The global economy is expected to strengthen moderately next year, supporting insurance premium growth in most regions, according to Swiss Re's latest publication, Global insurance review 2015 and outlook 2016/17. Demand for nonlife insurance is expected to grow,

led by an 8% to 9% annual gain in the emerging markets in 2016 and 2017. The life insurance sector faces challenges, in particular from ongoing low interest rates. Nevertheless, global life premiums are forecast to rise by about 4% in each of the next two years, led also by the emerging markets. The global economy is expected to strengthen moderately next year. The US and the UK economies are currently growing by close to 2.5%, and real gross domestic product (GDP) growth in Japan and the Euro area are a more subdued 0.7% and 1.5%, respectively. The four economies are all expected to see slightly better growth in 2016. Emerging markets will grow by about 5% in each of the next two years, an improvement on the current 4% pace. The global economy faces three main headwinds: slower growth in China, lower commodity prices and an imminent rate increase by the Federal Reserve. The headwinds pose a risk to the baseline forecast, but are unlikely to derail the improving growth momentum. With the overall improved outlook and expected monetary policy tightening in the US and UK, government bond yields (especially in the US and the UK) will likely rise. "Global economic growth is a good sign for insurers," says Kurt Karl, Swiss Re's Chief Economist. "This is especially so in the emerging markets, where urbanisation and growing wealth will support overall sector growth. We've said for some years now that emerging markets are the growth engines for the insurance industry – and this is expected to continue for at least several years more." Non-life premium growth will improve along with economic activity Demand for primary non-life insurance should increase in the next two years. Global primary non-life premium growth is forecast to improve to 3% in 2016 and 3.2% in 2017, from 2.5% this year. Growth in advanced markets is expected to slow slightly due to the generally softening prices and only modest improvement in economic growth. The emerging markets will be the main drivers in non-life, with premiums up an estimated 7.9% and 8.7% in 2016 and 2017, respectively, after a 5.6% gain in 2015. Premium growth is expected to be strongest in emerging Asia (12% annually), and a recovery is expected in Central and Eastern Europe after contraction in 2014 and 2015. Despite the challenging pricing environment, underwriting profits in primary non-life insurance have been sustained by low natural catastrophe losses and a continuation of reserve releases from past years. The non-life reinsurance sector underwriting result has likewise been strong so far this year, also based on low natural catastrophe losses. However, with falling prices, profit margins have eroded over the past two years. Property catastrophe reinsurance rates are currently close to bottoming out and the rate softening in most lines is expected to moderate or come to a standstill. In casualty and specialty, significant differences in pricing developments by market and line of business are expected. Life insurers face major challenges but premiums will grow Primary life insurers face significant downside risks in the short to medium term from the modest global growth outlook, persistently low interest rates, volatility in financial markets and regulatory changes. Nevertheless, in the 2 advanced markets, real premium income is forecast to rise by about 2.5% in 2016 and 2017, up from about 2% this year. In emerging markets, premiums will grow by an estimated 10.7% in both 2016 and 2017. This improvement will in part be attributable to improved use of currently available technologies, such as wearable devices and cloud computing. Again, emerging Asia is expected to have the most robust growth of about 13% each year. A key issue in many emerging markets will be the implementation of risk-based solvency regimes.