

172、ergy crisis to accelerate the continental European transition towards net-zero,with most of the new insurance business realisation shifting forward.The largest chunk of new premium generation is anticipated to come from operational covers,at 93%(of which 71%for property damage&business interruption

173、policies,and 29%for machinery breakdown),against 7%for construction covers(of which 77%for erection all risks/construction all risks policies,and 23%for delay in start-up or advanced loss of profits policies)(see Figure 9 right).25 Ibid.Investment and innovation in energy security offer medium term

174、growth opportunities.Figure 9 Forecast cumulative global insurance premiums from renewable energy investments,20222035.Per regional contributor(left)and per project phases(right)Source:Swiss Re Institute0%20%40%60%80%100%7%93%22%25%20%33%EuropeNorth AmericaAsia PacificRest of worldOperationalConstru

175、ctionPer project phasesPer project phasesUSD237 billionPer regional contributor sigma No 6/2022 Swiss Re Institute 19We are cautious on the outlook for global insurance premiums given the elevated downside risks over the next two years.A negative macroeconomic backdrop,persistent albeit easing infla

176、tion pressures and volatile financial markets are weighing on premium growth and profitability.We forecast a 0.2%fall in global insurance premiums in 2022(though+5.6%growth in nominal terms)and below-trend growth of 2.1%annually on average in 2023 and 2024 in real terms(2023:1.5%,2024:2.8%,see Table

177、 4).26 We continue to forecast total premium volumes in nominal terms to exceed USD 7 trillion this year,for the first time.This is attributed to a market recovery from pandemic-induced lows,rate hardening in commercial lines,and stronger premium growth,particularly in emerging markets.Looking forwa

178、rd,we believe 1)further rate hardening in non-life insurance fuelled by high inflation and large losses from both Hurricane Ian and the war in Ukraine;2)anticipated fiscal support to relieve the consumer cost-of-living crisis;and 3)higher interest rates will raise both nominal-terms premium growth a

179、nd profitability for all insurers from 2023.The difficult environment creates challenges for the insurance industry,but opportunities too(see Figure 10).Macroeconomic dynamics:the environment of expected inflationary recessions and risk of financial instability is challenging for the insurance indus

180、try.We expect higher interest rates to be a silver lining for insurers as inflation pressure abates from 2023.Market landscape:we see risk and opportunity in hardening markets,new risk pools catalysed by digitalisation,higher risk awareness in consumers and governments,among other factors.26“Trend”r

181、efers to the long-term 20062021 average CAGR.Trend growth for total global real insurance premiums is 2.4%per annum.The global insurance industry is facing underwriting and investment pressures,but major mitigation measures are taking place in response and we expect hard market conditions to continu

182、e for some years.We expect a slight contraction in global premiums in 2022 after adjusting for inflation,and real growth of 2.1%on average for the next two years,below the long-term trend.In non-life insurance,we see weak real premium growth this year,strengthening in 2023 and 2024 from anticipated

183、lower inflation and a hard market for commercial lines.The Florida landfall of Hurricane Ian adds profitability pressure to non-life insurers already feeling the effect of higher claims severity this year.In life insurance,we forecast real premiums to fall this year as the cost-of-living crisis redu

184、ces disposable incomes,but expect higher interest rates and digital adoption to return premiums to growth in 2023 and 2024.The rising interest rate environment is positive for insurers investment returns and profitability over time,though capital losses add near-term pressure.We expect global insura

185、nce premiums to grow at a below-trend rate for the next two years when adjusted for inflation.The insurance industry is facing challenges and opportunities from economic and market dynamics.Figure 10 Macroeconomic and market dynamics Source:Swiss Re Institute Economic recession Prolonged and more vo

186、latile inflation Rising interest rates Financial stability risks Hardening market New risk pools(eg cyber)Consumer and government risk awareness Huge losses from natural catastrophe eventsMacroeconomic dynamicsMarket landscape Declining capacity in re/insurance market Reduction in shareholder equity

187、 Insurance market outlook 2023/2420 Swiss Re Institute sigma No 6/2022 Insurance market outlook 2023/24Table 4 Real insurance premium forecasts,key marketsNote:figure shows insurance premium forecasts,in real terms.Total insurance premium forecasts are for life and non-life combined.Icons show direc

188、tion of deviation from long-term trend(20062021)for each region.EMEA refers to Europe,Middle East and Africa.Source:Swiss Re InstituteTotalNon-lifeLifePast 20172021Growth rate 2022Outlook 20232024Past 20172021Growth rate 2022Outlook 20232024Past 20172021Growth rate 2022Outlook 20232024World2.6%=0.2%

189、2.1%3.5%0.9%2.3%1.5%=1.9%1.7%=Advanced markets2.2%0.8%1.6%=3.2%0.6%1.9%0.7%=2.8%0.8%North America2.9%1.2%1.5%3.4%1.0%1.9%1.3%1.5%0.0%EMEA2.4%2.9%1.6%2.6%1.2%1.9%1.8%4.2%0.7%Asia Pacific0.5%3.9%2.2%3.1%2.1%2.3%1.7%6.0%2.0%Emerging markets4.4%2.1%4.2%5.4%2.7%4.1%4.4%0.9%4.3%Excluding China2.5%1.5%4.0%

190、2.2%1.4%3.2%3.1%2.0%5.1%China6.2%2.6%4.3%8.5%3.6%4.7%5.3%0.2%3.7%Table 5 Insurance market key indicators Note:*as a%of net premiums earned.Non-life insurance encompasses property,casualty and also health insurance.Past trend(20172021);Current(2022);Outlook(20232024).CAGR=compound annual growth rate.

