Global Premiums Rise by 1.5% in 2017, Driven by Emerging Markets: Swiss Re

July 16, 2018

Global insurance premiums continued to rise in 2017 with emerging markets leading the way, according to a study published by Swiss Re Institute’s sigma, which is celebrating its 50th anniversary of market research.

Global insurance premiums increased 1.5 percent in real terms to nearly US$5 trillion in 2017 after rising 2.2 percent in 2016, said the sigma study, titled “World insurance in 2017: Solid, but mature life markets weigh on growth.”

Global non-life premiums rose 2.8 percent in 2017 to approximately US$2.2 trillion – a further slowdown from the past two years, but slightly above the 10-year average of 2.1 percent.

Non-life premium growth in emerging markets slowed to 6.1 percent in 2017, lower than the 9.8 percent growth in 2016 and the 10-year average of 8.4 percent, the study said. Sigma noted that the slowdown was largely driven by China, where growth fell from 20 percent in 2016 to 10 percent in 2017 due to lower motor premium rates.

Nevertheless, the report said, China continues to be the growth engine in emerging markets.

Meanwhile, non-life premium growth in advanced markets remained steady at 1.9 percent, compared to 1.7 percent in 2016 and somewhat above the 10-year average of 0.9 percent.

Global life insurance premiums grew only marginally by 0.5 percent in 2017 to roughly US$2.7 trillion, said sigma, explaining that falling life premiums in advanced markets, such as the U.S. and Western Europe, were the main cause of the drag on overall global premium growth. Indeed, life premiums shrank by 2.7 percent in advanced markets in 2017.

In contrast, life premiums in emerging markets jumped 14 percent, largely driven by China, and remained well above the 10-year average of 8.3 percent, sigma said.

Given the current low levels of insurance penetration, the insurance markets in emerging countries have outperformed the corresponding economies for decades, said the report, explaining that incomes, revenues and assets of individuals and companies are growing in these markets, which in turn boosts the demand for insurance.

Asia’s Premium Engine

During sigma’s 50 years of analysis of the global insurance market, Asia has been an important contributor to premium growth, the report indicated.

In 1960, advanced and emerging Asia accounted for 5 percent of global insurance premiums, compared to 22 percent in 2017, according to Jerôme Haegeli, Swiss Re Group chief economist.

Non-life penetration has virtually stagnated in the advanced markets since around the turn of the century, while it has been on a declining trend in the life sector of advanced markets, the report added.

“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,” Haegeli said. “In the following decades, other markets such as India, Indonesia, Brazil, Mexico, Pakistan, Nigeria or Kenya could become more important.”

Market Outlook

Over the next few years, the Swiss Re Institute predicts that global life insurance premiums will rise, driven by strong growth in China, although profitability will continue to be under pressure as a result of too low interest rates, increasing 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,” Haegeli affirmed.

The Swiss Re Institute also expects global non-life premiums to increase, led by advanced markets such as the U.S., where the economy is strengthening. Despite decades of the solid performance from emerging countries, the Swiss Re Institute estimates that, in the years to come, advanced markets will contribute more than half of the additional premiums in absolute terms.

The sigma report can be downloaded from the Swiss Re Institute portal, along with a short YouTube video detailing the sigma findings.

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