Low Interest Rates, Large Losses Will Drive Further Market Hardening

Swiss Re expects further price hardening across all lines of business, while the reliance on underwriting will increase in the low-interest-rate environment.

In a statement, Swiss Re also said it expects more opportunities for re/insurers due to a combination of improving insurance demand and growing exposures.

Further price increases will also be driven by increasing loss trends seen around the world, Swiss Re said.

"Hurricanes are frequently affecting areas where exposures have grown as a result of wealth accumulation," the Swiss Re statement said. "This leads to increasingly severe losses, as demonstrated in the past few years."

The reinsurer noted that 2020 is looking to be no better, with the current Atlantic hurricane season being the first on record to see 9 tropical storms forming before August and 13 before September.

The situation is further aggravated by the higher frequency and severity of secondary perils, such as floods and wildfires, leading to rising claims and highlighting the need for insurance protection, Swiss Re said.

The Swiss Re statement noted that while low interest rates have been affecting the industry's profitability since the global financial crisis, further rate cuts aimed at fighting the economic impact of COVID-19 compound the issue.

"Even before the COVID-19 crisis, most major markets were operating at below-average profitability," Swiss Re Chief Executive Officer Moses Ojeisekhoba said in the statement. "To be able to address the growing need for insurance protection in a sustainable way, further price increases across all lines of business are clearly needed."

Swiss Re said it expects the non-life insurance market to continue to grow, driven primarily by exposure growth. COVID-19's impact on increasing awareness of the danger of being uninsured along with the increasing frequency of weather-related events are further driving that growth, the reinsurer said.