191、Regional stock market indicators contain advanced and emerging countries in each of the region.Colours are based on deviation from long term trend(20062021)for each region:1.5%Source:Swiss Re Institute,BloombergAdvanced marketsWorldNorth AmericaEMEAAsia-PacificPastCurrentOutlookPastCurrentOutlookPas

192、tCurrentOutlookPastCurrentOutlookNon-life,directProfitability,ROE average7.3%3.4%7.4%7.4%3.1%7.6%7.0%3.3%7.2%7.0%5.8%6.5%Profitability,Underwriting results average*1.1%2.4%0.2%0.3%3.6%0.6%2.9%0.4%1.8%2.1%1.6%2.4%Profitability,Investment results average*8.9%6.8%8.5%9.5%7.3%8.7%7.9%6.0%9.0%6.9%5.7%6.0

193、%Life,directProfitability,ROE average9.7%9.9%10.2%11.9%8.3%11.2%10.0%8.6%Total(Stock market indicators)Price to book,insurance sector average1.21.41.31.51.11.31.21.2Price to book,total market average2.12.43.83.91.92.11.51.4Stock prices,insurance sector,CAGR%3.2%15.0%8.2%9.5%1.2%26.0%4.0%18.0%Stock p

194、rices,total market,CAGR%8.4%1.5%14.0%25.4%4.4%24.5%2.6%26.9%Insurance market outlook 2023/24 sigma No 6/2022 Swiss Re Institute 21The big concern:more persistent and volatile inflationIn 2022,inflation became the number one worry for insurance executives(63%of respondents to BlackRocks global insura

195、nce survey).27 Inflation affects insurers on both sides of the balance sheet,by(1)hurting demand for products as affordability decreases,(2)increasing the cost of claims and expenses,but also(3)pushing up rates and nominal premiums and(4)generating with a lag higher nominal investment returns becaus

196、e of the(usually)associated increases in interest rates.Inflation volatility as well as the absolute level will be an additional challenge for insurers,as the industrys underwriting will have to cope with higher uncertainty in the outlook.Inflation as a headwind for insurance demandBusinesses and in

197、dividuals tend to scale back demand for discretionary goods and services when prices rise.In lines of business where covers are compulsory,such as motor or professional liability,demand is likely to hold up better.Large firms may use captive insurance to self-insure as an alternative to commercial i

198、nsurance markets.28 For life insurance products,higher inflation erodes the value of future fixed pay-outs,decreasing its attractiveness.The volatile nature of this years inflation outlook is a further secondary headwind,as volatility is robustly negatively correlated with economic growth.There is s

199、upporting evidence for this view for both advanced and emerging markets,after controlling for the effect of inflation levels.29Inflation as a drag on underwriting performanceUnderwriting results typically suffer as inflation pushes up the cost of claims and expenses.Non-life is most affected at pres

200、ent as high inflation in car parts and construction negatively impacts motor and property claims(see Table 6).Higher fuel prices also have an effect as costlier transportation adds to the final cost of claims.30 Long-tail business,such as liability claims,will be more affected by wage and healthcare

201、 inflation in the long term,while the latter will also affect health insurers.The industry is also exposed to social inflation,which stems from shifts in judicial and court judgments to award larger financial settlements to plaintiffs,and legislative changes.31Inflation as a driver of higher nominal

202、 non-life premium growthForecast changes in specific components of inflation provide guidance on the extent to which claims and cost in non-life insurance may increase.Property and motor damage costs,healthcare expenditures(HCE)and income compensation are the main moving parts in insurers claims exp

203、enditures,while wages are key for administrative costs.For example,bodily injury claims in liability and accident insurance depend on HCE and income compensation(wages).Our forecasts suggest that property lines,which account 27 2022 Global Insurance Report.BlackRock.28 Hard market solutions:captive

204、insurance thrives in tough times.Swiss Re Institute.2021.29 R.Judson,A.Orphanides,“Inflation,volatility,and growth”,Board of Governors of the Federal Reserve System.1996.https:/www.federalreserve.gov/pubs/feds/1996/199619/199619pap.pdf 30 Inflation lifts reconstruction costs as fuel prices boost vol

205、atility.Verisk,2022.31 Annual Report 2021.Swiss Re.Inflation at current levels makes insurance less affordable.Inflation erodes profitability via higher claims and expenses,especially in property and motor.Table 6 Impact of inflation on insurance claims,global trendsSource:Swiss Re InstituteLine of

206、businessClaims impact 2022Claims impact 2023ReasonNon-lifePropertyHighAbove averagePrice of materials peaked in 2022,but wage growth to continue in 2023Motor,physical damageHighAverageHigh car part prices related to supply chain imbalances,and wage growthMotor,bodily injuryBelow averageAbove average

207、Wage growth and medical cost inflation to exceed general inflationLiabilityAverageAbove averageWage growth,medical,and social inflationHealthBelow averageAbove averageMedical cost inflationLifeLifeNoneNoneBenefits are set at policy issueInflation in cost components relevant for insurers suggests the

208、ir claims and costs may increase significantly.22 Swiss Re Institute sigma No 6/2022 Insurance market outlook 2023/24for around 13%of non-life premiums,should see the greatest pressures on claims in 2022,largely due to the forecast rises in construction costs(producer price index for construction,PP

209、I-C).Claims and costs in other lines are also seeing strong pressures driven by wages,HCE and components such as motor repairs.In 2023,increases in prices relevant for property and motor may ease,but sticky inflation components such as wages mean costs and claims are likely to continue to climb at p

