High interest rates, ageing demographics and the return of industrial policy are reshaping the global economy, yet the Swiss Re Institute’s latest sigma report has suggested that the insurance sector enters this tighter regime from a position of strength, supported by strong capital buffers, elevated investment yields and resilient profitability.
“The increased risk of fiscal dominance — where central banks prioritise debt stability over price stability — and sustained industrial spending will keep inflation anchored above pre-2020 norms, keeping long-dated bond yields elevated,” the firm’s report explained.
Real global GDP growth is forecast to remain stable from 2025, but below the pre-pandemic decade’s 3.1%.
Swiss Re said the US will see growth moderate to 2% by 2026 and 1.9% by 2027, while the Euro area benefits from fiscal stimulus, notably Germany’s €1 trillion investment programme.
China’s growth is expected to ease to 4.5% in 2026 and 4.2% in 2027, due to weak domestic consumption and property-linked investment headwinds, despite a more accommodative policy stance.
Emerging Asia, meanwhile, is projected to remain resilient under flexible monetary frameworks, benefiting from trade re-routing in a fragmented world.
On structural shifts reshaping the insurance landscape, Swiss Re noted, “Industrial policy has returned to the core of national economic strategies. The number of government interventions in industrial sectors has tripled since 2012, spurring a global race for technological and manufacturing leadership.”
While heightened reliance on industrial policy boosts domestic investment, particularly in semiconductors, AI infrastructure and defence, the report warned it also drives fragmentation and concentration risk.
“Industrial policy aims to build resilience but raises the risk of inefficiency, as firms accelerate a regional re-routing of supply chains, production operations and sourcing. For insurers, it means more opportunities in engineering, property and liability lines, but also more correlated exposures when shocks occur.
“Population ageing is reshaping labour markets, consumption, and protection needs. Demand is shifting from family protection to longevity, retirement income and health solutions, requiring insurers to innovate and extend cover across longer lifespans. Ageing also changes asset-liability management dynamics, lengthening duration requirements and amplifying the importance of long-term solvency planning for insurers.”
At the same time, AI is reportedly driving operational shifts across value chains in non-life and life insurance.
The report estimates that globally, 3–8% of insurers’ IT budgets have been allocated as of 2025 to develop AI capabilities, seeking efficiency gains, time savings and workflow improvements, yet less than 5% of insurers, based on a sample of 187 major companies, have disclosed any financial impact.
Swiss Re does not anticipate AI-driven labour market dislocations in the near term, as most insurers aim for human workforce augmentation rather than full automation.
However, the report observed that a key challenge will be modelling and pricing risks with no historical precedent while leveraging AI’s potential to improve underwriting, claims and productivity.
Despite these headwinds, the global insurance industry enters this new era from a position of strength.
“Structural tailwinds from high long-term interest rates, demographic change and technological innovation will continue to support profitability,” the report noted.
“The sector remains well capitalised and resilient, with solvency ratios above 200% and strong liquidity buffers. Global insurance premiums are set to grow by 2.3% in real terms in 2026 and 2027. The non-life sector is forecast to see global real premium growth easing to 1.7% before recovering to 2.5% in 2027.
“Profitability will remain solid, with ROE around 10.5%, supported by structurally elevated investment yields (4.3%) and disciplined underwriting. In the life sector, global premiums will grow by 2.5% per year, up from 2.2% in 2025.
“Higher long-dated bond yields will underpin investment income and strengthen profitability, with the sector’s return on investment rising to 4% in 2027. Global life premium volumes are expected to reach USD 4.1 trillion by 2027, accounting for 44% of total market premiums.”
Jérôme Jean Haegeli, Group Chief Economist of Swiss Re and Head of Swiss Re Institute, commented, “Industrial policy is rewriting the economic playbook, AI is accelerating, growth looks strong, but the credit cycle will reveal how solid it really is.
“The re-industrialisation drive and technological transformation are powering activity and supporting the core of underwriting, yet headline economic growth figures mask deeper structural fragilities that will surface once the credit cycle turns.
“Over the shorter term, we expect the economy to navigate a soft patch, with tariffs still feeding through to prices in the US and exports globally.”
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