Swiss Re has forecast prices will continue to rise in the next renewals season as adverse risk and interest rate trends are exacerbated by the coronavirus pandemic.

The reinsurer says reliance on underwriting profits has increased in the low interest rate environment, while risk exposures have been rising, as shown by recent hurricane and wildfire disasters.

“Even before the COVID-19 crisis, most major markets were operating at below-average profitability,” CEO Reinsurance Moses Ojeisekhoba said. “To be able to address the growing need for insurance protection in a sustainable way further price increases across all lines of business are clearly needed.”

The Swiss Re Institute says that to achieve a reasonable return on equity through 2021, non-life insurers in G7 markets need to improve underwriting margins by as much as 7-12 percentage points to compensate for lower interest rates.

Swiss Re also notes hurricane losses in the past few years have increased as systems frequently affect areas where exposures have grown due to wealth accumulation, and the trend is continuing.

The current Atlantic hurricane season is the first on record to see nine tropical storms forming before August and 13 before September.

“The situation is further aggravated by the higher frequency and severity of secondary perils such as floods and wildfires, leading to rising claims and highlighting the need for insurance protection,” it says.

Swiss Re forecasts a global growth rate of 3.3% next year in real terms for the non-life insurance market, driven mainly by increasing exposures. The rising frequency of weather-related events and greater awareness, triggered by COVID-19, of the dangers of not being covered are also set to drive demand.