210、ace.The situation can vary greatly depending on the individual insurer and market.Considering the impact from nat cat losses,we anticipate that pressure on premium growth to maintain stable combined ratios could increase over this year and next.Higher interest rates a tailwind for investmentsHigher

211、interest rates create a more attractive environment for rate-sensitive investments.This an important profitability tailwind for insurers via higher net investment income,which helps to offset higher claims liabilities,but takes time to have an effect.However,financial market volatility can continue

212、to accompany interest rate rises,especially if sudden or sharp as seen in 2022.For non-life insurers this volatility can have adverse effects as mark-to-market losses on fixed income asset values have a counter-effect on investment profitability.For life insurers,valuation losses are typically unrea

213、lised and so portfolio revaluation due to interest rate changes does not have a material impact,but lapse rates of life policies may rise along with interest rates,which would force life insurers to sell out asset with losses realised accordingly.Non-life outlookReal premium growth will bottom out i

214、n 2022,with a slow recoveryWe expect global non-life premiums to increase by 0.9%in real terms in 2022.Slowing global economic growth and high inflation reduce investments into new projects and,particularly in personal lines,spending on insurance.Meanwhile,decades-high inflation mechanically leads t

215、o lower real growth.Indeed,nominal premium growth is estimated at 8.0%in 2022,above the five-year average of 6.0%,underpinned by increases in exposure and rate hardening in commercial and personal lines.We forecast real premiums to grow 2.3%on average over the next two years(1.8%in 2023 and 2.8%in 2

216、024),below the 20172021 average of 3.5%,as economic conditions take time to normalise.Nominal non-life growth should moderate in 20232024 as inflation comes down.We stress that there is more than the usual uncertainty surrounding our forecasts,Figure 11 Forecast changes in key components of claims a

217、nd costs,key markets Note:E=estimates,F=forecasts,PPI-C=producer price index for construction,HCE=healthcare expenditure.Source:Swiss Re Institute0%5%10%15%20%202320222022E2023FGermanyFranceUKAustraliaUSPPI-CWagesMotor repairHCEPPI-CWagesMotor repairHCEPPI-CWagesMotor repairHCEPPI-CWagesNew vehicles

218、HCEPPI-CWagesNew vehiclesHCEHigher interest rates are a silver lining for insurers.2022 is expected to be the trough for real non-life premium growth,but 202324 growth will remain below trend.Insurance market outlook 2023/24 sigma No 6/2022 Swiss Re Institute 23amid volatile inflation and the impact

219、 of Hurricane Ian on claims,pricing and loss ratios(see Natural catastrophe losses elevated after Hurricane Ian).Advanced markets set to slow in 2022 and 2023;emerging markets to improveMacroeconomic headwinds will impact advanced markets the most,but we expect advanced EMEA to perform worst in 2022

220、 and 2023.In that region,we forecast a 1.2%decline in non-life premiums in 2022 and a 0.9%increase in 2023,caused by a squeeze on household incomes,with also limited price hardening in 2022.There is a large gap between nominal and real growth,and nominal growth is also weaker than in most other regi

221、ons.Growth should recover as Europe exits the inflationary recessions forecast for early 2023,with more scope for rate hardening.In North America,though we expect just a 1.0%rise in real terms in 2022,due to inflation,nominal growth is an above-trend 9.2%and real growth should rebound in 202324 as p

222、rices continue to firm while inflation eases.Rate hardening is expected to remain strong in commercial lines and is accelerating in personal lines.In advanced Asia,aside from Australia,lower inflation makes for more favourable real growth than in other advanced markets.After underperforming in 2020

223、21,we see emerging markets premium growth outpacing advanced economies in the coming years.This is due to their relatively strong pace of economic development and rapid growth in lines of business such as health,general liability and agro.China will remain the key contributor at close to 60%of our e

224、stimated 2022 emerging market non-life premiums.We anticipate real growth in China of 4.0%in 2023 and 5.8%in 2024,contributing to respectively 0.4ppts and 0.5ppts of global real premium growth in those years.Although those are high numbers,non-life premium growth in the coming years will be below hi

225、storical trends as economic growth slows.We see strong real premium growth in emerging Asia excluding China of 7.3%on average in 2023 24,driven by commercial lines,health and a resilient economic backdrop.In Latin America,we also expect a 7.3%rise in real non-life premiums in 2022.The war in Ukraine

226、 is creating headwinds in emerging Europe(including Russia).We forecast non-life premiums to fall 12.1%in real terms in 2022 in that region,with further smaller declines in 2023 and 2024.Nominal premiums will grow at a slow pace.Figure 12 Global non-life insurance premium growth rates in real terms(

227、2022 values in brackets)Note:E=estimates,F=forecasts.Source:Swiss Re Institute2%0%2%4%6%8%10%China(3.6%)Excl.China(1.4%)All(2.7%)Asia-Pacific(2.1%)EMEA(1.2%)North America(1.0%)All(0.6%)World(0.9%)Advanced marketsEmerging markets2022E201721202324FWe forecast weaker real premium growth in advanced mar

228、kets in 2022 and 2023 due to weakness in EMEA.Emerging markets are returning to premium growth outperformance.24 Swiss Re Institute sigma No 6/2022 Insurance market outlook 2023/24Personal lines premium growth lags commercial as rates keep risingWe see commercial lines(including workers compensation

229、)continuing to benefit most from rate hardening and expand more than personal lines(excluding health)in the coming years.We estimate 3.3%growth in commercial premiums in 2022,and a 3.7%gain in 2023.In contrast,we expect personal lines insurance premiums to shrink by 0.7%in 2022,primarily due to poor

