Emerging markets bolster global premium growth

Non-life premium growth was driven by emerging markets. In emerging markets, non-life premium growth remained strong at 8.3% in 2013 after 9.3% in 2012, and was solid across all regions with the exception of Central and Eastern Europe (CEE), said the report. The expansion in emerging Asia was supported by sustained strong growth in Southeast Asia and China. Non-life growth in advanced markets has remained soft since the financial crisis in 2008, said Swiss Re. Premiums increased by an annual average of 0.7% between 2009 and 2013 compared with 1.9% in the period 2003-2007. Looking ahead, the firming economy and labour markets in the advanced markets will support the non-life sector, and growth in the emerging markets should hold up also, according to Swiss Re. Overall profitability has improved in the non-life sector, though investment returns, an important component of insurers' earnings, remain low in line with the very low level of interest rates since the 2008 financial crisis. In 2013, interest rates started to rise particularly in the US and UK and will trend up through 2017. This will benefit insurers, but but not for a few years, said the report.hideThe Swiss Re report looked at regional emerging markets and edited highlights are detailed below. Asia Non-life premium growth in emerging Asia was little changed at 13% in 2013, supported by sustained strong growth in China (+16%) based on rising motor sales and infrastructure investment. In India, non-life premium growth slowed to 4.1% from 8.9% in 2012 due to weaker economic growth and business sentiment. In Southeast Asia, Thailand had robust growth in premiums (+13%), despite lingering social unrest, while strong macro fundamentals underpinned insurance demand in Indonesia (+13%) and the Philippines (+10%). In Vietnam, premiums were down 1.6%. The market was still recovering from the domestic financial turmoil of 2011-2012 related to corporate bankruptcy, when banks' balance sheets deteriorated because of rising non-performing loans. Profitability in non-life is estimated to have improved in 2013, given an absence of major losses from natural catastrophes other than Typhoon Haiyan which struck the Philippines in November. The underwriting results of non-life insurers in the region were mostly stronger and investment yields improved. Non-life premium growth in emerging Asia will remain strong in 2014 supported by improving economic activity. In China, the motor business faces challenges after the compulsory motor third-party liability market was opened up to foreign participation, increasing competition. Rising incomes and an expanding middle class in India will fuel demand for non-life insurance products there. Latin America Non-life insurance premiums grew by 7.2% in 2013 to $103bn, despite a cooling economic environment. Growth ticked up in Brazil, Mexico and Argentina, and slowed in Chile, Colombia and Venezuela. In Brazil, tax incentives for new vehicle purchases continued to boost motor insurance premiums. In contrast, rising tax rates and depressed consumer confidence in Mexico were behind sluggish growth in that market. Chile and Colombia also had weak growth in the motor and property lines, reflecting slowing economic growth and increasing competition. In Chile, harder rates after the 2010 earthquake attracted additional capacity into property insurance, which set the stage for the current soft market. In Colombia, the removal of restrictions on foreign insurance companies to conduct cross-border business in certain non-life lines of business (eg, marine, international commercial aviation) increased competition. Meanwhile, premiums grew by 9.8% in Argentina and remained flat (-0.1%) in Venezuela amidst elevated inflation. Non-life premium growth is forecast to slow in 2014 as a result of weaker economic growth. Insurance demand in Brazil will be further hit by expiry of a tax incentive for motor vehicles and as tight monetary policy curtails credit growth. Additionally, uncertainty surrounding the implementation of structural reforms will likely affect infrastructure- and investment-related insurance. Similarly, in Mexico investments associated with structural reforms will only take effect in 2015, thus delaying an anticipated acceleration in engineering, credit and surety premium growth. With the motor market expected to remain weak in 2014, Mexico will likely continue to trail most of its regional peers. In Peru and Colombia, resilient infrastructure investment should cushion the downside from softer private consumption, while exposure to an accelerating US economy also bodes well for trade-related lines of business. Central and Eastern Europe Non-life premium growth slowed to 2.5% in CEE reaching $55bn in 2013 (2012: +4.2%). Growth slowed most in the largest market Russia from 13% to 1.5%. Premiums in Poland grew marginally (+0.7%) as demand for motor insurance remained weak. Meanwhile the health business grew robustly and property and liability also had solid performances. In some CEE EU countries, premiums were down, but there were some positive developments as well. For instance, the Czech Republic (+2.6%) and Bulgaria (+3.3%) had positive growth after years of declining premiums and in Hungary premiums were stable. Among the CIS countries, Ukraine and Belarus continued to show very solid growth, while the Baltic states grew only marginally. In contrast to the weak motor business in many markets, health insurance growth remained strong in several countries. Overall, underwriting profitability remained stable in CEE, though insurers in the Czech Republic were negatively affected by losses from the floods in June. Economic recovery will lead to lower unemployment, and rising consumption and investment activity. All this should support the non-life sector, particularly in the region's EU-member countries. Russia, however, will have slower growth than in recent years. The country's economic outlook has been negatively affected by the Ukraine crisis, which has undermined investor sentiment and led to capital flight. This will likely have a negative impact on insurance demand.

Emerging markets bolster global premium growth

Want to read this article?

Read Next

UK market softening set to accelerate in 2025, says Aon

Moody’s upgrades Dutch non-life insurance market

Aon hires COO for France and Iberia from AXA XL

US product recalls remain near record high but Trump clouds future direction

Convex launches new Lloyd’s syndicate

UK market softening set to accelerate in 2025, says Aon

Moody’s upgrades Dutch non-life insurance market

Aon hires COO for France and Iberia from AXA XL

US product recalls remain near record high but Trump clouds future direction

Convex launches new Lloyd’s syndicate

Keep yourself informed

Sign up for Commercial Risk’s newsletters

Want to read this article?

Read Next

UK market softening set to accelerate in 2025, says Aon

Moody’s upgrades Dutch non-life insurance market

Aon hires COO for France and Iberia from AXA XL

US product recalls remain near record high but Trump clouds future direction

Convex launches new Lloyd’s syndicate

Related Articles

Keep yourself informed

Sign up for Commercial Risk’s newsletters