Though the COVID-19 pandemic is expected to lead to the deepest recession since the 1930s, global insurance premium volume will rebound to pre-crisis levels by the end of 2021, forecasts Swiss Re in its latest sigma report.

Moreover, the pandemic has sparked an uptick in general “risk awareness,” which could support growth for the insurance industry over the long term, Swiss Re said.

Global non-life premium volume will shrink 0.1 percent in 2020 after growing 3.5 percent in 2019, Swiss Re predicts. However, it noted that the industry was well capitalized ahead of the pandemic and should be able to absorb the COVID-19 losses, returning to around 3 percent positive growth in premiums by the end of 2021. The emerging markets, in particular China, will lead the comeback.

While personal property insurance premiums will likely continue to grow in 2020, Swiss Re said personal auto premiums could shrink by close to 5 percent in the large mature markets. On the commercial lines side, workers compensation could see strong declines in premiums as unemployment has risen at an unprecedented speed, particularly in the U.S. The hardest-hit lines will likely be those closely linked to transport, travel, trade and entertainment, and Swiss Re expects sharp drops in premium volume in marine, aviation, trade credit and event cancellation.

With the COVID-19 pandemic still active, there is a lot of uncertainty around how large the claims numbers could get; however, Swiss Re noted that the midpoint estimate for global non-life losses from the pandemic is $55 billion. Beyond travel insurance and event cancellation coverage, the report said the main lines impacted will likely be: property, with a number of lawsuits for business interruption already seen in the U.S.; liability, where D&O and medical malpractice could see a jump in claims; workers compensation, which could see a rapid rise in claims from health care and other essential workers.

“The industry’s capital position means it should be able to handle the COVID-19 shock. The upper end of the range of total property and casualty claims estimates by most external insurance analysis is USD 100 billion, similar in scale to losses caused by Hurricanes Harvey, Irma and Maria in 2017, which the industry also absorbed,” said Swiss Re Group Chief Economist Jerome Jean Haegeli.

Swiss Re said it is also seeing some paradigm shifts from the COVID-19 crisis, including rising risk awareness, accelerated digital transformation thanks to lockdowns and the implementation of social distancing measures (e.g., more focus on digital claims handling and usage-based insurance products), and parallel supply chains.

Other highlights from the sigma report:

• Premium growth in the emerging economies strengthened to 7.7 percent in 2019, with premiums in China up 12 percent. Swiss Re forecasts that China’s share of global premiums will continue to rise rapidly to an estimated 18 percent in 2030. Excluding medical insurance premiums, China remains on track to become the largest insurance market globally by the mid-2030s.

• Global natural and man-made disasters in 2019 cost $146 billion, well below the previous 10-year annual average of $212 billion, with the insurance industry covering $60 billion of the losses. Swiss Re said the decrease in overall losses last year stemmed mainly from the absence of large and costly hurricanes in the U.S. However, forecasts for the 2020 hurricane season point to above-average activity. In addition, the COVID-19 crisis could increase losses from hurricanes and other natural catastrophes due to reduced preparation and mitigation activities, increased costs for claims adjustment, and increased contractor costs.