India will emerge the sixth largest insurance market by 2032, Jérôme Jean Haegeli, Group Chief Economist, Swiss Re said on Thursday.

Currently, India is ranked tenth largest in the global listing of countries by insurance premium volumes. 

The expected rise in rankings for India will be on the back of likely 14 per cent compounded annual growth rate (CAGR) in insurance premiums over the next decade, Haegeli said, discussing the findings of Swiss Re Institute’s latest report on Global economic and insurance outlook. Both structural factors and strong fundamentals will drive insurance growth in India, he added.

Haegeli, who is visiting India, said that Indian economy is expected to record average 7 per cent growth over the next decade and this augurs well for growth in insurance sector.

India’s life insurance market is expected to be fifth largest by 2032. Swiss Re expects the global life insurance premiums growth will be almost flat this year and grow by 1.9 per cent in real terms in 2023. However, Indian life insurance industry will show resilience and grow at an exceptional rate of 6.6 per cent (in real terms) in 2022 and further grow at 7.1 per cent in 2023. Considering the projected growth rate, the life insurance premiums in India are set to cross $ 100 billion for the first time in 2022.

NON-LIFE INSURANCE

In non-life insurance space, Swiss Re expects a notable slowdown in personal lines growth this year. The group forecasts that the global non-life premium growth will slow to 0.8 per cent (in real terms) in 2022 from 2.6 per cent in 2021. In India, the non-life insurance market returned to a growth of 5.8 per cent (in real terms) in 2021 after a slight contraction in 2020.

The growth will slow down slightly in 2022 to 4.5 per cent, mainly due to high inflation. However, the sector is further expected to witness a growth of close to 8 per cent CAGR (in real terms) between 2023 to 2032. One of the driving factors for the sectoral growth is the systematic change to India’s non-life insurance sector brought by the pandemic. It resulted in a greater risk awareness leading to higher demands in health insurance, making it the biggest LoB (Line of Business) by premium volume in 2021.

GLOBAL ECONOMY 

Haegeli said that the Ukraine conflict worsened the near-term economic outlook. The global economy is on the brink of inflationary recessions, with policymakers facing an increasingly difficult inflation-growth trade off. Swiss Re expects India to reign as the world’s fastest-growing economy in 2022, he added.

Haegeli said that insurance sector is facing a mix of long-term tailwinds and short-term headwinds with impacts across segments, investment performances and the balance sheet. On the positive side, investment income is set to improve gradually as the rise in yield curve feeds into bond portfolio returns. 

Non-life commercial and personal lines will benefit from rate hardening as claims inflation to feed through this year and next. For life insurers, the profitability of large legacy book of saving products with guarantees also stand to improve under a gradual tightening. On the negative side, the Ukrainian and Russian markets will face considerable loss of premium income due to the conflict and international sanctions. Moreover, lower disposable income in high-inflation and slowing economies will impact purchasing power and curb demand for insurance products. Volatile equity markets this year and widening credit spreads will likely lead to mark-to-market valuation losses to assets 

 

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