Europe acts as drag on global premium growth

Emerging markets continue to drive global insurance premium growth, particularly in non-life insurance where the market has only just returned to growth in western Europe after years of stagnation. With a 30% share of global non-life premiums written, western Europe has played an important role in the 'lacklustre development' of global premium growth since the financial crisis, according to the sigma report. Non-life premiums in western Europe have been flat since the financial crisis. Real premiums in 2014, adjusted for inflation, were up just 0.5% on 2007. This is the weakest gain of any advanced market region over the last seven years, the reinsurer said.hideIn contrast, since 2007 non-life premiums in advanced Asian markets and Oceania were up by 25% and 21% respectively. They rose by more than 60% in some emerging market countries. The latest Swiss Re sigma report found that global non-life insurance premiums were up 2.9% in 2014 to $2.12tn. Emerging markets saw a 'robust' 8% growth, compared with just 1.8% for mature markets. The main drivers for growth in emerging non-life markets were China and India, which expanded 17% and 5% respectively. In contrast, non-life premiums in Russia shrank 0.3% and 1.4% in Mexico. Mature markets have also seen some improvements. In the US premiums were up 2.6% on the previous year and in western Europe premiums returned to positive growth of 0.6% after years of decline. However, growth of non-life premiums in mature markets was hampered by sluggish performance in Japan-up 0.8%-and contractions or weak growth in European countries. Non-life premiums in the UK were 1.7% higher in 2014. In France they grew 1% and in Germany 1.3%. However, premiums fell 3% in Italy, 8.4% in Greece and 1.2% in central and eastern Europe. Swiss Re noted that insurance premium growth is closely linked with economic growth. As a result, Europe's weak economy was the main driver for the lack of growth in its insurance market. Europe's GDP in 2014 was just 0.6% higher than it was in 2007 while GDP-per-capita was 2.2% less than the level of 2007. Swiss Re expects the UK economy to grow faster than other European countries. Germany and Spain are expected to outperform others in the euro area, while Italy and France will lag due to lack of structural reforms, it predicts. With the exception of medical and property insurance, European premiums have shrunk in all lines since 2007, according to Swiss Re. Private medical insurance premiums in Europe have grown 14% and property 2.4% since 2007, while casualty lines have fallen 10%. Marine insurance and credit and surety premiums have fallen by more than 15% and 20% respectively. Swiss Re's economists predict that non-life premium growth will again be sluggish in advanced markets in 2015, but strong in emerging countries. "Premium rates are expected to remain low in most markets but an improving global economy should provide some support for premium growth," Swiss Re said in its sigma report. "In North America, growth could weaken due to slowing price increases, and the outlook in western Europe remains likewise subdued due to the sluggish economic recovery," it added. Underwriting results in European non-life were slightly weaker in 2014, reflecting an up-tick in claims and lower contributions from prior-year reserve releases, according to Swiss Re. Improvements in Germany were more than offset by weaker results in France, Italy and the UK. The underwriting profitability in eight major global insurance markets deteriorated as the combined ratio rose to 98.1% in 2014 from 97.5% in 2013, according to the Sigma report. Going forward, weaker underwriting results-due to flat or even lower premium rates and a smaller contribution from reserve releases-will weigh on earnings, predicts Swiss Re. Total worldwide insurance premium, including life, increased 3.7% to $4.78tn last year, having stagnated in 2013. At $2.66tn, global life premiums bounced back to positive growth of 4.3% last year, after falling 1.8% in 2013. Life premiums are now above the pre-financial crisis average. Increasing life premiums reflect strong growth in both advanced and emerging markets, said Swiss Re.

Europe acts as drag on global premium growth

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