Life Insurance Set to Boom as Interest Rates Surge, Says Swiss Re Institute

Higher interest rates will significantly boost profitability in the life insurance industry, Swiss Re Institute forecasts. An additional USD 1.5 trillion of global life savings premiums will be generated over the next decade – more than double the amount of the previous decade. Advanced markets will generate 61% of the additional savings premiums in the next decade, with 39% from emerging markets.

Higher interest rates are transforming the outlook for life insurance growth and profitability. Savings products are attractive to consumers after a decade of weak demand and low returns. Swiss Re Institute expects a new high for US fixed annuity sales this year after record sales in both 2022 and 2023.

Significantly higher government bond yields are improving life insurers' investment returns and margins for fixed annuities. The operating result for insurers in the largest eight life markets worldwide, including the US, UK, Germany, and Japan, will rise by more than 60% as investment income increases by 40%.

Swiss Re Institute estimates that advanced markets will generate USD 900 billion of additional premiums, with emerging markets contributing USD 578 billion. China alone is expected to add USD 256 billion between 2025 and 2034.

Swiss Re Institute's report outlines how insurers have adapted to low interest rates by exiting core lines or shifting to capital-light, fee-based strategies. The study concludes that the life insurance landscape is evolving, with competition on asset management set to benefit consumers through more attractive returns.