KUALA LUMPUR: In their latest study, Allianz SE analyses the growth prospects of global life and property & casualty (p&c) insurance markets.
After the meagre years of the financial and economic crisis, insurers can look ahead with more confidence: While insurance premiums grew worldwide by only 3.1 per cent between 2008 and 2016, growth should accelerate to 5.9 per cent over the next decade. This recovery mirrors the return of the global economy to normal growth and inflation rates.
The turnaround is most pronounced in mature markets, namely Western Europe. In some emerging markets, on the other hand, growth might even slow down a little, albeit still at a much higher level than in the developed world.
“The Latin American region and Asia (ex Japan), for example, are likely to continue reporting double-digit growth rates over the next ten years. The Malaysian market is expected to grow by 5.8 per cent per year over the next decade.
“The long lean spell of the crisis years is finally behind us”, said Michael Heise, chief economist of Allianz SE.
“In particular in Western Europe, many markets look back at a lost decade, in terms of premium income they are today smaller than before the crisis. However, we are not set for fireworks in the future either. In mature markets, insurance premium growth may trail behind economic activity for the time being.
“On the other hand, most emerging markets will continue to grow at breakneck speed, first and foremost China: Over the next ten years, one in three euros of additional global premiums will be earned in the Middle Kingdom.”
Future growth will reverse a trend seen in the crisis years, the declining weight of insurance in today’s economies. Over the next ten years, global insurance penetration, i.e. total premiums as percentage of GDP, should rise again, from 5.6 per cent in 2016 to 5.8 per cent in 2027.
However, this increase is almost entirely due to emerging markets. However, in this respect, Malaysia behaves rather like a mature market with stable or even slightly declining insurance penetration.
Furthermore, in the next ten years, the balance between the segments life and p&c will also shift again. Whereas the p&c segment was quite robust during the lean years, growing globally by 3.8 per cent per year on average since 2008, the life segment clocked up a rate of only 2.8 per cent.
Even in Asia, a region clearly dominated by the life segment – which accounted for three quarters of total insurance premiums in 2016 – the p&c segment grew slightly faster. In future, however, demand for life products should revive.
Because the need for private savings for retirement is as pressing as ever.
As a consequence, life insurance premiums should grow worldwide by 6.5 per cent per year until 2027, against average growth of 4.9 per cent in the p&c segment.
In Asia (ex Japan), too, insurance is expected to again show stronger growth than p&c insurance, and by a wide margin: 12.2 per cent against 8.7 per cent per year.
In Malaysia, the lead of the life segment will be much less pronounced (5.8 per cent vs 5.6 per cent). This rapid expansion of life markets reflects the huge pent-up demand as well as political support for private provisions in the region. “Growth in Asian life markets will be extraordinary over the coming years”, commented Michaela Grimm, co-author of the study.
“But this does not reflect Asian extravagance but rather sheer necessity, given the demographic development in the region: In 2050, more than half of the global population aged 80 and older will live in Asia.
But this rapid aging hits social security systems for old age that are not fully developed yet. So, most people have no choice but to put money aside themselves.
“The good news is: New technologies such as digitalisation can in future be used to allow more people to access and experience insurance cover by launching new products and providing better service. Digitalisation can make insurance products for more people more attractive.”