230、 performance in motor insurance in advanced markets(see Motor in focus:a re-balancing after COVID-19 disruption).In China,growth in motor should normalise after the de-tariffication effect of 2020/21 although new car sales are weak there too.For 2023,we forecast global personal lines to grow by 1.8%

231、.Health insurance,which accounts for about half of global non-life premiums,is set to expand by 1.1%in 2022 and 0.8%in 2023 in real terms.In the US,the largest primary health insurance market,rising prices and utilisation are driving premium growth.Emerging markets health insurance is also benefitin

232、g from higher risk awareness and a strong medical expenses insurance market in China.Motor in focus:a rebalancing after COVID-19 disruptionMotor insurance,the second largest line of business in non-life,is experiencing a strong increase in claims frequency and severity in 2022 in major markets such

233、as the UK.Premium income is lagging these claims trends,though,as policyholders benefit from strong price competition in many motor markets,fuelled by windfall gains from reduced mobility during the pandemic in 2020 and 2021.Figure 14 depicts the development in the UK motor market:claims frequencies

234、 are still slightly below pre-pandemic levels and may increase.Claims severity has risen significantly and is about 23%higher in the first half of 2022 than in 2021 for accident and property damage as well as for bodily injury.If the inflationary environment persists,a continued rise in claims trend

235、s is to be expected.Without a similar rise in premiums,the outlook is challenging for insurers.Figure 13 Contributions to annual real growth rates in non-life premiums per region (percentage points)Note:E=estimates,F=forecasts.Source:Swiss Re Institutekein AI-Chartda zu kompliziertmit Stapel im nega

236、tiv-Bereich0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%20212022E2023F2024FNorth AmericaAdvanced EMEAAdvanced Asia-PacificEmerging Asia excl.ChinaLatin AmericaEmerging EMEAChinaCommercial lines of business will continue to benefit most from rate hardening.Motor claims frequency and severity are rapidly incre

237、asingInsurance market outlook 2023/24 sigma No 6/2022 Swiss Re Institute 25Rate hardening to regain momentum amid rapidly increasing loss trends We anticipate the significant claims inflation in commercial lines of business this year to fuel fresh momentum in rate hardening for the next 12 18 months

238、.The significant increases in construction costs in many countries,and high and rising natural catastrophe losses following Hurricane Ian,will put upward pressure on property lines.In the US for example,commercial property price growth already reaccelerated to 8%year-on-year in 3Q22,from 6%in 2Q22.I

239、n casualty,we expect rising wages and healthcare costs in the post-pandemic world,and a continuing trend of social inflation,to push up premium rates in 2023.Pricing in commercial lines has continued to improve in 2022,albeit more moderately.Before that,commercial lines pricing had continued rising,

240、albeit by a more moderate 6%in 3Q22 from a peak of more than 20%in late 2020,according to Marsh(see Figure 15).Property insurance rates moderated to 6%from the 2020 peak of 20%,while casualty price increases have been more moderate over the whole cycle.Financial and professional liability lines,whic

241、h are least exposed to economic inflation,exhibited a small decline of 1%in 3Q22 after five years of soaring rate increases.Compared to the trough in 2017,property rates are 60%higher,while casualty rates were up by close to 20%.Regional variations remained small for property and casualty rates.Figu

242、re 14 Premiums and claims of UK motor insurance Source:ABI quarterly motor statistics,Swiss Re Institute01002003004005006001H222021202020192018201710%20%30%40%50%60%70%Claims ratio(rhs)Claims ratio(right axis)Premiums per policyClaims per vehicle exposureClaims inflation is prolonging the hard marke

243、t in commercial lines of business.Pricing in commercial lines improved again in 3Q22,the 20th consecutive rise and the longest continuous growth in the series.Figure 15 Commercial lines rate index,2012 2022 Source:Marsh global insurance rate index,Swiss Re Institute10%0%10%20%30%40%50%43214321432143

244、21432143214321432143214321432120222021202020192018201720162015201420132012CasualtyPropertyFinProAll lines26 Swiss Re Institute sigma No 6/2022 Insurance market outlook 2023/24Natural catastrophe insured losses elevated after Hurricane Ian Hurricane Ians landfall in Florida as a category 4 storm and

245、in South Carolina as a category 1 has triggered an estimated insured loss of USD 50 to 65 billion,32 the second costliest catastrophe loss event ever for the insurance industry after Hurricane Katrina in 2005.We now estimate that natural catastrophe insured losses totalled at least USD 100 billion s

246、o far in 2022,already well above the last 10-year annual average of USD 81 billion.Hurricane Ian brought catastrophic damage due to the intensity of its winds,storm surges and torrential rainfall,and caused the loss of 134 lives.Hurricane Ian provides a reminder that it only takes one large primary

247、peril event to push insurance losses for a year significantly higher.Hurricane risk is a major threat to US coastal businesses and residents and a capital-intensive peak peril for the re/insurance industry.This year has also been characterised by a high number of winter storms,severe convective stor

248、ms and devastating floods globally.Insurers have experienced elevated natural catastrophe insured loss years since 2017,after a dip in 20122016,driven primarily by recurring high-loss secondary peril events such as severe convective storms,major floods and wildfires,a number of peak perils events in

249、cluding Hurricanes Ida in 2021 and Ian in 2022 and,of late,inflationary pressures.Inflation rates for key loss components,and in particular construction costs,have risen in the past two years significantly.For example,in the US,total reconstruction costs including material and labour rose 20.6%betwe

250、en September 2021 and September 2022,more than three times the pace of increase for the same period a year earlier.33 As demand-supply imbalances continue,construction costs are projected to stay elevated into 2023,which will affect home repair and reconstruction costs.This increases the potential f

