Aon reveals global insurance market opportunities

The report, Global Insurance Market Opportunities, revealed that global property casualty premium totalled $1.4tn for 2014, with an average penetration rate of 1.9% across the world’s top 50 insurance markets.

Property casualty penetration is 1.9% of GDP based on 50 of the largest countries, nearly flat compared to last year. Motor insurance accounts for 47% of property/casualty premium, while property accounts for 33% and liability 20%. This mix of business is nearly unchanged from last year, said Aon. The study noted that motor insurance is also the fastest growing line of business, with 4.2% annual growth over the last five years, driven by strong growth in China, Brazil, Argentina, Venezuela and Saudi Arabia. Property is growing at an annual rate of 3.5% and liability at 2.7%.

The study highlighted that losses from extreme corporate liability events continue to have a marked impact, with 86 individual losses reported in excess of $1bn since 1989. It estimated that there is a one-in-two chance annually of an individual corporate liability loss in excess of $10bn-and that nearly 50% of such losses result from environmental, products, premises and operations liability, and similar causes that are potentially insurable.

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The study found that 13 countries achieved annual growth of more than 10% over the last five years. Over this period, Nigeria was shown to have the lowest combined ratio at 84.8%, while Romania had the highest combined ratio at 120.3%. In 2014, 27 of the 50 countries analysed in the study achieved combined ratios below 95%, with Indonesia leading the rankings with a combined ratio of 83.6%, followed by Brazil and Malaysia.

According to Aon’s Country Opportunity Index, which ranks markets based on a combination of profitability, growth potential, and political stability, Indonesia, Malaysia, and Singapore were the top performers, followed by Ecuador, Chile, Saudi Arabia, Nigeria, Australia, UAE, Brazil, South Africa and Norway. These make up Quartile 1 in the listing.

Of these, all with the exception of UAE, were in Quartile 1 last year, and most have been in for the last three years. Indonesia, Malaysia, and Singapore tied this year for the number one position-all three have exhibited low combined ratios, healthy premium growth and GDP growth, and a stable political environment, said the study.

In the study, Aon said that in order to determine expansion opportunities, it examined premium growth and loss ratio performance by country across motor, property, and liability lines of business as well as premium growth and combined ratio performance by country for all lines. Countries were then identified as either low growth or high growth, and as either out performers or under performers.

According to Aon, twenty countries are high growth, loss ratio outperformers in at least one line of business. Of these twenty countries, five appear in each of the lines of business analysed as high growth out performers: China, Colombia, Ecuador, Indonesia and Venezuela. It noted that China, Colombia, Ecuador and Indonesia were high growth out performers last year as well.

The study identified seven key business opportunities for insurers over the next five to ten years: US mortgage credit, the sharing economy, reputation and brand, microinsurance, corporate liability covers, terrorism cover, and cyber risk. It highlighted that three key strands of the market-demand driven by new emerging risks, supply from new capital and empowering data and analytics-have all seen favourable developments, contributing to a positive outlook for the insurance industry.

“A core theme of the study is how data and analytics can, and must, provide the glue between supply and demand to ensure a growing, thriving insurance market over the coming decade,” said Stephen Mildenhall, Global CEO of Analytics for Aon. “We believe that while data, technology, and analytics are driving many of the emerging risk perils, they simultaneously hold the promise of delivering parallel solutions through the new capabilities they enable.”

The study explained that that the ‘middle’ of risk is disappearing: risks today are either well established, well understood, and well managed-or emerging, complex, and undermanaged. “Today the industry has a unique opportunity to strengthen its relevance by providing solutions to these emerging risks,” Aon said.

The study revealed that emerging risk lines will be the growth engine for insurers over the coming decade, providing coverage against perils like cyber, reputation and brand, social media, corporate liability and risks related to the sharing economy.

The full 2015 Insurance Risk Study can be accessed at: http://bit.ly/1VCMvlE.