There are fundamental shifts happening in the world economy that might have significant and enduring repercussions. Global economic growth is anticipated to abruptly slow down, and inflation rates will rise to their greatest levels in recent decades.
The COVID-19 crisis, disruptions in global supply chains, and high energy and commodity prices as a result of the war in Ukraine are just a few of the factors contributing to the high rate of inflation. Other factors include the high levels of fiscal stimulus that were injected into the economy at the height of the COVID-19 crisis. As a result, a severe recession is anticipated in several major economies during the next 12 to 18 months.
The Egyptian Insurance Federation's weekly report states that the insurance markets would likely be impacted by the current economic downturn and the high inflation environment. Inflation's primary effects will start to show up in the rising price of claims for property insurance rather than life insurance, where the benefits of the policy are predetermined. In the near future, it is anticipated that property and car insurance will be impacted even further. Supply disruptions and a lack of personnel have raised the cost of repair and reconstruction in the construction industry, which has led to greater claims.
Regarding automobiles, claims expenses increased since the price of both new and used vehicles increased unpredictably due to a lack of replacement components. Since high inflation is fuelled by bodily harm claims, inflation will also have an impact on accident and car liability insurance as well as general liability. Therefore, insurance firms must comprehend the factors that contribute to inflation and take the necessary steps to manage their budgets and reserves in order to offset the negative effects of claims expenses on earnings.
The analysis forecasts a strong 6.1% increase in gross premiums (life and property) in 2022. This growth translates into nearly steady growth (+0.4%) in real terms. Furthermore, it is anticipated that by the end of this year, worldwide premium volumes would surpass $7 trillion nominally for the first time ever. This prediction is based on property insurance prices continuing to tighten in order to combat high inflation and robust premium growth in emerging economies. As a result, premium volumes will be 17% greater than they were at the start of the Covid-19 crisis, demonstrating the ability of the insurance markets to function both during and after the epidemic.
In particular in North America and Europe, inflated exposure and price tightening are anticipated to fuel premium increase, increasing the actual value of worldwide premiums by 0.8% this year.
Property insurance premiums are projected to increase globally by 2.2% in 2023, largely as a result of price compression, particularly in the commercial insurance branches. With actual growth predicted to be 3.0% in 2022 and 4.2% in 2023, premium growth in developing countries is projected to outperform that of established economies this year and the next. Demand is also most likely the key factor driving this rise. The effects of greater public knowledge of the value of health insurance following the COVID-19 pandemic experience on short-term health insurance.