251、or further elevated natural catastrophe property losses over the next two years.Going forward,we expect natural catastrophe insured losses from both primary and secondary perils to continue grow by a long term annual rate of 57%,exceeding expected GDP annual growth rate of 2.5%,underpinned by econom

252、ic development,urban sprawl into hazardous areas,hazard intensification in a warming planet,as well as rising construction costs.34 Non-life profitability to reach a trough in 2022In our view,global non-life insurance profitability will be challenged significantly in 2022 by weakness in both underwr

253、iting performance and investment results.Using a sample of largest markets as a proxy for global profitability35,we estimate global non-life after-tax return-on-equity(ROE)at 3.4%in 2022,down from an average of 7.3%between 20172021.However,we expect a rebound in average global non-life ROE to 6.5%in

254、 2023 and a 10-year high of 8.3%in 2024.32 Includes National Flood Insurance Program(NFIP).The foregoing estimates are subject to uncertainty and may need to be subsequently adjusted as the claims notification and assessment process continues.33 Producer Price Indexes,Bureau of Labor Statistics,Sept

255、ember 2022.34 Construction costs will persistently rise beyond economic inflation due to emerging standards for investments in energy efficiency and natural hazard mitigation as well as income/wealth effects.35 Asia includes Australia and Japan,EMEA is proxied by France,Italy,Germany and the UK.Nort

256、h America captures both Canada and the US.Profitability trends in China are described but are not part of the sample.Hurricane Ian pushes natural catastrophe insured losses for 2022 above 10y average,providing a stark reminder of the loss potential of primary perils.Insured catastrophe losses have b

257、een elevated since 2017 and going forward projected to grow by 5 7%annually.Global non-life insurance ROE is expected to fall in 2022,recovering thereafter.Insurance market outlook 2023/24 sigma No 6/2022 Swiss Re Institute 27Higher claim values and insufficient rate hardening will combine to put un

258、derwriting results under pressure in 2022 and 2023.We estimate non-life global underwriting losses will reach 2.4%of net premiums earned(NPE)in 2022,with further losses of 0.8%of NPE in 2023,as claims and pricing only improve gradually.Motor insurance is particularly impacted by the mismatch of clai

259、ms and pricing.Our estimates also factor in the impact of hurricane Ian,but there remains uncertainty regarding its impact,in particular if insured losses grow more than expected due to economic inflation in Florida and social inflation caused by litigation.As insurers seek to mitigate higher claims

260、 with rate rises,we expect underwriting results to gradually improve and bring underwriting results back to profitability in 2024,at levels close to the 20172021 average.Investment results will likely deteriorate in the near-term due to some realised capital losses,but higher interest rates graduall

261、y improve investment income as bond portfolios roll over.We expect a global non-life investment result of around 6.8%of net premiums earned in 2022,down from 8.9%between 2017 and 2021.The biggest driver for this is declines in asset prices as interest rates have risen,given more than 60%of insurers

262、global investments are in fixed income,but equity investments,which accounted for roughly 20%of insurers global invested assets,36 are also expected to post negative returns for 2022.Still,rising interest rates should provide a boost in the medium term.We forecast the global non-life investment yiel

263、d to rise progressively.From 2.4%in 2021,it will climb to about 2.6%in 2022 and to more than 3%in 2023 as maturing low-yielding debt is progressively re-invested into higher-yielding new bonds.37 Non-life insurers typically hold more short/medium-term bonds than life insurers,which explains the rela

264、tively faster rebound in portfolio yields.38 As a result,by 2024 we expect the non-life industry investment result to be 8.6%,close to 2021.However,the more beneficial investment environment ahead will not enable insurers to take a softer stance on underwriting since projected investment yields rema

265、in low by historical standards.In advanced EMEA,we expect underwriting losses to more than offset investment gains in many economies this year.We forecast advanced EMEA after-tax ROE to fall about 3.2ppts to 3.3%in 2022,and that it will take until 2024 for underwriting results to return to historica

266、l trends.We estimate that investment results will improve meaningfully in 2023 and the regional ROE will climb to roughly 6.3%in 2023 and to 8.2%the following 36 Those shares are based on investment portfolios reported by insurers to regulators in our country sample.37 We distinguish between the“net

267、”yield that only includes changes in income from capital,and“total”yield that also factors in realised gains or losses.The latter is falling in 2022,but will then rebound slightly higher than the former as asset prices recover in the medium term.Picking a few examples among the large re/insurers,bot

268、h Zurich and Generali have commented on important increases in their reinvestment yields in H1 2022,while Scor estimates its overall investment yield will reach 33.5%in 2025.Sources:Generali Investor Relations,Zurich Investor Relations,Scor H1 2022 results.38 Globally,around 15%of non-life insurers

269、bond portfolio will be renewed in 2023,and bond yields are rising at the fastest pace in decades.AM Best.Figure 16 Aggregate performance of eight of the largest non-life insurance markets,%of net premiums earned Note:E=estimates,F=forecasts.The eight markets are the US,Canada,France,Italy,Germany,th

270、e UK,Australia and Japan.ROE is expressed in%of shareholders equity.Source:Swiss Re Institutekein AI-Chartda zu kompliziertmit Stapel im negativ-Bereich5%10%0%5%10%15%20%200620082010201220142016201820202022E2024FOperating resultROE after taxUnderwriting resultInvestment resultUnderwriting results wi

