Despite continued market volatility and uncertainty, we remain fundamentally optimistic about the future of the insurance industry. The insurance industry has shown resilience throughout the pandemic and in the face of inflation, losses and reserve demand headwinds.
In March 2020, the new coronavirus infection (COVID-19) became a global pandemic, and the resulting economic slowdown caused Insurance industry evaluation Sometimes there were sudden drops, but those declines were short-lived. As customers seek security in uncertain times, insurers are seeing increased demand in many business sectors, particularly in the Asia-Pacific, Middle East and Africa markets, all of which are experiencing significant growth. By April 2021, the global average insurance market capitalization had returned to pre-pandemic levels.
The industry’s resilience was also reflected in its financial performance. Thanks in large part to the strong stock market, insurance companies have increased their retained earnings to new heights. And for the first time, insurance companies in both the North American and Asia Pacific markets achieved surpluses of more than $1 trillion.
This increase in capital has given insurers the ability to cope with an evolving risk landscape in an increasingly complex and volatile world. However, market dynamics are changing and insurers need to change their strategies to remain resilient.
Inflation affects the entire value chain
Impact of Prolonged inflation The problem will grow, and insurance companies will need to prepare. For example, repairing a vehicle after an accident or repairing a building due to wind or water damage can be expensive. Increased claims costs for insurance companies. At the same time, intense competition for workers is driving up operating costs everywhere, exacerbating the challenge in business sectors such as disability and long-term care that rely on a shrinking workforce. care staff.
These rising claims costs have affected underwriting operations, prompting interest rates to rise even further, and the market environment remains challenging. These rate increases may maintain the combined ratio if needed in the short term, but they cannot keep pace as claims costs exceed the amount of premium increases that the market will tolerate. Dew.
It’s not all dark clouds
There is a ray of light in the dark clouds of inflation. With stock markets in decline, rising interest rates due to inflation could provide insurance companies with much-needed investment income that could be used to cushion underwriting results.
Our research also shows that the investor community is bullish when looking at the top 50 insurance companies by segment. Expected normalized earnings per share (EPS) are currently on a recovery and growth trend towards 2024 compared to 2021, with CAGR of +10.6% for P&C insurers, +4.3% for multi-insurers, and +4.3% CAGR for life insurance companies. Companies and health insurance companies are up +0.5%.
We remain optimistic about the insurance industry’s operational and financial strength and continued resilience in the face of market volatility. As the world becomes more aware of risks and underinsured, and concerns about health and mortality increase, there is a growing demand for insurance products that provide comprehensive protection. Insurers that are innovative in these areas can help protect the future of themselves and their customers.
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