This section assesses the underwriting performance of the non-life sector in 2023. It looks at the growth of premiums and gross claims payments over the period. It then examines the combined ratio (the excess of claims paid or incurred and operating expenses over premiums) to assess whether insurers achieved underwriting gains. Finally, it discusses reinsurance prices and its effect on the take up of reinsurance by direct insurers.
Global Insurance Market Trends 2024
Abstract
Gross premiums written in the non-life sector grew in nominal terms in all reporting jurisdictions in 2023, by 12.4% on average (Figure 2.1), slightly below the nominal growth rate in 2022 (14.1% on average) (OECD, 2023[8]). Gross premiums written generally grew faster than consumer prices in 2023, with a few exceptions (Finland, Japan, Luxembourg), thus leading to growth in real terms. The premium growth rate in real terms doubled, from 2.9% in 2022 to 6.2% in 2023 on average.
In per cent
Note: Data refer to the gross premiums written in the non-life sector for all undertakings (i.e. domestic undertakings and branches and agencies of foreign undertakings operating in the reporting jurisdiction) except when only data on domestic undertakings are available. The nominal premium growth rate is not shown for Türkiye (112.1%) for readability purposes.
Source: OECD Global Insurance Statistics.
The nominal growth of non-life premiums was visible across the main non-life insurance classes. In nearly all reporting jurisdictions, gross premiums grew in nominal terms for motor vehicle, fire and other property damage and accident and health (Figure 2.2).
In per cent
Note: For Korea, "Fire and other property damage insurance" only covers fire insurance. "Accident and health insurance" for Korea reflects both protection and the savings component of Korean accident and health insurance products.
Source: OECD Global Insurance Statistics.
The growth of non-life premiums was partly attributable to an increase in the number of non-life insurance policies. Car sales increased in some jurisdictions (e.g. Croatia, Mexico, Malaysia), supporting the demand for motor vehicle insurance.1 More generally, the economic recovery following the COVID-19 pandemic has boosted the demand for insurance coverage. Some supervisors also attributed the growth in the number of insurance policies to an increased awareness of the population about the need for insurance protection (e.g. property insurance in Lithuania due to recent disaster events). Finland also recorded an increased demand for voluntary health insurance due to new products enabled by technology and because of concerns over the availability of public health care services.
The increase in gross premiums written in nominal terms across the main non-life insurance classes was also the result of increasing prices of non-life insurance policies. Insurance policy prices increased in 2023 in most OECD countries and across all the main classes of insurance, and in some cases significantly (Figure 2.3).
In per cent
Note: Data for dwelling insurance for Canada refer to tenants' insurance premiums; data for motor vehicle insurance refer to passenger vehicle insurance premiums. Data for health insurance in Norway and Türkiye are for insurance connected with health; data for motor vehicle insurance are for insurance connected with transport. For Portugal, data in the first panel refer only to insurance connected with transport (including vehicle insurance, freight insurance) instead of motor vehicle insurance. Data for the United States show a U.S. city average for all urban consumers.
Source: Australia's Department of Health and Aged Care; Eurostat; Statistics Canada; DANE (Colombia); INEC (Costa Rica); Israel's Central Bureau of Statistics; Statistics of Japan; Korean Statistical Information Service; Statistics New Zealand; ONS (United Kingdom); United States Bureau of Labor Statistics.
The increase in prices in 2023 is due to larger claims payments that insurers in most jurisdictions faced in 2022 (OECD, 2023[8]). Insurers have passed on some of these costs to customers through higher policy rates. In only a few cases has the price of insurance policies remained stable or even declined, due for instance to a lower frequency of claim events than in the past (e.g. motor vehicle insurance in Japan),2 competitive pressures (e.g. motor vehicle insurance in Korea)3 or regulatory caps (e.g. health insurance in Slovenia).4 Competitive pressures and regulation may prevent insurers from raising the prices of insurance policies to adjust for rising claims costs.
The increase in prices of insurance policies could increase the risk of widening insurance protection gaps. The price of some non-life insurance policies increased more than the overall amount of gross premiums written in some countries. For example, in the United Kingdom, the price of motor vehicle insurance grew by 45% in 2023 while gross premiums written for motor vehicle insurance only grew by 4% in nominal terms. Increased insurance pricing and the rising cost of living may have led policyholders to reduce the amount or the scope of cover (for example moving from comprehensive policies with extras, to core cover, or with higher levels of excess or deductibles).
Non-life insurers continued to face higher claims costs in 2023. While gross claims payments increased by 17% in nominal terms in 2022 (OECD, 2023[8]), they grew again by around 17% on average among 49 jurisdictions in 2023 (Figure 2.4). This is more than the growth rate of consumer price indices in 2023 – in real terms, the growth in claims payments almost doubled on average, from 5.5% to 10.1%.
