The global insurance broking industry grew at a compound annual growth rate (CAGR) of 7% between 2012 and 2016, however, MarketLine warns that despite impressive growth, lower commissions and the stagnant reinsurance industry are contributing to a slowed growth trend for the sector.
Data and analysis from research firm, MarketLine, shows that during the four-year period between 2012 and 2016, the global insurance brokers sector recorded impressive growth, reaching a value of $42.8 billion.
The majority of the growth has come from “healthy revenue increases in the U.S.,” which MarketLine explained is the largest individual market in the world, with impressive growth also occurring in China.
But despite the recent impressive growth experienced by the sector, MarketLine warned of a decelerating growth trend, driven in part by the stagnant reinsurance sector.
Nicholas Wyatt, Project Leader for MarketLine, said; “We still expect the sector to record impressive growth on a global scale, but we are projecting a deceleration in the growth rate through to 2021. The US will continue to dominate the global sector, but lower commissions caused by declining premium rates, along with a stagnant reinsurance segment, are triggering a decelerating growth trend for brokers.”
The U.S. accounts for more than 63% of global insurance broker revenues, so how it performs clearly has a strong influence on the performance of the sector as whole, explained MarketLine.
“Demand for setting up new insurance contracts has been quite strong in the US in recent years and, with the country’s penetration of brokers as a distribution channel the highest in the world, much of it is directed towards brokers,” said Wyatt.
During the four-year period the Chinese market also witnessed rapid expansion, growing at a CAGR of 16.2%.
Wyatt, said; “Brokerage is nowhere near as prevalent in Asia as it is in North America, but the emerging demand for insurance products based on rising income and economic acceleration of countries within the region has stimulated the sector’s growth there. Nowhere has this been more apparent than in China.”
However, Wyatt continued to explain that much like the U.S., a slowed growth trend is also expected in China.
“China’s growth will remain impressive but will not hit the dynamic heights of recent years. A tightening of regulation in the insurance industry in 2016 to mitigate increasing risks, associated mainly with property insurance products, has already had an impact, and demand for non-life insurance products is also expected to slow, obviously having a knock-on effect for brokers,” said Wyatt.
For the period 2016-2021, MarketLine predicts growth of the global insurance broker sector to decline to a CAGR of 5.1%, resulting in a sector value of $54.8 billion.
The expected deceleration growth trend of the global insurance broker industry, driven by lower commissions and the stagnant reinsurance sector, shows just how far-reaching and influential the persistent soft market has been.
As noted by MarketLine, the current state of the reinsurance industry is having a negative impact on the revenues of the broker sector, and with headwinds expected to remain, pressures will only intensify in the coming months.