Insurers in G7 markets need to improve underwriting margins in the range of 7 to 12 percentage points to achieve a reasonable return on equity through 2021.

Swiss Re said carriers needed to create this uptick in underwriting performance to compensate for lower interest rates.

It accepted that low interest rates had been affecting the industry’s profitability since the global financial crisis, but said further rate cuts aimed at fighting the economic impact of COVID-19 will only exacerbate this problem.

Moses Ojeisekhoba , CEO of reinsurance at Swiss Re, said: “Even before the COVID-19 crisis, most major markets were operating at below-average profitability. 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.”

Increasing loss trends were another major challenge for carriers. Swiss Re highlighted the impact of major weather events and said the current Atlantic hurricane season was the first on record to see 9 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.

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