In per cent
Note: Growth rates of gross claims payments take into account the variations in outstanding claims provisions (when this information is available) to reflect better the magnitude of the obligations that the industry had in 2023 as a result of insured events that occurred. When the breakdown of gross claims paid or changes in claims outstanding provisions for composite undertakings into their life and non-life businesses was not available, the breakdown in each subsector was assumed to be the same as for gross premiums written. The nominal growth rate of claims paid is not shown for Türkiye (155.3%) for readability purposes.
Source: OECD Global Insurance Statistics.
The continued increase in claims costs was a combination of several factors, including rising prices and a higher frequency or higher cost of claim events. Prices continued to increase in 2023, although they increased at a slower pace than in 2022 (IMF, 2024[9]). The rise in prices affects multiple lines of business (e.g. motor vehicle, health, property). The costs of car repairs increased due to higher costs of material and labour (e.g. United States).5 Medical expenses (e.g. drugs, hospitalisation) also increased, accounting to some extent for the growth in gross claims payments in France and Slovenia. The increase in claims payments was also due to a higher frequency of claim events in a number of countries such as Denmark, Finland, Lithuania, Nicaragua and Norway. The surge in car sales in Nicaragua and the higher incidence of traffic accidents led to a surge in claims payments. Norway also recorded a higher frequency of claims for motor insurance, assistance and property, which drove up claims payments. Countries that recorded an increase in the number of policies are also likely to record a larger number of claim events.
Natural hazards led to higher claims payments in 2023 in different countries and regions. For example, non-life claims payments surged in 2023 following floods in central Greece, a hurricane in Mexico, a landslide and storm in Norway, storms and floods in Slovenia, an earthquake in Türkiye, and a drought in Uruguay. Swiss Re (2024[10]) estimates that the number of insured natural catastrophes reached a new record in 2023, although these catastrophes generated lower economic losses overall in 2023 than in 2022. The increased frequency of severe storms also contributed to the rise in claims costs for property and casualty in the United States (NAIC, 2024[11]). Insurers in Portugal continued to pay claims in 2023 for the multiple floods in Lisbon in December 2022.
Insurers in some jurisdictions experienced a return to lower claim payments after settling payments for major high-cost events, such as natural hazards and the COVID-19 pandemic. Insurers experienced a reduction in claims payments from natural hazards in 2023 after large payments in Australia (for individual and commercial property insurance from the 2022 flooding event in New South Wales and Southeast Queensland) and Honduras (final payments in 2022 for claims related to storm Eta and Iota in 2020). Japan also recorded a lower occurrence of severe natural hazards in 2023. In Chinese Taipei, the claims of the non-life insurance industry in 2023 were down by 36.4% compared to 2022, primarily due to a decrease in claims payments related to COVID-19.
Legislative changes can also affect trends in claims payments. For example, a legislative amendment in Finland removed several examinations and treatments by private doctors from the scope of reimbursements from the public health care system (Daily Finland, 2022[12]). This development, combined with the increased demand for private health insurance (Yle, 2024[13]) may have accounted for the increase in payments from insurers in 2023. In Lithuania, amendment of the Law on compulsory insurance against civil liability related to the use of motor vehicles at end-2023 broadened the definition of vehicle and increased the minimum obligatory amounts of insurance coverage. This will likely affect payments in this line of business.
Despite the rise in gross claims payments, non-life insurers recorded underwriting gains in most reporting jurisdictions in 2023. Figure 2.5 shows that the combined ratio was below 100% in most jurisdictions. The combined ratio measures the underwriting profitability of insurance companies in their direct non-life business. It is the aggregate of the loss ratio (which measures claims paid and changes in claims provisions relative to gross premiums) and expense ratio (which measures expenses incurred and commissions relative to gross premiums). A combined ratio of less than 100% represents underwriting gains (also called technical profits) for the insurance industry, which was the case in most jurisdictions, despite the rise in gross claims payments. Insurers experienced an underwriting loss in a few jurisdictions (6 out of the 34 reporting jurisdictions), the largest losses occurring in Chinese Taipei (where claims payments remained high because of COVID-19) and Türkiye (most likely because of the earthquake in early 2023 (Insurance Journal, 2024[14])).
In per cent
Notes: The combined ratios are the results of the calculations by the respective authorities in the reporting jurisdictions. The underlying formula may therefore be different across jurisdictions.
1. The results are net combined ratios.
2. The result is the sum of the net claims incurred and net operating expenses over net premiums earned.
3. The result is the simple average of the combined ratio of P&C insurance (102.5% in 2022, 101.5% in 2023) and health insurance (97.5% in 2022, 98.2% in 2023).
4. The result is the simple average of the combined ratio of accident and health (96.9% in 2022, 97.7% in 2023) and auto insurance (101.5% in 2022, 99% in 2023).
5. The results are for fiscal years instead of calendar years.
6. The result is the sum of gross claims ratio, acquisition costs ratio and administrative expenses ratio.
7. The results are net underwriting combined ratios for the general insurance industry for years ending in June.
8. Data cover life insurance.
Sources: APRA (Australia); Danish Financial Supervisory Authority (Denmark); ACPR (France): MNB (Hungary); IVASS (Italy); CNSF (Mexico); KNF (Poland); ASF (Portugal); ISA (Slovenia); FINMA (Switzerland); Bank of England (United Kingdom); NAIC (United States); answers to the qualitative questionnaire of the OECD Global Insurance Statistics exercise (all other jurisdictions).
