DJ Ageing, AI and the revival of industrial policy - structural regime shifts redefine global economy, says Swiss Re Institute
Swiss Re Ltd / Key word(s): Market Report/Research Update
Ageing, AI and the revival of industrial policy - structural regime shifts redefine global economy, says Swiss Re
Institute
2025-11-19 / 10:00 CET/CEST
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. Fiscal expansion, industrial policy, ageing societies and AI to transform global economy and risk landscape
. Global GDP growth to stabilise at 2.5% in 2026 and 2.6% in 2027 with inflation to remain above 2% in advanced
economies
. Global insurance premiums to grow by 2.3% annually in real terms with life insurance premiums to be on track to
reach USD 4.1 trillion by 2027
London, 19 November 2025 - The global economy is entering the next phase of fiscal expansion and industrial policy
dominance. While accommodative fiscal and monetary policies cushion growth against the impact of trade tariffs, Swiss
Re Institute finds that this comes at the cost of structurally higher inflation and rising debt burdens. According to
the latest sigma report "Shifting Sands", real global GDP growth is forecast to be stable from 2025, but below the
pre-pandemic decade's 3.1%.
"Industrial policy is rewriting the economic playbook, AI is accelerating, growth looks strong, but the credit cycle
will reveal how solid it really is. The re-industrialisation drive and technological transformation are powering
activity and supporting the core of underwriting, yet headline economic growth figures mask deeper structural
fragilities that will surface once the credit cycle turns. Over the shorter term, we expect the economy to navigate a
soft patch, with tariffs still feeding through to prices in the US and exports globally", said Jérôme Jean Haegeli,
Group Chief Economist of Swiss Re and Head of Swiss Re Institute.
An evolving political economy with heightened reliance on industrial policy is among the structural regime shifts
taking hold over the longer term. The increased risk of fiscal dominance - where central banks prioritise debt
stability over price stability - and sustained industrial spending will keep inflation anchored above pre-2020 norms,
keeping long-dated bond yields elevated.
The US will see real GDP growth moderate to 2% by 2026 and 1.9% by 2027, while the Euro area benefits from fiscal
stimulus, notably Germany's EUR 1 trillion investment programme (2026: 1.3%; 2027: 1.5%). China's growth will moderate
to 4.5% in 2026 and 4.2% in 2027, due to still weak domestic consumption and property-linked investment headwinds and
despite a more accommodative policy stance. Emerging Asia will stay resilient under flexible monetary frameworks,
benefiting from trade re-routing in a fragmented world.
Structural regime shifts reshape insurance landscape
Industrial policy has returned to the core of national economic strategies. The number of government interventions in
industrial sectors has tripled since 2012, spurring a global race for technological and manufacturing leadership.
While an evolving political economy with heightened reliance on industrial policy boosts domestic investment
- particularly in semiconductors, AI infrastructure and defense - it also drives fragmentation and concentration risk.
Industrial policy aims to build resilience but raises the risk of inefficiency, as firms accelerate a regional
re-routing of supply chains, production operations and sourcing. For insurers, it means more opportunities in
engineering, property and liability lines, but also more correlated exposures when shocks occur.
Population ageing is reshaping labour markets, consumption, and protection needs. Demand is shifting from family
protection to longevity, retirement income and health solutions, requiring insurers to innovate and extend cover across
longer lifespans. Ageing also changes asset-liability management dynamics, lengthening duration requirements and
amplifying the importance of long-term solvency planning for insurers.
AI - opportunity and challenge
AI is driving direct shifts in operations across value chains in non-life and life insurance. Swiss Re Institute
estimates that globally 3-8% of insurers' IT budgets have been allocated as of 2025 to develop AI capabilities, seeking
operational benefits in the form of efficiency gains, time saved and workflow enhancements, yet less than 5% of
insurers according to the sigma (based on a sample of 187 major insurers) have disclosed any financial impact.
In the near term, the sigma authors do not expect AI-driven labour market dislocations as most insurers aim for human
workforce augmentation rather than complete automation of processes. One of the main challenges for insurers will be to
model and price risks with no historical precedent while leveraging AI's potential to improve underwriting, claims and
productivity.
Insurance markets maintain robust profitability
Despite these headwinds, the global insurance industry enters this new era from a position of strength. Structural
tailwinds from high long-term interest rates, demographic change and technological innovation will continue to support
profitability. The sector remains well capitalised and resilient, with solvency ratios above 200% and strong liquidity
buffers.
Global insurance premiums are set to grow by 2.3% in real terms in 2026 and 2027. The non-life sector is forecast to
see global real premium growth easing to 1.7% before recovering to 2.5% in 2027. Profitability will remain solid, with
ROE around 10.5%, supported by structurally elevated investment yields (4.3%) and disciplined underwriting.
In the life sector, global premiums will grow by 2.5% per year, up from 2.2% in 2025. Higher long-dated bond yields
will underpin investment income and strengthen profitability, with the sector's return on investment rising to 4% in
2027. Global life premium volumes are expected to reach USD 4.1 trillion by 2027, accounting for 44% of total market
premiums.
Table 1: Real GDP growth and CPI inflation forecasts, 2024 to 2027F
2024 2025F 2026F 2027F
Global 2.9% 2.6% 2.5% 2.6%
US 2.8% 2.0% 2.0% 1.9%
UK 1.1% 1.3% 1.2% 1.5%
Real GDP growth,
annual avg.
Euro area 0.8% 1.3% 1.3% 1.5%
Japan 0.2% 1.2% 0.7% 0.9%
China 5.0% 4.8% 4.5% 4.2%
Global 5.1% 3.5% 3.0% 2.7%
US 3.0% 2.8% 2.8% 2.3%
UK 2.5% 3.4% 2.5% 2.3%
Inflation, all-items CPI,
annual avg.
Euro area 2.4% 2.1% 1.8% 2.2%
Japan 2.7% 3.0% 1.8% 2.0%
China 0.2% 0.2% 0.5% 1.0%
F = forecasts. Data as of 6 November 2025. Source: Swiss Re Institute, Bloomberg
Table 2: Insurance premium growth forecast in real terms
Total Non-life Life
2025F 2026- 27F 2025F 2026-27F 2025F 2026-27F
World 3.1% 2.3% 3.8% 2.1% 2.2% 2.5%
All 2.6% 1.9% 3.8% 1.8% 0.8% 2.1%
North America 3.2% 1.6% 4.3% 1.7% 0.1% 1.6%
Advanced markets
Western Europe 1.5% 2.3% 2.5% 2.0% 0.9% 2.4%
Asia Pacific 2.0% 2.2% 2.2% 2.5% 1.8% 2.0%
All 5.6% 3.9% 3.7% 3.9% 6.4% 3.8%
Emerging markets Excl. China 3.4% 3.9% 3.9% 4.0% 2.9% 3.9%
China 7.6% 4.0% 3.6% 3.7% 9.0% 3.7%
F = forecasts. Data as of 6 November 2025. Source: Swiss Re Institute, Bloomberg
How to order this sigma study:
The English version of the sigma 5/2025, "Shifting Sands - Global Economic and Insurance Market Outlook 2026-2027", is available on our sigma explorer, where you will find all research from Swiss Re Institute under one roof. To gain free access to Swiss Re Institute's macroeconomic and insurance market data, forecasts and research publications, please register at sigma explorer. You can download an executive summary of the sigma 5/2025 here.
For further information please contact Swiss Re Media Relations: + 41 (0)43 285 7171 or Media_Relations@Swissre.com. Please use this link to access Swiss Re's press releases.
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