For those in the life insurance market, it’s gratifying to see the sector have its moment in the sun.
It’s a moment characterized by buoyant market conditions, with Swiss Re’s latest Sigma report projecting growth of more than twice the historical average, at 3% in real terms over 2025 and 2026, after a decade-high 5% growth in 2024. Meanwhile, total global life insurance premiums are expected to reach US$4.8 trillion by 2035, up from US$3.1 trillion in 2024, driven by higher interest rates.
In a briefing exploring the themes of the report, Paul Murray (pictured), CEO of Life & Health Reinsurance at Swiss Re, noted the “overwhelmingly positive” opportunity facing the market today, and his belief that, “this is a bigger opportunity than we’ve ever seen before.” Traditionally seen as a somewhat boring market segment, he noted that the life sector has been experiencing a period of high drama, shaped by the knock-on impacts of what’s happening in the wider world.
One such wave of change is the retirement of the baby boomer generation, and the question mark over whether they have saved enough for retirement. “There’s a huge gap between what people should save and what they are saving,” he said. “High interest rates are certainly an encouragement for people to save more, and we'll see some of the impact shortly on the life insurance industry.”
Pointing to the retirement savings gap – which in the UK stands at nearly 400% - he highlighted that this is one of the “crashing waves” that will affect wider society and will become a political issue in the coming generations. “In our industry, we’ve been very successful at creating vehicles and good value products that people can invest in, and we’re distributing those very well. So it's an opportunity for us, and we must, as an industry, take this opportunity and find ways to make sure that we think very broadly, and in a very ambitious way, about how we can tackle this huge emerging opportunity.”
The size of the opportunity facing the life insurance market is underpinned by several key considerations including wage growth, ageing demographics, and the rise of the middle class. There are several other dynamics also underlying the industry, Murray said, and life expectancy is a core part of how reinsurers manage their pricing. That’s a social demographic which has seen a complete transformation given that life expectancy roughly doubled during the 20th century.
“We've become used to the thought of living longer and dealing with the problems of it but actually, since 2010, life expectancy improvements have slowed down,” he said. “And the things that have driven mortality improvements in the past are probably not the things that are going to drive mortality improvement in the future.”
There are several ‘fractures’ beneath the surface of this shift, among them the significant slowdown in cardiovascular improvements. It could be that cardiovascular medicine has been optimized already, Murray said, though Swiss Re can see some room for further potential improvements.
An interesting point is the state of the US health market given that it’s the wealthiest society in the world. This has not translated into having the highest life expectancy in the world, as only the top 10% socio-economic group has a high life expectancy by developed economy standards. Some of the issues there include access to healthcare, obesity, the opioid crisis and the ongoing aftereffects of COVID-19. In the US, excess mortality is now running at about 25% of what it was during the peak of COVID, where it stood at 23%.
Another source of drama for the market is the emerging theme of antimicrobial resistance (AMR) which is shedding doubt on the ability of antibiotics to work at full effectiveness in the future. The doubling of life expectancy seen in the 20th century was largely due to the impact of antibiotics and the risk they might be less effective going forward is a cause for significant concern. Murray noted that, in 2021, there were just over 1.1 million global deaths directly attributable to AMR, with 4.7 million in some way influenced by AMR.
“During the pandemic, we actually made the problem worse,” he said. “This often happens – when you're trying to optimize for one variable, you take your eye off another one. But during the pandemic, the World Health Organization reported that only 8% of patients had bacterial co-infections, but 75% were treated with antibiotics, and this is what causes AMR.
“We're calling out for increased awareness, and we’re working with government and transnational bodies to try and find mechanisms that we can build to deal with this. Cooperation is absolutely required.”
Despite these waves of challenges, Murray sees reasons to be optimistic when looking at the future, not least regarding the promising technologies which will look to bring medical advancements in the future. In the short to medium term, he said, obesity drugs, immunotherapy and mRNA vaccines, are poised to make a difference. Meanwhile, there are promising experiments underway in the Alzheimer's space which will hopefully have an impact over time – an especially critical consideration in the context of an ageing society.
Another area of interest is around developments in the GLP-1 drug space and the impact this might have on obesity rates. For the first time since Murray can remember, US statistics show that obesity is falling in the US having been on a dramatic upward curve for many years. There is a good chance this is at least somewhat attributable to GLP-1 drugs, though their longer-term impact on health and life expectancy remains to be seen.
“Whether some of the things around AMR, COVID and future sources of mortality improvements will be a good or a bad thing [for the market], I think is open for debate,” he said “But for life insurance companies, the key thing to make a success of an uncertain future is to make sure you're well reserved. So, you have to start with a very good understanding of what these issues are. And make sure you're prepared for potentially slightly adverse outcomes, and some of these will be very meaningful economically, but reserve for them well now, and it should lead to good profits in the future.”
