What's in store for Life & Health insurers and reinsurers for 2025

Forecasting the future can be a notoriously tricky business, for reinsurers or anyone else.

Ask Robert Metcalfe, the US tech pioneer and inventor of Ethernet technology who 30 years ago predicted in a magazine column that the internet "will soon go spectacularly supernova and in 1996 will collapse."

Even though Metcalfe's crystal ball was wildly off target, I still believe looking ahead with a critical, thoughtful eye has real value. As an actuary by profession, I know how life insurers and reinsurers are compelled to take risks built upon decades of predictive thought about the future.

Diligent, data-driven forecasting helps us set expectations, guide decision-making, identify risks and opportunities – and provides a compass to recalibrate, should things develop differently than anticipated. There's always that tension between the actual versus the expected.

With this cautionary preface, I'll offer a few thoughts on what I believe will be important life and health insurance and reinsurance themes in 2025.

Steady growth, strong profitability

After the Global Financial Crisis more than a decade ago prompted central banks to cut interest rates, it felt to many of us on the life insurance side of our industry that ultra-loose monetary policy would never end.

When the pendulum finally swung back as inflation surged during the COVID-19 pandemic, insurers began benefiting from higher fixed-income returns. Annuity products with attractive rates have seen unprecedented demand.

In my view, life insurers will continue to see steady growth in 2025 —  perhaps not the decade-high levels of last year, but still exceeding the historical average.

One change we will likely see is a shift from fixed-rate annuities toward indexed products, not only in countries like Italy and France where demand is already strong but also in the US as normalising monetary policy supports a pivot.

With fixed income yields still robust, life insurers' 2025 profitability prospects are intact.

Partnering to de-risk pensions

With higher interest rates also helping shore up defined-benefit pension funding, the pace of de-risking transactions like bulk annuity transfers is likely to continue and may even accelerate in 2025.

Part of this relates to demographic change, with Baby Boomers either retired or planning to retire; globally, people older than 60 years outnumber those under five. Consequently, pension funds are looking to protect themselves from potential longevity risks accompanying the aging populations they protect.

For years, Swiss Re has been a strong partner for life insurers on longevity risk transactions, helping clients in Asia, Australia, Europe, the UK, and the US achieve goals including improving solvency ratios as regulatory frameworks change.

UK Solvency II reforms should drive additional pension risk-transfer activity, creating new opportunities for reinsurers to assist clients.

And with many life insurers assessing the impact of their transitions to IFRS accounting standards, I see expanded scope for reinsurance to help them optimise their balance sheets and fuel new business growth.

A year to turn the corner?

If you've read Swiss Re Institute's publication The future of life expectancy, you'll know we are following mortality improvement trends closely.

We've raised concerns about plateauing longevity gains, as factors like rising rates of obesity and diabetes conspired to slow progress in key insurance markets even before COVID-19 hit.

And while the pandemic has passed its acute phase, we are still living with its consequences.

Swiss Re recently published a report highlighting how COVID-related excess mortality in the general population could be up to 3% higher than pre-pandemic levels in the US and 2.5% higher in the UK by 2033.

Under more optimistic scenarios in which healthcare systems succeed in reducing lingering pandemic backlogs, however, mortality could return to pre-pandemic levels more quickly.

Disease prevention, including vaccinations and a strong emphasis on healthier lifestyles to counteract chronic metabolic disease and cancer, will help. And while it's early days, GLP-1 drugs also offer great potential to improve health outcomes. 

I personally am cautiously optimistic that 2025 could be the year in which we start turning the corner on reinvigorating mortality improvement. 

It would certainly be gratifying to say in 12 months' time that my hunch was correct, since this would mean improving prospects for people to live longer, healthier lives.

For 2025, I also believe the pandemic's lingering shadow will fuel increased awareness of infectious disease as a potential threat. We have seen signs of this already.

Last August, the World Health Organization (WHO) issued a health warning about the spread of Mpox. We have also seen renewed attention on antimicrobial resistance, which could kill millions more people annually by mid-century.

This heightened vigilance is a good thing, helping detect threats like the current bird flu outbreak so they can be effectively contained.

Forecasting the future — and shaping it

Insurers and reinsurers must work proactively to harness the forces transforming our industry, this year and any other year. But the challenge lies not just in forecasting the future but shaping it.

For 2025, this means putting attractive market conditions to work to support retirement savings products and industry profitability; recognising opportunities that accompany changing demographics and regulatory developments; and staying watchful for threats to public health that only a few years ago might have seemed remote.

Before I sign off, I would like to add that Robert Metcalfe, who famously predicted the internet's imminent demise back in 1995, had a pretty good sense of humour about his doomed guess.

Two years later, with the web still very much alive, Metcalfe stuffed a copy of the column where he'd made his prediction into a blender and then literally drank his words.  

Once 2025 winds down, let’s see how I did with my own forecasts. I've got the blender ready, just in case.

This article first appeared on the Swiss Re website and is reproduced here with permission.