Kathmandu. The Swiss Re Institute’s latest Sigma report says that high interest rates, a growing population and changing industrial policies are reshaping the economy. Even under the changed circumstances, the global insurance sector is poised to enter a world of tight economy from a strong position supported by strong capital funds, rising investment yields and resilient profits.
According to the report, a developed political economy, with an increasing reliance on industrial policy, is one of the structural regime changes to take hold in the long run.
“The growing risk of financial dominance, where central banks prioritise credit stability over price stability, and sustainable industrial spending will keep inflation above pre-2020 norms.” The long-term bond yields will be kept up,” the firm’s report explained.
Real global GDP growth is projected to remain stable from 2025, but lower than the 3.1% of the pre-pandemic decade.
Growth rate of the United States and Europe:
According to Swiss Re, the U.S. will see growth of 2% by 2026 and 1.9% by 2027. In particular, Europe will benefit from financial stimulus from Germany’s $1 trillion investment programme. In contrast, China’s growth is expected to slow to 4.5% in 2026 and 4.2% in 2027, due to weak domestic consumption and asset-related investment constraints despite a more favorable policy stance.
Meanwhile, emerging Asia is expected to remain resilient under a flexible monetary framework, benefiting from a trade recovery in a fractured trading world.
Among the structural changes that have reshaped the insurance landscape, Swiss Re noted, “The number of government interventions in industrial sectors has tripled since 2012, fueling a global race for technological and manufacturing leadership.” ”
Increasing reliance on industrial policy will boost domestic investment. Particularly in semi-automated, AI infrastructure and defense, the report warns that it also increases fragmentation and concentration risk.
Demand for products related to longevity:
“The aging of the population is reshaping the labor market, consumption and security needs. The demand for insurance is shifting steadily from family protection to longevity, retirement income and health solutions. Because of this, insurers need to innovate and expand the risk to a long-lived population.
Investment in Information Technology: {
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The report estimates that globally, by 2025, 3-8% of insurers’ IT budgets will be allocated to developing AI capabilities, seeking efficiency gains, time savings and workflow improvements. But only less than 5% of insurers based on a sample of 187 major companies disclosed any financial impact.
Dependent on manpower
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Since most insurers aim for human workforce growth rather than full automation, Swiss Reilly does not anticipate AI-driven labor market displacement in the near term.
The report observes that a key challenge will be modeling and pricing risk, which will occur without any historical precedent while leveraging the potential of AI to improve underwriting, claims and productivity.
“Structural tailwinds from higher long-term interest rates, demographic changes and technological innovation will continue to support profitability,” the report noted.
Adequate Financial Flexibility{
Globally, the insurance sector is in a sufficiently capitalized resilient position with solvency ratios above 200% and strong liquidity buffers. Global insurance premiums are projected to increase by 2.3% in real terms between 2026 and 2027. Global real premium growth for the non-life sector is projected to decline to 1.7% before recovering to 2.5% in 2027.
Fair Return:
Profits will remain solid, with a return on investment backed by disciplined underwriting of around 10.5%, structurally enhanced investment yield (4.3%). In the life insurance sector, global insurance premiums will increase by 2.5% per year, up from 2.2% in 2025.
“Higher long-term bond yields will underpin investment returns. Profit will be strengthened. In 2027, the return on investment in the sector will rise to 4%. The global life premium volume is expected to reach US$4.1 trillion by 2027, accounting for 44% of the total market premiums. “
