Albeit at a slower pace than in 2016, global insurance premiums continued to rise in 2017 driven mainly by emerging markets, and global reinsurer Swiss Re expects continued growth in both life and non-life sectors.
The latest sigma study from the Swiss Re Institute, a division of the global reinsurance giant, explores recent international insurance industry growth as well as looking back over the last 50 years of sigma insurance industry publications.
In 2017, global insurance premiums increased by 1.5% to almost $5 trillion, which, while positive, is a slow down from the 2.2% growth witnessed in the prior year. By sector, life premiums increased by 0.5% in 2017 to approximately $2.7 trillion, while global non-life premiums increased by 2.8% to roughly $2.2 trillion.
According to Swiss Re’s data, declining life premiums in advanced markets, such as the U.S. and Western Europe, were the main driver of slower life premium growth and, while reduced, still sound growth in emerging markets contributed to the slowdown in the non-life space.
Overall, China remains an important driver of global insurance premium growth, especially in the life sector, where it continues to be one of the fastest growing insurance markets in the world, now only second in size to the U.S. life market. In total, emerging markets life and non-life premiums increased by 14% and 6.1% in 2017, respectively.
According to Swiss Re, insurance markets in emerging parts of the world have outperformed the corresponding economies for decades, which perhaps isn’t too surprising given the current low levels of insurance penetration. However, demand for insurance, which in turn drives a demand for greater reinsurance protection, is on the rise in some emerging markets, driven by the fact incomes, revenues and assets of both individuals and companies are on the rise.
The 50th annual sigma study reveals that in advanced markets the picture is somewhat different, with non-life premiums remaining broadly flat in 2017 at 1.9%, while life premiums in advanced markets fell by 2.7% in 2017, which Swiss Re notes as the “primary cause of the drag on global growth.”
Looking back over the last 50 years, Swiss Re notes that the regional structure of the global insurance industry has transitioned from Europe and North America to advanced and emerging Asia, something discussed in more detail by Swiss Re Group Chief Economist, Jerome Haegeli, who said: “Back then, Advanced and Emerging Asia accounted for 5% of global insurance premiums versus 22% in 2017. For the next decade, the shift to China is likely to continue.
“Given the impressive number of infrastructure initiatives underway in China, China’s contribution to world insurance premiums could yet again exceed expectations. In the following decades, other markets such as India, Indonesia, Brazil, Mexico, Pakistan, Nigeria or Kenya could become more important.”
Ultimately, Swiss Re anticipates that global life insurance premiums will rise over the next few years, driven mainly by China, while global non-life growth is expected to come from advanced markets where the economy is strengthening, such as the U.S. However, challenges remain, and companies will have to navigate the low interest rate environment that continues to hinder profitability, as well as competition and regulatory changes.
“The ongoing low interest rate environment remains a major concern for life insurers’ profitability and their ability to offer attractive long term life insurance products, particularly in combination with Solvency II types of regulatory frameworks,” said Haegeli.
