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Life Insurers Look Fine: Swiss Re Economists

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What You Need to Know

  • Rising costs could nip at products such as dental insurance.
  • Higher interest rates would help in-force products with guarantees.
  • Rate increases can cause losses as well as gains.

Economists at a Swiss Re research arm have tried to think about the winds that might blow the world’s life insurers around over the next two years.

The economists have come out with a cautious prediction that life insurers could do pretty well, in a new report on the possible effects of “stagflation,” or a combination of rising prices and slow economic growth.

What It Means

A reinsurer such as Swiss Re sells arrangements that act like insurance for insurance companies.

If reinsurers are still happy with the finances of their customers, that might be a sign that the world’s capital will continue to flow into life insurance, annuities, health insurance and related products at about the same rate, and that your clients will continue to be able to choose from future life and annuity product menus that look at least as attractive as the old menus.

That could also might that, as far as the experts can tell, the odds that life insurers will meet product obligations continue to look good.

The Winds

When the economists looked at the “headwinds,” or negative forces, facing life, health and annuity issuers, they came up with following list of profitability headwinds:

  • The Ukraine-Russia could hurt the overall world economy.
  • Interest rates could stay low.
  • High inflation could hurt customers’ demand for life insurance, annuities and health insurance.

But the economists also created a list of possible “tailwinds,” or helpful forces:

  • The easing of the COVID-19 pandemic could lead to a decrease in claim costs.
  • Interest rate increases could start to improve investment income.
  • Memories of the pandemic could increase demand for protection products.


Inflation itself could increase the claim costs associated with some types of indemnity-based health insurance products, such as dental coverage. But in most cases, life insurers can handle that kind of risk by updating product benefits and prices, the economists say.

The economists say inflation will likely contribute to modest increases in investment earnings, and could be great for the profitability of any lines of business, such as life insurance and annuities, with built-in benefits guarantees.

Insurers’ Future Premium Revenue

Inflation-adjusted premiums at life and health companies in developed markets, such as the United States, might fall a bit this year, but inflation-adjusted premium growth should exceed 2.2% next year, the economists predict.

If a bad recession hits, that could reduce U.S. premium growth by about 3 percentage points this year, 2 percentage points in 2023 and half a percentage point in 2024, according to the forecast.

If the world simply goes through a period of moderate stagflation, U.S. life and health premiums might fall a little this year, then begin growing again in 2023 and 2024, the economists say.

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