Insurance sector investment performance saw a strong rebound in 2023, following a challenging 2022, as equity markets surged and government bond yields fell. According to the OECD’s 2024 Global Insurance Market Trends report, insurers in around two-thirds of jurisdictions reported positive real returns on investments.
In 2024, the insurance industry is bracing for potential rate cuts amid a backdrop of ongoing inflation and high interest rates, which have shaped recent market conditions.
Higher Premiums Driven by Rising Claims Costs and Tightening Reinsurance
Non-life insurance premiums saw a notable increase, driven by rising claims costs and a tightening reinsurance market. The motor, health, and property sectors saw the most significant price hikes. Premiums written grew by 12.4% in nominal terms and 6.2% in real terms in 2023, a sharp increase compared to the previous year’s real growth rate of just 3.1%. Most jurisdictions reported positive underwriting performance, underscoring the resilience of the market.
Mixed Impact of Interest Rates on Life Insurance
The life insurance sector experienced mixed effects due to higher interest rates. While demand for annuity and guaranteed life investment products rose in several regions, some policyholders opted to surrender their policies in favor of alternative investments or home purchases. Additionally, rising mortgage rates indirectly affected life insurance sales in markets where credit institutions require insurance coverage. Despite these challenges, gross written premiums in the life insurance sector grew in nominal terms across most reporting jurisdictions.
Improved Profitability Amid Strong Investment Returns
Investment returns provided a significant boost to insurer profitability, with many markets reversing the losses seen in previous years. Strong equity market performance and falling government bond yields were key contributors to the positive results. Combined with improved underwriting results, overall insurer profitability saw a notable recovery in 2023.
New Accounting Standards and Market Trends
The adoption of new accounting standards, particularly IFRS 17 in Europe, has impacted insurers’ reported liabilities and shareholder equity. Despite these changes, insurance penetration—measured as premiums written as a percentage of GDP—remained higher in wealthier economies, with countries like France, the United Kingdom, and the United States seeing penetration rates exceeding 10%.
In contrast, some Latin American and European countries reported lower levels of insurance penetration, reflecting regional disparities in market development. Non-life insurance remained dominant globally, particularly due to mandatory motor vehicle coverage, while life insurance demand was stronger in high-income economies.
The report highlights the insurance sector’s overall performance in 2023, covering sector penetration, premium and claims trends, investment returns, and profitability, offering valuable insights into the evolving market landscape.
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