Underwriting results varied across lines of business. For example, in Costa Rica, the combined ratio for the non-life sector was below 100% but it exceeded 100% for fire, health, occupational risk and motor vehicle insurance. The median combined ratio for non-life insurers in Europe ranged from below 50% for credit and suretyship insurance to close to 100% for motor vehicle insurance in Q4 2023 (EIOPA, 2024[15]). In the United Kingdom, the non-life sector had a combined ratio below 100% but many UK motor insurers still had a combined ratio of more than 100% (average of 114%). In the United States, the combined ratio for the non-life sector was below 100% although insurers in homeowner lines recorded underwriting losses due to an above-average frequency of catastrophes (NAIC, 2024[11]).
Despite positive underwriting results for the non-life sector in 2023 across jurisdictions, underwriting profitability fell in 2023 relative to 2022 in close to half of the reporting jurisdictions (14 out of 32). The combined ratio deteriorated the most in Greece, Norway, and Slovenia (by more than 7 percentage points), due to natural hazards (in the three countries) or for other reasons (such as the growth in claims payments for health insurance in Slovenia). These events led to a large growth in gross claims payments, larger than for premium growth.
Where the underwriting profitability of non-life insurers improved relative to 2022, the reasons for the improvement differed across jurisdictions. In some cases, the improvement was driven by claims payments declining (e.g. Costa Rica, Chinese Taipei). In some others, claims payments increased at a lower pace than premiums (e.g. France, United Kingdom, United States). In others, although claims paid increased faster than premiums, the combined ratio improved thanks to a reduction of the expense ratio (e.g. Mexico, Romania).6 In the case of Finland, the improvement reflected a change in methodology.7
Reinsurance can have an effect on underwriting profitability and sectoral trends. For example, in Australia, the combined ratio deteriorated on a net basis despite the decline in gross claims incurred because of a fall in reinsurance recoveries. Finland noted that the increase in reinsurance prices of large international reinsurance companies has affected the profitability of non-life insurance business. In the case of the United States, homeowner insurers bore the brunt of claims payments arising from natural hazards in 2023 since the events did not reach reinsurance limits. This contributed to underwriting losses of homeowner insurers in the United States.
The reinsurance market hardened in 2023 as reinsurance prices increased. Reinsurance prices increased significantly, in particular for property reinsurance cover where pricing increased by between 20% to 60% (Fitch, 2023[16]). This increase is due to both inflation and more frequent and costlier natural hazards, which have led to larger claims payments by direct insurers.
Increased reinsurance pricing may have contributed to an increase in retention ratios in some jurisdictions. The retention ratio is the proportion of premiums – and therefore risk – that insurers retain rather than transfer to reinsurers. The retention ratio was higher in 2023 than in 2022 in 20 out 45 reporting jurisdictions, although the increase tended to be marginal (Figure 2.6). For example, the retention ratio increased from 76.5% in 2022 to 77% in 2023 in Germany, and from 63.9% to 64.1% in the United Kingdom.
In per cent
Source: OECD Global Insurance Statistics.
The hardening of the reinsurance market was also visible in the terms and conditions of reinsurance policies. Czechia noted a restriction of the range of reinsurance coverage offered. Malaysia also noted a hardening of reinsurance terms. Reinsurers may, for example, change the terms by raising the level at which a reinsurance policy pays out (Carrier Management, 2024[17]). Reinsurers may have also been less inclined to reinsure secondary perils (i.e. smaller but more frequent events such as tornadoes, thunderstorms, fire and floods) on which they incurred losses in the recent years (Carrier Management, 2024[17]). In this context, some insurers faced challenges in renewing their reinsurance protection and have had to increase retention levels and take on more risk.
← 1. Malaysian authorities attributed the rise in car sales to promotional campaigns and the launch of new car models (e.g. electric cars).
← 3. Small insurers were offering policies at a lower price to maintain their market share. This has led to a decline in the average price of motor vehicle insurance policies: Motor insurance segment in S. Korea to exceed $19b by 2028: GlobalData | Insurance Asia
← 4. In April 2023, one insurance company offering supplementary health insurance policies announced a 30% increase in premium rates. After that announcement, the Slovenian government intervened and capped the maximum premium rate for all Slovenian insurance companies selling these policies, allowing only a 3.4% increase.
← 5. See Insurance Inflation: How & Why Rates Are Affected. For example, the cost of motor vehicle maintenance and repairs in the United States was up by 13% in June 2023 compared to the year before: Cost of Insurance: Why is it rising and what you can do.
← 6. See Presentación de PowerPoint (for Mexico). Romania has an 8% cap on sales commissions.
← 7. In Finland, the combined ratio improved because of a change in the calculation methodology. The combined ratio would have deteriorated without this change.