Global life insurance market forecast: $4 trillion in premiums by 2034
Over the next decade, an additional $1.5 trillion in life insurance premiums will be generated worldwide – more than double the amount generated in the previous decade, the Swiss Re Institute predicts.
Developed insurance markets will generate 61% of additional premiums over the next decade, with emerging markets accounting for 39%.
Higher interest rates around the world are changing the outlook for life insurance growth and profitability. Accumulated insurance products are attractive to consumers after a decade of weak demand and low incomes.
The Swiss Re Institute expects US fixed annuity sales to hit a new high this year, following record sales in 2022 and 2023.
“Higher interest rates are making a difference, creating a push for life insurance and retirement products to more effectively address the retirement savings challenges of an aging demographic. Accumulation products are becoming attractive again as a direct result of the normalization of interest rates also benefiting long-term insurance products,” says Jérôme Jean Heguely, Chief Economist at Swiss Re Group.
In its study, Life Insurance in an Era of Higher Interest Rates, the Swiss Re Institute predicts an additional $1.5 trillion in global life insurance savings premiums over the next decade as consumers begin buying life savings that provide higher retirement incomes.
As a result, total global premiums are projected to grow to $4 trillion by 2034. In contrast, global life insurance premiums grew by only $300 billion during the entire decade of low interest rates from 2010 to 2019.
Paul Murray, CEO of Swiss Re Life & Health Reinsurance, believes that higher interest rates offer more attractive options for consumers to secure their retirement income. “We are seeing very positive growth in the life insurance market to meet this need.
In addition, reinsurers can support life insurers by freeing up capital, increasing underwriting capacity and focusing on innovative capital growth products.”
Much higher government bond yields are also now improving investment returns for life insurers and margins for fixed annuities. Between 2022 and 2027, the Swiss Re Institute predicts that operating results for insurers in the eight largest insurance markets worldwide, which include the US, UK, Germany and Japan, will grow by more than 60% as investment income increases by 40%.
Life insurer operating results and investment returns, 8 key markets, 2021-2027
The growth of the life insurance market is an important mechanism for closing the shortfall in retirement savings, which the Swiss Re Institute estimates at $106 trillion in 2022 for six advanced economies, as well as China and India.
Developed markets that will contribute to growth
The Swiss Re Institute estimates that developed markets will generate about 61%, or $900 billion, of additional premiums in absolute terms over the next decade, while emerging markets will generate an additional 39%, or $578 billion.
China will generate about 17% of total global premiums, adding $256 billion between 2025 and 2034.
The life insurance landscape is changing
The Swiss Re Institute report also outlines the structure of the life insurance industry. It analyzes how listed insurers, mutuals and private companies have responded to a decade of low interest rates, for example by exiting core businesses or moving to small-cap, fee-based strategies.
The report examines how new private equity entrants have absorbed traditional assets that were foreclosed on through reinsurance transactions. Insurers and asset managers have turned to alternative and illiquid investments to generate additional income.
Today, insurers are expanding their asset management capabilities to grow their savings businesses, and private investors are providing extensive asset management capabilities. Swiss Re foresees competition in life insurance asset management, where, for example, large insurers will acquire private credit instruments and asset managers will buy insurance companies.
Consumers should benefit from this environment with more attractive yields for life insurers.
The report also examines the impact of rising yields on life insurance risks, such as the threat of a sharp rise in interest rates. Swiss Re Institute’s analysis of disruption risk suggests the peak is likely passed. The rate hike also increased credit risk, especially in areas such as commercial real estate, but the risks of life insurers are considered manageable on average.