Asian insurance market outlook robust despite rising headwinds: Swiss Re

The Asian insurance sector will sustain robust growth in 2016 and 2017 despite the economic headwinds. However, the growth rates in both overall gross domestic product and insurance will differ quite markedly between ‘advanced Asia’ and ‘emerging Asia’. Life insurance markets in the region will continue to post healthy growth in savings and increasingly protection products too. Non-life premiums will grow at a slower rate during the next two years. They will be constrained by weaker economic momentum in many Asian economies and continued low rates driven by high levels of regional and global capacity and, thus, competition.hideProfitability in the non-life sector has been bolstered by a relatively low level of catastrophe losses but this of course could quite rapidly and dramatically change. The outlook for China’s insurance sector remains favourable but Hong Kong is expected to enter a cyclical downturn. These are the key forecasts from Clarence Wong, chief economist Asia-Pacific, and Irina Fan, senior economist, at Swiss Re, who presented their outlook in Hong Kong earlier this month. Mr Wong gave a relatively upbeat presentation on his expectations for the wider economy and insurance market in the region. However, the local Hong Kong insurance market will not have been delighted to hear that it will be one territory that will struggle to maintain the pace of growth because of high competition and a slowdown in the underlying economy, according to Swiss Re. But it seems that in Asia, as elsewhere in the world, mature economies are struggling to post anything close to the growth rates offered by so-called emerging economies. The global non-life premium growth rate is forecast to improve from 2.5% last year to 3% in 2016. But low interest rates will continue to pressure the global life market, said Mr Wong. Real-life insurance premiums are expected to grow by about 2.5% in advanced economies but by an impressive 11% in emerging markets, according to the reinsurer’s latest global Re/insurance Review 2015 and Outlook 2016/2017.Mr Wong said the world’s economy is forecast to grow by just over 3% during the next two years. Asia is expected to post “moderate” economic growth of about 5% with mild inflationary pressure but emerging Asia (including China) will manage about 6.5% during the next two years. Advanced Asia has a gloomy forecast growth rate of just under 2%, according to Swiss Re. Mr Wong reckons the life sector could see healthy growth in savings and increasingly in protection products, including universal life, whole life and health insurance. Non-life premiums could, however, be constrained by weak economic momentum and premium rates.China is expected to maintain “stable” premium growth rates of about 20% per annum during the next two years, mainly because of supportive government policies and robust underlying demand. Sales of life insurance in China are expected to be “very promising in 2016” as it is the main “savings vehicle” in the country, said Mr Wong.Premiums in China rose by 20% to CNY2tn ($303.48bn) by September 2015. Total insurance assets reached CNY11.6tn ($1.76tn).On the downside, Mr Wong pointed out that there is still a very large catastrophe protection gap in China, which vies for top slot in the table of countries with the largest uninsured natural catastrophe exposures—with the US and Japan. Catastrophe models estimate the global annual uninsured losses from future natural disaster events to be $153bn. Earthquake and flood are roughly equally uninsured, while wind is also a problem in China. There is a similar protection gap on the life side. The mortality protection gap in China is significant, estimated at just over $32bn in 2014 and with a compound average growth rate of 17% from 2004 to 2014. As for Hong Kong, the non-life sector saw decelerating growth and rising combined ratios in 2015. Mr Wong expects this market trend to continue during the next two years, mainly because of the intense local market competition and challenging investment environments.

Asian insurance market outlook robust despite rising headwinds: Swiss Re

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