271、ll be under pressure in 20222023 as claims rise strongly.Higher re-investment yields will boost results by 2024,but that will not enable insurers to take a soft stance on underwriting.Advanced EMEA set for a gradual recovery until 2024.28 Swiss Re Institute sigma No 6/2022 Insurance market outlook 2

272、023/24year.In North America,Canada is expected to fare better than the US in 2022.US ROE is estimated to fall to 2.5%with both underwriting and investment performance deteriorating,while Canadian P&C ROE is expected to be around 11.5%.In addition to insured losses from hurricane Ian,high inflation i

273、n property and motor hull insurance is forecast to increase the North American gross combined ratio by 5ppts to 103.2%,despite large rate increases already filed by insurers.In advanced Asia-Pacific,we expect Australia and Japan combined to post an after-tax ROE of 5.8%of NPE,in line with 2021.Sever

274、e floods in Australia will likely lower the underwriting result in 2022,39 but investment results are set to be robust in both economies.Non-life profitability data reported by the main Chinese insurers(outside our sample of key countries)shows non-life after-tax profits in 2021 largely flat year-on

275、-year at around 6%of NPE.40 There were small underwriting losses(around 0 to 0.5%of NPE)from the liberalisation of motor insurance,but investment results were strong for main insurers in 2021,at around 6.57%of NPE.We expect profitability to ease somewhat in 2022 and after as Chinese insurers contend

276、 with anticipated falling equity and property prices,higher advanced market bond yields and slowing economic growth.Financial stability risks in non-lifeFor non-life insurers,we see a key risk to asset prices should financial stability worsen significantly,as credit spreads have widened and could fa

277、ce a further hit.As illustrated by the impact of falling gilt prices in the UK in late September,financial market stress can lead to the fire sale of assets and other disorderly behaviours.Non-life insurers typically do not use leveraged derivative positions for hedging,as seen by UK pension funds.4

278、1 They are vulnerable to falls in the price of the assets they hold,but those are usually held until maturity so only a small part of the losses is realised.Besides,strong solvency ratios and the lessons learned from the 200708 financial crisis mean falling asset prices and wider spreads are unlikel

279、y to be a threat to the industrys financial stability.Cyber risk:big challenges and big opportunities for insuranceCyber is a burgeoning risk pool and a line of business with strong growth opportunities.Digitalisation is increasing exposure to cyberattacks throughout society and the risk landscape i

280、s rapidly becoming more complex.But as risks have risen so does awareness and demand for commercial and personal coverage.Swiss Re forecasts global cyber insurance premiums to reach USD 23 billion by 2025,from an estimated USD 10 billion in 2021.42 In the US alone,the largest cyber market,premiums g

281、rew by 74%in 2021,with standalone policy premiums increasing 92%.43 Smaller companies with lower cyber-defence capacity are at the forefront of demand.It is estimated that half of small businesses go out of business within six months of a cyberattack.44 Whether this demand converts into premiums dep

282、ends on SMEs ability to afford coverage today.In their decision-making,they should consider that incident-related costs including forensics45,regulatory compliance(s),legal and internal costs(eg,system/data restoration,business interruption losses,public relations)accumulate fast and can compromise

283、operations.Cyber insurance may help to fill the protection gap with policies that typically cover most of these elements and offer privileged access to a network of specialised service providers to facilitate a prompt intervention.39 Detailed industry loss footprint for February-March 2022 Eastern A

284、ustralia floods,Perils,13 September 2022.This would be the costliest natcat event on record for the country.40 We use 2021 financial reports for the six largest non-life insurers,covering 70.5%of the Chinese market.41 In 2017,non-life insurance firms held only 3%of total insurer derivative exposure

285、in the US.Health insurers exposure was negligible.National Association of Insurance Commissioners,https:/content.naic.org/cipr-topics/derivatives42 Cyber insurance:strengthening resilience for the digital transformation,Swiss Re Institute,7 November 2022.43 Cyber insurance coverage can be provided o

286、n a standalone basis or packaged within an existing commercial multi-peril policy.The standalone market developed in response to the introduction of cyber exclusions in other policies and has grown to nearly twice the size of the packaged cyber market by direct premiums written.44 The Need for Great

287、er Focus on the Cybersecurity Challenges Facing Small and Midsize Businesses,SEC,19 October 2015.45 Forensic costs typically range from USD 20 000 to USD 100 000 for companies with turnover of less than USD 50 million.That includes costs to investigate a firms vulnerabilities and processes as well a

288、s the nature and extent of the damage following a security breach.In China,profits were stable in 2021 but are likely to ease somewhat going forwardThere are growing systemic risks around financial stability,but non-life insurers are most likely safe.Cyber is a burgeoning risk and business line with

289、 growth opportunities.Demand for new coverage will mainly originate from smaller entities at risk.Insurance market outlook 2023/24 sigma No 6/2022 Swiss Re Institute 29But not all cyber risks are insurable.The risk of a catastrophic event stemming from geopolitical conflicts or critical infrastructu

290、re failure along with the human nature of the risk and difficulties quantifying the potential liability keep capacity and expansion constrained in cyber insurance.This leaves a revenue opportunity on the table for insurers and decreases societys cybersecurity resilience.A larger cybersecurity employ

291、ee base,better modelling and data,and new sources of capital are all necessary for a resilient security infrastructure.Life insurance outlookCost-of-living crisis to subdue real growth in 2022 Strong inflationary headwinds and declining purchasing power are creating a cost-of-living crisis for consu

292、mers in advanced economies,and we estimate that global premiums will contract by 1.9%in real terms in 2022.Advanced EMEA and advanced Asia Pacific will likely experience the largest declines(see Figure 18).In our view,North America will expand 1.5%in 2022.Emerging markets(incl.China)growth should st

