Life insurance policies are becoming more attractive thanks to rising interest rates
Published: Monday, May 27th 2024, 11:10
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Reinsurer Swiss Re is seeing a sharp rise in demand for life insurance products worldwide. The boom was triggered by higher interest rates, as the Swiss Re Institute wrote in the Sigma study published on Monday.
After ten years of weak demand and low returns in the life insurance industry, the purchase of savings products is once again attractive, according to the press release accompanying the study. In the USA, for example, the Swiss Re Institute expects fixed-interest annuity policies to reach a new record high this year, following records in 2022 and 2023.
Overall, the industry will generate an additional 1.5 trillion US dollars in savings premiums over the next ten years, the Swiss Re experts estimate. By 2034, the premium volume is therefore likely to climb to USD 4 trillion, up from USD 2.5 trillion in 2024. By comparison, savings premiums rose by USD 300 billion during the low-interest phase from 2010 to 2019.
According to the Swiss Re Institute, industrialized countries will account for the majority of the additional savings premiums at USD 900 billion (61%), with the remaining USD 578 billion (39%) going to emerging markets. Strong growth is expected in China. The premium volume there is likely to increase by 256 billion between 2025 and 2034.
Growth and higher investment returns thanks to higher interest rates will also improve providers' margins. The Swiss Re Institute assumes that between 2022 and 2027, the operating result of insurers in the world's eight largest life insurance markets will increase by more than 60 percent and investment income by 40 percent.
Savings products are attractive again as a result of the normalization of interest rates, according to Swiss Re Chief Economist Jérôme Jean Haegeli, who is quoted in the press release. "Life insurance and pension products are once again an attractive alternative for building up retirement capital in good time and taking better account of demographic change."
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