Emerging Markets To Drive Non-Life Premium Growth–Swiss Re

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Yemisi Izuora/Agency Report

Emerging markets, in particular emerging Asia, will drive premium growth in non-life business in the next couple of years, according to Swiss Re.

Emerging market non-life premium growth will hit 6.7 percent in 2018, with Asia delivering 9 percent growth.

The global economy is expected to grow moderately over the next two years, supporting continued growth in insurance premium volumes, said Swiss Re in its ‘Global Insurance Review and Outlook for 2017/18’.

Growth in global non-life premiums is forecast to fall slightly from 2.4 percent in 2016 in real terms to 2.2 percent in 2017, and accelerate to 3.0% in 2018.

Of the major economies, the US is expected to grow by slightly more than 2 percent in inflation-adjusted (real) terms annually over the next two years. Swiss Re noted that the election of Donald Trump as president-elect was not explicitly incorporated into the US forecast, but said that this development is unlikely to have a major impact on insurance markets over the next two years.

The euro area and the UK are forecast to grow by about 1.0 percent and 1.5 percent, respectively, while Japan should grow by less than 1.0 percent. China is expected to grow by around 6.5 percent.

“The insurance industry faces headwinds, with moderate economic growth, and still ample capacity in the markets creating a challenging pricing environment,” said Kurt Karl, Swiss Re’s Chief Economist.

“Nevertheless, premium volumes continue to grow, in both the advanced and emerging markets along with economic activity and an increase in the insurance penetration rate, particularly in emerging markets.”

Emerging markets are expected to drive the improvement in non-life insurance sector premium volumes over the next couple of years.

Premium growth in the emerging markets is forecast to increase steadily from an estimated 5.3 percent in 2016 to 5.7 percent in 2017 and 6.7 percent in 2018.

An improvement in commodity prices and strengthening economic activity will stimulate increased demand for insurance from the emerging regions, said Swiss Re.

Emerging Asia growth engine
Emerging Asia will likely have the strongest growth in non-life premiums, forecast to be nearly 8 percent in 2017 and 9 percent in 2018.

A contributing factor will be the investment opportunities presented by China’s One Belt One Road programme, which is expected to generate an increase in demand for commercial insurance, said the review.

Swiss Re said now that commodity prices have stabilised, growth in premiums in Latin American and Sub-Saharan Africa will return to about 4 percent by 2018 while the Middle East and North Africa and Central and Eastern Europe are expected to sustain growth near 5 percent and 4 percent respectively.

“The pricing environment in the global non-life sector remains challenging,” said Swiss Re.

“Pricing in commercial lines continues to deteriorate across all regions, but at a slower pace. In contrast to many other commercial lines, however, rates in cyber insurance continue to harden but at a slowing pace and could level out soon. Increased awareness of the risks associated with cyber attacks and data breaches is boosting demand for related insurance solutions, and represents a significant growth opportunity for the non-life sector.”

To date, profitability in non-life has been sustained by low natural catastrophe losses and reserve releases, Swiss Re noted.

In non-life reinsurance, global premium growth is expected to be 2.7 percent in 2017 and 2.9 percent in 2018, based on increasing cessions from emerging markets.

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