293、ay positive at 0.9%in 2022,albeit below the historical average(201721:4.4%).Tailwinds for the life insurance sector should create a recovery in real premium growth in 202324 and we forecast global premiums to grow 1.7%,slightly above the historical average(201721:1.5%).Emerging markets(incl.China)wi

294、ll lead with 4.3%annual increases.Digital adoption,risk awareness and public sector support for life insurance development,particularly in Asia(excl.China),will benefit both these markets and global premium growth.However,the potential for a steeper economic deterioration or financial market instabi

295、lity mean downside risks are elevated.We see premium growth drivers diverging in advanced and emerging markets.Inflation in advanced markets,particularly Europe,will squeeze household incomes and we expect consumers propensity to save and so buy individual saving products to decline.However,individu

296、al and group savings will still underpin premium growth in some advanced markets due to regulatory and industry factors(the US,UK and France in particular).In emerging markets,we expect a growing middle class and government targets for life insurance penetration to carry saving business growth.Deman

297、d for protection products will be supported by younger,digitally-savvier emerging markets consumers who are more aware of the benefits of holding term life policies.We expect demand for long term care,disability and critical illness products to remain anchored across advanced and emerging markets,wi

298、th less saturated markets driving the momentum(see Is the pandemic boom fading?).But non-insurable catastrophic risks leave a market gap,impair cyber resilience,and require innovative and coordinated solutions.We estimate global life premiums to fall 2%in real terms in 2022.Squeezed budgets are a he

299、adwind in advanced markets but emerging markets growth outlook is robust.Figure 17 Contributions to annual real growth rates in life premiums per region (percentage points)Note:E=estimates,F=forecasts.Source:Swiss Re Institutekein AI-Chartda zu kompliziertmit Stapel im negativ-Bereich3%2%1%0%1%2%3%4

300、%5%20212022E2023F2024FNorth AmericaAdvanced EMEAAdvanced Asia-PacificEmerging Asia excl.ChinaLatin America&CaribbeanEmerging EMEAChina30 Swiss Re Institute sigma No 6/2022 Insurance market outlook 2023/24Resilience in North America,but Europe to feel cost-of-living painThe EMEA region has a very sub

301、dued outlook due to inflationary pressure,expected recessions and geopolitical turbulence.We expect premiums to decline 4.2%in real terms this year,and recover to 0.7%annually on average in 202324.Households in Italy and Germany are likely to delay any saving products purchases this year as record-h

302、igh inflation squeezes middle incomes propensity to save and stock markets stay volatile.We estimate a real premium decline of 12%and 7.1%respectively in these markets in 2022(nominal of 5.9%and 0.2%),also partly due to base effects from 2021.In France and the UK,life premium growth is expected to d

303、ecline 4.3%and 4.1%respectively in real terms,as inflation erodes nominal growth(+0.7%and+4.2%respectively).The transformation of traditional savings and pension contracts into unit-linked products in France46,and the pick-up of the bulk annuity market in the UK as de-risking of group pension contra

304、cts continues,underpins saving-linked products growth.The weak macroeconomic outlook in the region may result in increased unemployment and a further slowdown in demand for life insurance.In contrast,North America looks to be resilient.We forecast 1.5%growth in real terms in 2022,supported by strong

305、 annuity premiums,which are aided by higher interest rates and positive US regulatory developments last year.47.We expect life premium growth to be almost flat in 2023 and 2024 driven by a base effect contraction in saving business(0.4%)as regulatory tailwinds fade.We estimate protection products wi

306、ll continue to grow moderately(1.5%in 202324).Sustained high inflation would further dent disposable incomes and curb demand for annuities.Advanced Asia Pacific is also under pressure.We estimate life insurance premiums to decline by 6%in real terms in 2022,led by South Korea,Taiwan,Hong Kong,and Au

307、stralia.Saving business declined strongly year-to-date in South Korea,and domestic competition from alternative products is a risk to watch.48 In Hong Kong,restricted mobility during the Omicron outbreak has reduced premium growth this year,but we expect a strong rebound next year if the border with

308、 China reopens.In Australia,we expect a contraction of 4.3%in real terms mainly due to high inflation.49 Regulatory tightening and market volatility have reduced demand for ordinary life and annuity products in Taiwan.Growth tailwinds are coming from Japan,where digitalisation of 46 As part of the F

309、rench pension reform(transformation Loi Pacte).We encompass Eurocroissance products into the broader unit-linked products category.47 The US Department of Labors new fiduciary rules came into effect last year,and the 2019 SECURE Act opened the door to annuities in 401(k)s and other retirement plans.

310、48 Source:FitchRatings.49 Investment-linked insurance premiums have been shrinking in Australia in recent years.Advanced EMEA to contract 4.2%in 2022 amidst a darkening economic outlook.Figure 18 Global life insurance premium growth rates in real terms,actual and forecast(2022 values in brackets)Sou

311、rce:Swiss Re Institute8%6%4%2%0%2%4%6%China(0.2%)Excl.China(2%)All(0.9%)Asia-Pacific(6%)EMEA(4.2%)North America(1.5%)All(2.8%)World(1.9%)Advanced marketsEmerging markets2022E201721202324FNorth America to stay resilient in 2022 and grow 1.6%.Advanced Asia-Pacific premiums to contract 6%this year from

312、 lockdowns,inflation and competitive pressure.Insurance market outlook 2023/24 sigma No 6/2022 Swiss Re Institute 31sales channels is supporting life protection and we estimate 1.5%real terms premiums growth this year and next.We expect premiums in advanced Asia will grow by an annual average 2%in r

