Kurt Karl said the industry had successfully restored its capital base in the face of the financial crisis and heavy catastrophe losses, but there were still challenges to be met.

“The insurance industry faces three main challenges from the current economic and political environment: low government bond yields; the euro debt crisis; and slowing growth with elevated inflation in the emerging markets”, he told the Swiss Re Economic Forum in London.

Swiss Re used the forum to present latest publication “Global insurance review 2011 and outlook for 2012 and 2013”, which predicted given the global economic outlook the environment for the insurance industry remains very challenging but expected a more positive outlook, particularly after 2012. It added the insurance industry has successfully restored its capital base to a higher level compared to the beginning of the financial crisis.

It cautioned that large catastrophic losses, but also low investment yields, will lower profitability this year, and weak economic growth in the mature markets will constrain life and non-life premium expansion. But non-life profits will improve again after markets harden, probably late next year.

Premium growth for both life and non-life will grow in 2012 and further increase in 2013. Growth in emerging markets for both the life and non-life industries is expected to be in the range of 7-9% for 2012.

It added after an initial upturn, capital markets faltered this year. The euro zone and the US are on the brink of recession and growth in emerging markets is also slowing, albeit slightly. Interest rates will remain low for at least a couple more years, particularly in Germany and the US.