Global insurance premiums increased by 4.4% during 2016 when compared with the previous year, driven largely by the continued expansion of the Chinese marketplace, but also growth in other peril regions, suggesting a need for greater reinsurance demand across the globe.
The latest, global analysis on insurance premiums by Allianz Research, a division of insurer and reinsurer Allianz SE, reveals that global insurance premiums increased to a record high of roughly €3.65 trillion (US$3.89 trillion) in 2016, growth of 4.4% on the previous year.
Despite growth in 2016 being less than the previous two years, which both recorded growth of more than 5%, this translates to global insurance premium growth of roughly €150 billion which, according to Allianz, some €70 billion, or 46.6% came from China alone.
Greater levels of insurance penetration in China is likely to result in increased demand for reinsurance protection in the region. However, as discussed previously by Reinsurancene.ws, the recent development and establishment of local reinsurance entities has increased competition while margins are starting to thin for local business, which has seen a number of the larger, foreign reinsurers pull-back in the region.
Absent China’s continued expansion Allianz notes that the international insurance industry in 2016 would have recorded growth of just 2.7%, revealing that the “Chine effect” was especially notable in the life insurance sector, where China is still behind averages for developed countries but is catching up with other regions around the world.
“This Chinese dominance can definitely also be attributed to the slump on the life insurance markets elsewhere in the world,” says Allianz. Explaining that while the Chinese life market expanded in 2016 in Western Europe, premium income is expected to have declined by 1.2%, overall in 2016. This is the first negative trend in Western Europe since 2012, says Allianz.
Furthermore, markets also contracted in some parts of Eastern Europe, and also Australia in 2016, says Allianz.
Life markets in Russian and Turkey, alongside the majority of Asia’s emerging markets, such as India, Indonesia and Vietnam, recorded insurance premium growth in the double-digits in 2016, with the U.S. also reporting strong growth.
International premium income from the life sector in 2016 totalled €2.3 trillion (US$24.6 trillion), growth of 4.7% on the previous year, says Allianz.
Wherever and whenever there’s greater insurance penetration the need for more reinsurance protection becomes evident, as companies look to secure and diversify their growing exposure. People are living longer in many parts of the world, and combined with a rising middle class in emerging markets this is helping to drive demand for life insurance solutions, which in turn will result in a greater need for reinsurance cover, such as longevity reinsurance transactions, for example.
Moving away from the life sector Allianz says that the global property and casualty (P/C) sector in 2016 likely increased by 4% on the previous year, with just a few regions experiencing negative growth during last year.
After five years of growth averaging above the 5% mark in the global P/C sector, the reported 4% would be the lowest since 2010, explains Allianz.
China again recorded solid growth, although at 9% its P/C sector expansion dipped below an average 10% for the first time since the 1990s. “This also means that the global trend is much less reliant on China in the P&C segment, with only one-fifth of last year’s global growth attributable to the Chinese market,” says Allianz.
Western Europe recorded impressive growth in the P/C sector, by its standards and according to Allianz, of 2.1% in 2016. However, “looking at both the life and P&C insurance segments – the western European insurance market stagnated,” says Allianz, which resulted in its share of the international market declining to 27% in 2016, from 36% a decade ago.
“This means that the advancement of China and other emerging markets is gradually eroding western Europe’s weight on the global market,” explains Allianz.
Interestingly, the above trend identified by Allianz does not apply to North America, which maintains a relatively stable global insurance market share of 33%. “At the start of the millennium, the insurance markets in North America and western Europe were virtually neck-and-neck in terms of total premium income, today’s North American market is around 20% bigger,” says Allianz.
The global risk landscape continues to evolve and as regions in parts of Asia, and elsewhere continue to expand their insurance markets and increase penetration levels, the need for greater reinsurance demand is a natural occurrence. For global players the challenge will be in entering these growth regions and being able to fight for a share of the market, as local players and protectionist practices could hinder growth potential.
