Zurich:
Global insurance premiums passed the USD 5 trillion mark for the first time in 2018, equivalent to more than 6 per cent of world gross domestic product (GDP). This was based mostly on solid growth in the non-life sector, particularly in China and other countries in emerging Asia, and also among advanced markets, says the latest sigma from Swiss Re Institute, "World insurance: the great pivot east continues".
Global insurance premiums are forecast to grow by 3 per cent in real terms in 2019/20, led by the emerging markets. Life premiums will increase by 2.9 per cent, well above the 0.6 per cent annual average of the previous 10-years, with a bounce back in China the main driver.
In non-life, global premiums are forecast to grow by 3 per cent, with emerging Asia taking the lead, supported by solid growth in advanced markets.China will contribute most to life and non-life premium growth over the next two years, and its share of global premiums will reach 20 per cent by 2029, up from around 11 per cent currently.
China remains on course to surpass the US as the largest insurance market by the mid-2030s. With the growing importance of the market in China and publication of this annual edition of sigma, Swiss Re Institute is pleased to announce the timely opening of its Swiss Re Institute China Centre in Beijing.
Global insurance premiums volumes surpassed the USD 5 trillion mark for the first time ever in 2018.
"Global direct premiums written were equivalent to more than 6 per cent of world GDP in 2018, underlining the very significant role insurance plays in supporting sustainable development and global resilience. With USD 5 trillion of premiums written globally per year, the role of the insurance industry as a long-term investor is becoming ever more important ",says Jérôme Jean Haegeli, Group Chief Economist at Swiss Re.
Global non-life premium growth was solid at 3 per cent in 2018, outpacing the historic average (2.2 per cent) as advanced markets slowed and emerging markets grew. In China, non-life premiums rose by 12 per cent, driven by strong increases in personal accident and health insurance. This was accompanied by a solid performance in emerging Asia overall. Growth in the global life sector was subdued due to shrinking markets in Europe, China and Latin America.
Near-term insurance demand to remain robust
Swiss Re Institute forecasts that global insurance premiums will increase by 3 per cent in real terms in 2019/20, based predominantly on strong life and non-life sector growth in the emerging markets.
"The outlook is promising", Jérôme Jean Haegeli continues. "While global economic growth is slowing, we expect insurance demand to hold up over the next two years, and China will be the main contributor to premium volume gains in both the life and non-life sectors."
Global life premiums are forecast to increase by 2.9 per cent in each of the next two years, much stronger that the 0.6 per cent annual average of the last 10. This will be mostly driven by emerging markets, where premiums are forecast to increase by 8.7 per cent .
China specifically is forecast to contribute almost half of the increase in global life premiums over next two years, with a rebound to 11% growth after a sharp 5.4% contraction in 2018 due to tightening of regulations.
Elsewhere in emerging markets, favourable polices such as tax benefits (eg,in Argentina) and promotion of financial inclusion schemes in some Asian markets should support demand. So too will positive economic momentum and favourable demographics.
In the advanced markets, life premiums are forecast to grow by 1.2 per cent in 2019/20. The US and Canada will lead, based on robust growth in the
annuities business and solid wage and employment growth also. In advanced Asia-Pacific, long-term growth drivers like ageing populations and rising affluence will support premium growth. The traditional savings business will remain unattractive for consumers in advanced markets due to low interest rates. Overall sector profitability will remain subdued for the same reason.
Global non-life premiums are forecast to grow by 3 per cent in real terms in 2019/20, above the 10-year average of 2.2 per cent. Growth in the emerging markets will remain robust (7 per cent), with China again being the main contributor,albeit at a slowing pace given more moderate economic growth there.
Emerging Asia will be the world's fastest growing region, with strong demand for health, liability and agriculture covers. The non-life sectors in the Middle East, Africa and Latin America will recover as economies in those regions strengthen.
Non-life premiums in the advanced markets will grow by 1.8%, slower than in 2018 but above the historic average of 1.1 per cent. This forecast is based on still solid premium growth expectations in the US and Canada, with premium rate increases lending support. The other advanced regions will likely follow longterm average growth trends.
Profitability in non-life insurance overall will remain under pressure. There has been an improvement in underwriting conditions, but stabilisation of the soft market trend has not been sufficient to notably narrow the profitability gap that still besets the sector.
The non-life sector faces a fundamental structural shift over the next decades,with a possible decline in premiums from motor, the dominant line of business today. This potential decline will come as a result of the ongoing evolution of advanced driver-assistance systems and self-driving car technologies, which are expected to lead to lower claims, and so also lower premium rates and volumes in motor.
The pivot east, and to China, will continue over the longer term The shift in global insurance business to Asia will remain ongoing. China
consolidated its position as the second largest insurance market globally in 2018, with total premiums written of USD 575 billion in 2018. The Chinese market is currently still less than 40% the size of the US market (USD 1 469 billion), and is also smaller than the three largest markets in Europe combined (the UK, Germany, and France: USD 836 billion).
However, the current shortfalls only serve to highlight the catch-up potential. Swiss Re Institute forecasts that Asia-Pacific as a whole will account for 42 per cent of the global premiums by 2029. China is and will remain a main driver of this development. Its share of the global premiums went from 0 per cent in 1980 to 11 per cent in 2018, and is forecast to reach 20 per cent in 10 years' time, almost as high as the share projected for the whole of advanced EMEA. China remains on track to surpass the US as the world's largest market in the mid-2030s.
In emerging Asian market, the non-life premium growth improved to 11 per cent in 2018 from 8.1 per cent a year earlier. This was based on recoveries in Indonesia and Malaysia, and sustained strong growth in India and Vietnam. Property and motor remain the two largest business lines in the region, both having achieved trend growth in 2018 despite intense competition and soft ratesIn India, agriculture insurance continued to be a major growth driver with double-digit increases, as has been the case since the launch of a revised crop insurance scheme by the government in January 2016.
“We estimate that life premiums in emerging Asia (excluding China) increased by 7 per cent in 2018 (2017: +5.8per cent). Premiums in Vietnam surged 28 per cent, up from a low base and supported by strong promotion through the agency and bancassurance channels.'' says the Swiss Re study.
India, the Philippines and Malaysia also reported stable premium growth of around 6‒8 per cent. In Thailand and Indonesia, weaker equity markets weighed on performance.
“We expect life premiums will maintain strong growth momentum of around 6‒7 per cent in each of the next two years. The conclusion of elections in India, Indonesia and Thailand should remove some of uncertainties around government policies and economic developmen,'' adds the study.
“We expect that insurance demand in emerging Asia will shift more towards protection-type products, as low interest rates and volatile risky asset prices continue to undermine the attractiveness of investment products.At the same time, government promotion (eg, in India, Indonesia and Vietnam) of financial inclusive schemes will help insurers gain access to new customer segments, including the low-income population. In some markets like Thailand, the population is aging rapidly. This will support sales of private pension plans, including annuities,'' explains the study