Re/Insurance Outlook: Anticipating Future Economic Shifts and Emerging Risks

In its latest Economic Insights, "Brighter Prospects, Unsettling Risks: Updated Alternative Macroeconomic Scenarios for Re/Insurers," Hendre Garbers, senior economist, Swiss Re Institute & Roopali Aggarwal, insurance economist, Swiss Re Institute, analyzed the global economic outlook for 2025 and 2026. They expect normalizing, resilient gross domestic product growth with progressive disinflation. 

According to Mr. Garbers and Ms. Aggarwal, the United States is projected to grow at 2.1 percent, with an average inflation rate of 2.5 percent in 2025. However, the dynamic risk landscape necessitates updates to alternative economic scenarios that could impact the re/insurance industry. These scenarios provide insights into potential future challenges and opportunities. 

Key Risk Scenarios

• Renewed Supply Shocks. Escalating geopolitical tensions or disruptive trade wars could cause stagflationary shocks, leading to inflation rates as high as 6 percent in the United States. This scenario would adversely affect underwriting performance and real premium growth, particularly in non-life insurance lines. 
• Global Recession. Prolonged tight monetary policies could trigger a global recession, reducing demand for insurance, especially in commercial lines. This scenario would see weakened profitability due to increased insolvencies and bankruptcies. 
• Productivity Revival. Optimistic technological advancements, particularly artificial intelligence, could drive significant productivity gains, boosting economic activity, life and non-life premiums, and investment returns. However, new technologies could also lead to severe, though infrequent, claims in cyber, product liability, and business interruption.

These scenarios, as Mr. Garbers and Ms. Aggarwal said, highlight the importance of scenario analysis in preparing for uncertainty and unexpected macroeconomic developments. The baseline outlook remains positive, with steady economic growth and rising real incomes supporting insurance demand and profitability. However, awareness and preparation for these alternative scenarios are crucial for the industry to remain agile and resilient, they said. 

Figure 1 in the full report provides detailed narratives of Swiss Re's baseline and alternative scenarios, along with key US forecasts and their impacts on the insurance industry.