2025 global insurance outlook

_{From left to right: Deloitte China Insurance Digital Partner Ben Woo, Deloitte China Insurance Leader Joanna Wong, Deloitte China Hong Kong Financial Services Industry Tax Leader Anthony Lau}

• Global insurance sector shows resilience with improved financial performance, but faces emerging challenges from climate risks, technological disruption, and evolving customer expectations
• Gen AI and advanced technologies gain traction among insurers, with some advancing beyond proof-of-concept stage into key areas like claims and customer service
• New global tax requirements including Pillar Two implementation set to reshape compliance strategies, data collection mechanisms, and organizational structures

Deloitte’s 2025 Global Insurance Outlook indicates that insurers must transform their operating models to remain competitive and relevant in an increasingly complex market environment, marked by climate uncertainty, technological disruption, and evolving customer expectations. The report also addresses the implications of new global tax requirements, while emphasizing the importance of balancing profitability with societal purpose.

Deloitte China Insurance Leader Joanna Wong says, “With unpredictable risks and consumer empowerment expected to drive changes to legacy infrastructure, processes, and business models, the global insurance industry must adapt to the rapid pace of change through innovation, strategic partnerships, and adoption of advanced technologies like AI. While the industry has demonstrated resilience with improved underwriting results this year, the risk-averse nature of insurers’ cultures and their focus on margins and solvency have generally restrained progress in innovation and modernization.”

“By modernizing and streamlining infrastructure, operations, and business models, industry leaders can develop a more forward-looking approach to risk modeling, assessment, analysis, and mitigation. Amid this transformation, new tax rules pose compliance challenges and opportunities for tax teams, particularly in areas like data collection, reporting, scenario planning, and restructuring. As we look ahead to 2025, insurers must become more agile in adjusting how they interact with consumers, distributors, government agencies, ecosystem partners, and even their own workforce.”

Creating opportunities for long-term growth in 2025

In the life sector, life premiums in advanced markets are projected to rise by 1.5% through 2025, while comparatively slower momentum in emerging markets like China may drive premium increases of 7.2% in 2024 and 5.7% in 2025. Meanwhile, in the annuity sector, continued demand for savings-type products is expected from the expanding middle class in emerging markets, though declines are projected in pension provisions from governments and businesses.

Joanna Wong adds, “Insurance operations must adapt to increasing demand for Life & Annuity products, requiring enhancements in product development. Insurers will need to focus on efficient onboarding processes and customer service to cater to a younger middle-class demographic while managing regulatory compliance and ensuring adequate risk assessment in emerging markets.”

The general insurance (GI) business sector achieved significant recovery in the first quarter of 2024. Globally, insurers’ return on equity is projected to reach 10% in 2024 and 10.7% in 2025. In Hong Kong, the GI sector recorded a gross premium and underwriting profit in H1 2024 of HK$37.9 billion (YoY +2.7%) and HK$1.9 billion (YoY +31%) respectively. Overall, the 2025 outlook is upbeat, with lower claims payout and higher premiums boosting profitability in GI sector.

Emerging risks and evolving customer demands offer growth potential for GI insurers in 2025. A recent Deloitte research predicts that AI-related insurance premiums could reach nearly USD4.7 billion annually by 2032, yielding a robust compounded annual growth rate of around 80%. Additionally, the embedded insurance market is expected to top USD722 billion globally by 2030, driven by customer demand for greater personalization across channels.

Relatively high renewal premiums and wage inflation have boosted group insurance performance over the few years, but with persistency expected to drop due to slower employment growth in 2025, insurers should explore new avenues for long-term success. Key strategies could involve partnerships with ecosystem players for advanced administration platforms and insurtechs that offer skills, capabilities, and data sources.

Robust data management and governance key to AI strategy

The release of multiple publicly available Generative AI (Gen AI) tools has brought the true transformative capabilities of AI to realization. According to a Deloitte survey of over 200 insurance executives, 76% of respondents said that their organizations have implemented Gen AI capabilities in one or more business functions. While most remain in the proof-of-concept stage, some are starting to integrate gen AI into prioritized areas like claims and customer service.

Deloitte China Insurance Digital Partner Ben Woo says, “Many insurers in Asia Pacific are also leaping ahead with AI and GenAI implementation initiatives across various functions from distribution to operations to and customer service, primarily driven by favorable technical talent availability and cultural acceptance in the region. While emerging technologies and alternative data sources can help predict, mitigate, and maintain long-term profitability, insurers must use technology responsibly and transparently to build trust among all stakeholders.”

While insurers have prioritized building the data foundation over the last decade to enable analytics and digital capabilities, the focus is now on enabling their data ecosystems to support scalable AI. This includes fostering a convergence for both real-time and batch environments, developing data products for use cases such as pricing optimization, fraud detection, segmentation, churn, and lifetime value. Data mesh architecture aids this shift, moving from large data warehouses to specialized, business-tailored solutions that facilitate AI scalability.

New global minimum tax rules pose challenges to insurance sector

Profits for insurers operating in low-tax jurisdictions may be impacted as a result of new global minimum tax rules. With Pillar Two tax laws expected to take effect in many jurisdictions across the world, many insurers are now focusing on compliance, reporting, and scenario planning. They may also need to analyze corporate restructuring considerations that may help mitigate adverse impacts.

Deloitte China Hong Kong Financial Services Industry Tax Leader Anthony Lau says, “To respond to these new rules, insurance tax departments need to proactively assess their compliance requirements and remain close to business and investment units. Although Pillar Two is nominally a tax reform, finance, legal, IT, and other impacted stakeholders may need to educate themselves on these new rules and the potential implications to their functions. Insurers should also consider reviewing their pricing, cost optimization, and M&A strategies in light of the erosion of tax benefits and uncertainty around the impact of new tax laws.

Specifically, Hong Kong will implement Pillar Two on in-scope MNE groups starting from 2025. Top-up tax may need to be paid for those enterprises in Hong Kong in order to bring up their effective tax rate up to 15%. Profits derived by certain Hong Kong insurance related businesses such as professional reinsurers, licensed insurance brokerage companies, etc, could be eligible for concessionary tax rate of 8.25%, subject to certain conditions. The implementation of Pillar Two in Hong Kong may impact those enterprises.”
The erosion of tax benefits could lead to increased pressure for higher pricing and greater cost optimization. Additionally, although reporting and compliance will likely require a significant effort, some insurers may opt for more drastic restructurings because of these new rules, either through choice of domicile or overall corporate structuring.