S&PASX 200 Index (ASX: XJO) insurance shares have delivered some market-smashing gains over the past 12 months.
Not to mention growing their dividends.
The Insurance Australia Group Ltd (ASX: IAG) share price, for example, is up 18% in 12 months. And QBE Insurance Group Ltd (ASX: QBE) has had an even stronger run, with the ASX 200 insurance share up 30% over that time.
For some context, the ASX 200 has gained a far more modest 1% since this time last year.
And on the passive income front, QBE shares trade on a party-franked dividend yield of 2.9%. IAG shares trade on a partly franked yield of 2.6%.
But with global risks and uncertainty rising across the globe, can these blue-chip insurance companies continue to outperform?
ASX 200 insurance shares facing heightened global risks
There was no shortage of risk and uncertainty facing investors, even before this month's Hamas-led attack on Israel.
Atop mounting climate-related risks, cybercrime, and Russia's ongoing war in Ukraine, investors in ASX 200 insurance shares are facing a year ahead which will see national elections held across some of the world's top economies. That includes what's shaping up to be a tumultuous election in the United States.
But rather than fear the rising unknowns and risks, John Neal, CEO of Lloyd's of London and former CEO of QBE, says they're likely to usher in fresh tailwinds for the global insurance sector.
According to Neal (courtesy of The Australian Financial Review), "It's a great time to be an insurer, because if we live in a world that's riskier and more uncertain, then insurance comes to the fore."
Why could rising risks be a boon for ASX 200 insurance shares?
"Rather than the insurance being an expense, it suddenly becomes a way to protect your revenue, your profit and loss statement, your balance sheet," Neal explains.
"As insurers, we've been going on about systemic risk for so long, and no one's believed us."
He also pointed to the added uncertainties from the wave of global elections in the pipeline:
Even on a simple level, just changing governments brings an added query as to what it means from a risk point of view. I think at a corporate level, people are beginning to understand the intangible value of the balance sheet.
Premiums on the rise
Significant, and ongoing, increases in insurance premiums have helped deliver the strong performance from ASX 200 insurance shares over the year gone by.
While that's good for profit margins, Neal believes the big insurance companies will likely need to partner with governments to ensure that insurance remains affordable.
According to Neal (quoted by the AFR):
We're at a tipping point where we've got to think about what a modern version of public and private partnership looks like. I don't think there's going to be a situation where there's a lack of cover, but where we need to be thoughtful, particularly at a consumer level, is around affordability.
If governments can get their head into the medium-term, insurers can provide medium-term protection.
While the proof is in the pudding, I suspect any potential future public-private partnerships with the Aussie government would offer a solid tailwind for ASX 200 insurance shares.