The non-life reinsurance market is expected to grow above GDP, driven mainly by inflation and urbanisation. The 10-year outlook for the market in USD shows nominal growth of approximately 5.4% per year, or around 3% if adjusted for inflation, said Swiss Re in a recent report.
Following years of weak performance and above-average natural catastrophe activity, the reinsurance market is reverting to a more sustainable level of risk-adjusted pricing. This trend is expected to continue at the upcoming January 2024 renewals.
Rising losses from natural catastrophes are strongly impacting the property re/insurance market. As demonstrated by many events across the world in 2023, risk profiles continue to evolve and insured losses in excess of $100bn per annum are expected to recur. Demand for natural catastrophe property reinsurance is likely to remain high as exposures keep increasing. At the same time, the main risk drivers remain unchanged: extreme weather events, urbanisation, higher property values and inflation.
Primary insurers are best suited to absorb frequency and attritional losses, while reinsurers are reverting to their core function, which is supporting insurers in recovering from large loss events such as the earthquake in Türkiye earlier this year. This trend towards a more sustainable balance in risk sharing is expected to continue.
Secondary perils such as wildfires, floods and hail will also be important, as modelling such perils remains challenging and the effects of climate change are becoming more evident as a result of increasingly extreme weather events. To achieve more predictable outcomes, greater data transparency and investment in predictive capabilities are required.
Challenging casualty market
The reinsurer added that social and economic inflationary pressures are driving up claims costs. Litigation funding grew by 42% from 2019 to 2022, and a Swiss Re analysis shows that between 2014 and 2021, the number of awards over $5m in US courts grew by 54%. This trend is expected to continue and while it is predominantly a US phenomenon, there are signs that it is emerging in other parts of the world. In such an environment, greater data transparency will be required to understand underlying exposure associated with emerging risks and to navigate upcoming challenges effectively. M