Insurance underwriting falters under global stagflation

A Swiss Re Institute analyst underscored that real premium growth in emerging markets, including China, outpaces the more advanced economies.

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An anticipated global economic slowdown could put insurers in a time machine back to a 1970s-style stagflation scenario, beating down underwriting performance. This could potentially entail setbacks on the insurer’s liquidity, capital, and shareholder equity.

Swiss Re Institute’s (SRI) chief economist for Asia Pacific, John Zhu, warns that insurers find themselves at a crucial juncture, requiring strategic adjustments to navigate the shifting economic landscape.

“I think some slowdown, maybe just mechanically, from one year to the next, is going to happen. The US Federal Reserve, through raising interest rates sharply in 2023, tried to slow down the economy so that inflation can come back to target,” Zhu said in an interview with Insurance Asia.

Zhu outlined that global economic growth is projected to fall to 1.7% this year, stemming from deceleration in major economies like the US, the Euro area, and China. This slowdown, while hinting at a potential dip in short-term insurance demand, comes with nuances.

The US, resilient in 2023, deliberately slowing its economy, and China experiencing a slower-than-expected recovery, present a mixed bag of challenges and opportunities.