313、eal terms in 2023 and 2024.Chinas life industry is navigating economic and structural challenges.We expect life premiums to grow by 0.2%in real terms in 2022 as uncertainty due to lockdowns weighs on consumer confidence and propensity to save.Life industry restructuring,including a shift in distribu

314、tion channels from agent-led to bancassurance,and the lagged impact of critical illness(CI)pricing directives revisions,are dragging on insurance sales.These headwinds should dissipate as economic conditions improve and we forecast average annual growth of 3.7%in 202324.In emerging markets excluding

315、 China,life premiums should grow by an estimated 2%in real terms in 2022,with the largest increases in Asia(5%).The medium-term outlook is still brighter,with 5.1%expected average annual real growth and 7.4%annual growth in emerging Asia(excluding China)alone,over 202324.In India,the second-largest

316、life insurance market in the emerging world,we expect life premiums to grow by 8%in real terms supported by economic recovery,risk awareness and rising insurance penetration.In the light of recent regulatory developments and a strong push from regulators50,there is a possibility of a much stronger g

317、rowth rate in India in the medium to long term.In Latin America,we estimate subdued life premiums growth of 1.4%in real terms,mainly due to high inflation,particularly in Brazil and Mexico.In the emerging Europe and central Asia group of markets,we estimate premiums to decline by 15%in real terms in

318、 2022 as supply-chain disruptions and sanctions from the war in Ukraine weigh on the outlook.We believe low insurance penetration rates and socio-economic development will support emerging markets life insurance growth in the medium to long-term.Is the pandemic boom fading?The COVID-19 pandemic boos

319、ted consumer awareness of mortality and morbidity risks and the benefits of insurance among consumers.51 In 2020 alone,the share of risk premiums in global life premiums jumped 1.2 percentage points.However,this impact may prove short-lived,as we see signs of the return of pre-pandemic structural tr

320、ends in the outlook now.Advanced economies,with relatively higher life insurance penetration rates before the pandemic,are seeing policy growth slow.For example,in the US life insurance applications were down 6.3%52 in the year to date September 2022 compared to 2021,as the pandemic moved out of the

321、 headlines and inflation led households to reconsider discretionary spending.53 In 2021,US risk premium growth was robust at 1.8%as higher pandemic risk awareness coincided with fiscal stimulus and favourable tax and regulatory developments.Swiss Re market research into US life insurance customers t

322、his year has found a 22%lapse rate among people who bought life insurance due to COVID-19 over the 18 months prior to being surveyed.54 Lapse rates were higher among low-and middle-income households and people younger than 30 years old.In the US and the broader advanced economies group,growth headwi

323、nds may build as lower risk awareness,higher inflation,rising interest rates or a spike in unemployment could encourage existing policyholders to lapse or surrender a greater share of policies than previously the case.In emerging markets,we expect the COVID-19 shock and its short-term risk awareness

324、 impact to fade away and a return to the pre-pandemic trend of increasing demand for life insurance as socio-economic status rises.The pandemic boosted risk perception for those lacking life and health protection.For example,in India,indexed Google searches 50 The Indian insurance regulator IRDAI al

325、located growth targets to insurers.51 sigma 5/2021 Turbulence after lift-off:global economic and insurance market outlook 2022/23,16 November 2021.52 U.S.Application Activity Declines in Q3-2022 Compared to Q3-2021,but Remains Above Q3-2019,MIB Group.53 L.Scism,“Pandemic Boom for Life-Insurance Poli

326、cies is Fading”,Wall Street Journal,26 August 2022.54 Swiss Re Institute Behavioral Research Unit,2022 US life-insurance customer-survey.1811 people surveyed over the 18 months prior to H2 2022.Findings not published publicly.Lapse is defined as people who cancelled their policy,reduced their covera

327、ge amount or shopped for cheaper providers.China is still in transition in 2022,with life premiums expected to decline by 0.3%.Emerging markets excluding China to drive growth in 2022 and the medium term.The COVID boost to life insurance risk awareness may be short-lived.Risk awareness is fading awa

328、y in the US and impacting life policies,as inflation fears anchor.Risk awareness tailwinds in emerging markets to reshape in a structurally higher awareness of the benefits of life insurance.32 Swiss Re Institute sigma No 6/2022 Insurance market outlook 2023/24for life and health protection products

329、 follow the same cycles as the waves of COVID-19 cases(see Figure 19).In parallel,life protection and health premiums grew respectively 11%and 22.5%in 2021(real terms).But as pandemic worries decrease,we expect longer-term demand tailwinds from economic development and higher incomes to dominate aga

330、in,moving emerging markets along their insurance S-curves.Underpinning factors include rising education levels,financial literacy,urban development,55 digitalisation,market development and regulatory interventions that boost life and health insurance penetration.56 Life profitability to improve as h

331、igher rates start to materialiseWe use a proprietary model to estimate life insurance profitability for eight advanced markets.We expect life insurance profitability to benefit from rising interest rates and a normalisation in mortality claims related to COVID-19 in 2022.Since life insurance claims

332、are driven by mortality experience and benefits are defined at the inception of the policy,inflation has a limited impact on life insurers.COVID-19 claims continued to impact life insurers earnings in the first half of 2022,but we remain cautiously optimistic for continued normalisation.Across all m

333、arkets other than Japan,yields on 10-year bonds are significantly above pre-pandemic levels and acting as long-term profitability tailwinds.Investment incomes for major global life insurers improved in the first half of 2022.Guaranteed benefit portfolios of life and annuity underwriters are particularly expected to benefit in this environment.We estimate that life insurance operating profitability