Global premium growth to reach pre-crisis level in next decade, Allianz predicts

After a ‘lost decade’, premium growth should return to pre-crisis level, with 6% growth predicted in the next decade, according to Allianz Research. It also revealed that China will take over from the US as the biggest insurance market worldwide. Insurance markets to continue to recover in the future, said Allianz, pointing out that while global premium growth has disappointed since the financial crisis, with a nominal rate of just over 3% a year, growth should accelerate to about 6% in the next decade – almost reaching the pre-crisis level. The predicted growth reflects more stable economic growth as well as higher inflation and interest rates. Allianz noted that after zero growth in the last ten years, premiums in western Europe should increase again in the future by an average of just under 3% per year. But is pointed out that at the end of the 2020s, about 40% of global premium income should be written in emerging markets – just ten years ago, this figure was still below 10%. Currently, the US is the largest insurance market worldwide, with €1.1trn, or just over 30% of global premium income, followed at a distance by China, with about €420bn. But China will overtake the US as the largest insurance market in the next decade. “Long-term forecasts are currently particularly difficult, [as] the insurance markets are undergoing fundamental change,” said Kathrin Brandmeir, economist at Allianz Research. “However, from our point of view, this disruption also offers great opportunities. With new technologies, insurance cover can be made accessible and tangible for more people, and insurance products can become more attractive. If we succeed in getting customers so enthusiastic about insurance that they again spend as much of their income on insurance cover as they did before the crisis, global premiums could be about €1trn higher at the end of the next decade than in our baseline scenario.” According to projections by Allianz Research, global premium volume in 2017 rose to a new record level, growing 3.7% to €3.66trn (excluding health insurance). However, premium growth was at a lower rate than GDP for the second year in a row. “Although the growth rate of premium income accelerated slightly compared to the previous year (2.9%), it lagged behind the expansion of economic activity (5.9% nominal growth) for the second year in a row. Insurance penetration (premiums as a percentage of GDP) has thus fallen to 5.5% – the lowest value in the last 30 years. At the beginning of the millennium, before the great financial crisis, this figure was on average one full percentage point higher,” said Allianz. “It is actually a paradoxical situation,” said Michael Heise, chief economist of Allianz SE. “On the one hand, the risks in the world are constantly increasing – just think of climate, demography, cyber or politics – but on the other hand, people worldwide are spending an ever smaller proportion of their income on insurance. A great joint effort by politics and industry is needed to close this protection gap.” Property and casualty grew by 5.0% last year, said Allianz, adding that it not only grew almost twice as fast as life insurance in 2017, but also recorded the largest increase since 2012. “Almost all regions contributed to the positive premium development; nevertheless, the growth discrepancy between emerging and industrialised countries remains striking: while premiums in the former soared by 11.6%, mature markets only managed an increase of 3.5%. Western Europe, however, is also lagging significantly behind this figure: premium growth in 2017 reached only 2.0% – but still the second highest value since 2007; in the previous year, the western European markets recorded zero growth,” said Allianz. Global insurance premiums in property-casualty and life totalled €3.66tn in 2017 compared to €2.681tn in 2007. For western Europe, premiums totalled €972bn in 2017 compared to €970bn in 2007, while for North America, premiums totalled €1,201bn in 2017 compared to €977bn in 2007. For China, premiums totalled €422bn in 2017 compared to just €87bn in 2007. And Latin America saw premiums total €116bn in 2017 compared to €33bn in 2007. Looking at predicted annual premium growth rates from 2018-2028, Allianz said that China would lead the field with 12.9%, followed by Latin America (9.9%), Asia (excluding Japan and China (8.8%), and eastern Europe (7.4%). Western Europe would see a growth rate of 2.8%, North America 3.7%, and Japan 3.2%. In terms of premiums per capita, based on 2017 exchange rates, the rankings were as follows: 1. Switzerland (€4923) 2. Denmark (€4671) 3. Singapore (€4188) 4. Taiwan (€3970) 5. Norway (€3481) 6. USA (€3443) 7. Sweden (€3305) 8. Great Britain (€3271) 9. France (€3025) 10. South Korea (€2940) 17. Germany (€1878) 35. China (€299)

Global premium growth to reach pre-crisis level in next decade, Allianz predicts

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