Filed Under:Markets, Commercial Lines

Emerging Markets Present Major New Opportunities for Global Carriers

Despite short-term challenges, insurers see bright, long-term future in Latin America, Asia and Africa as the ranks of the middle class rapidly expand

Burgeoning economies in emerging markets overseas provide enticing opportunities for insurance companies, and some major carriers are aggressively seeking to bolster their global market share.

Despite the inherent challenges in doing business in foreign territories—including the chance of adverse political developments; competition from local insurers; the need for establishing distribution networks; and mostly low underwriting margins—the potential upside to international expansion is too great to be ignored.

Asia and Latin America have contributed the most to emerging-market premium growth in the past decade, driven both by their healthy economic environments and improvements in insurance regulations.

And this expansion is only expected to continue. Between now and 2021, more than half the growth of the global economy is expected to come from emerging markets, according to a 2011 Swiss Re report, “Insurance in Emerging Markets: Growth Drivers and Profitability.”

P&C insurance premiums in emerging markets, the study says, are forecast to grow more than twice as quickly as those in industrialized nations.

As the middle class expands in a particular region, so does the potential to protect its assets. “Personal-lines demand, especially for auto insurance, which is our main business, is largely driven by the middle class,” says Luis Bonell, president of Liberty Mutual Insurance’s international country operations. “Overall, we see the middle class rising vigorously in most emerging markets.”

And on the commercial side, coverage for manufacturers and for massive infrastructure projects is an important part of the equation in maximizing the insurance potential of growing economies.


Several carriers looking to make inroads in growing markets have identified Latin America as a prime target.

“Latin America is a key region, and we are seeing significant growth in Brazil in particular,” says Hugh Burgess, CEO of the Americas region for Allianz Global Corporate & Specialty (AGCS), Allianz’s global line for corporate and specialty insurance.

Two local AGCS offices are in the process of being set up: a headquarters in Rio de Janeiro and a location in Sao Paulo.

“Brazil is a ‘must-be-there’ market with an attractive client base of both local Brazilian enterprises and overseas companies,” Burgess adds.

The Brazilian economy is forecast to grow nearly 8 percent in 2012 alone, including significant investments in large-scale infrastructure development.

The 2014 FIFA World Cup and upcoming Summer Olympics in 2016 are directly boosting the insurance market across all lines of business in the country. Additionally, with 12,000 registered aircraft, Brazil is the world’s fourth-largest domestic-aviation market.

“Growth in Latin America in particular has been very strong for us, driven by its growing economic importance to the world economy,” adds Bonell. For example, he says, both within Venezuela and Brazil, Liberty Mutual takes in more than $1 billion in net-written premium annually, including auto (personal and commercial); SME (small/medium enterprise) coverage in property, liability, life, marine and fleet; and individual/group life and health.

On the distribution front, Liberty International sells insurance products and services through two distinct approaches.

One way is through Liberty International Underwriters (LIU), which sells specialty commercial insurance worldwide. The other is through Liberty Mutual Insurance’s international country operations that sell personal and small commercial-lines products to individuals and businesses via direct, institutional and affinity channels. 

In January, XL Group received approval from the Brazilian insurance regulator, Superintendencia de Seguros Privados, to establish an insurance operation in the country. By spring, XL Seguros Brasil S.A. in Sao Paulo plans to offer a range of casualty, property, professional and specialty insurance products.

Bruno Laval, XL’s regional manager for Iberia & Latin America, said in January that Brazil represented 42 percent of South America’s P&C insurance premiums in 2010, and forecasts show that Brazil’s P&C market could reach $160 billion by 2030.

Gregory S. Hendrick, executive vice president and CEO of XL’s insurance operations, tells NU, “As the large and middle-market companies we’re focused on enter new markets and face different legislations and governance challenges—this is where we can help them move their world forward.”


The China Insurance Regulatory Commission has made significant changes to the business rules in the country in recent years, says Yvette Essen, director of industry research for Europe & emerging markets for A.M. Best-Europe. These include new rules established in 2010 that permit broader investment into assets including real estate projects and private companies.

The commission will also soon open the country’s compulsory motor-insurance market to foreign insurers, but Essen warns this may lead to increased capacity and greater competition on rates. Both Allianz and AIG have expressed interest in trying for their slice of the private-auto pie.

XL says it has adopted a long-term commitment to China, having opened an insurance office there in March 2011. The following month, Shanghai-based XL Insurance (China) Co. began offering property, casualty, specialty and professional coverage.

Liberty International, too, has been able to capitalize on the robust economy in China, “where we are the second-largest foreign property & casualty company,” says Bonell.

Growth for Liberty International has also come from a start-up operation in a country that borders China to the south: Vietnam.

Since it was liberalized four years ago, the Vietnamese insurance market has enjoyed rapid growth, with total direct-written premium increasing by approximately 20 percent year-over-year, says A.M. Best’s Essen.

Its P&C insurance market is expected to grow as the country’s middle class expands and moves from bicycles to cars, fueling an increase in Motor Third Party Liability coverage.

As is the case with most Southeast Asian insurance markets, Essen notes, auto insurance is Vietnam’s largest segment of the P&C sector—at 31 percent of direct-written premium in 2010.


Known for its high legal and regulatory risks, as well as exchange-transfer issues and political-violence risks, Africa remains an attractive but very challenging market for insurers.

Since 2000, sub-Saharan Africa has seen a compound annual growth in consumer spending of 4 percent, reaching nearly $600 billion in 2010, according to an Accenture report: “The Dynamic African Consumer Market: Exploring Growth Opportunities in sub-Saharan Africa.”

Consumer spending is expected to reach nearly $1 trillion by 2020 as Africa’s middle class expands. Accompanying this growth are improvements in income levels, infrastructure and the business environment that promise continued economic expansion.

Yet insurers note that the logistics across much of the continent can be unreliable, and its infrastructure lags behind much of the developed world despite its switch to open-market economies. Insurance is regulated primarily through various domestic agencies established by domestic governments—which are often at risk for upheaval.

Allianz is one insurer that is highly active in Africa. “We as AGCS cover clients across Africa through our international network, but we also established local operations in South Africa in 2010,” says Burgess. “We do expect further growth as a result of the overall growth in these regions, driven by major infrastructure projects in the coming years.”

FM Global has had a presence in the region for several years. More recently, says Kenneth Davey, managing director and senior vice president of the carrier’s Europe, Middle East and Africa/Asia-Pacific division, “we have seen a significant increase in our North American and European clients investing throughout Africa, including in Angola, Ghana, Burkina Faso and Senegal most recently.” 


Perhaps the most challenging of emerging markets is India, for a variety of reasons—not the least of which is intense competition. The country’s domestic insurers, such as New India Assurance Co. and United India, are the established, dominant players. Also a hurdle: the high costs associated with establishing distribution channels.

While its middle class continues to benefit from increased wealth, a slowdown in GDP and inflationary pressures could hinder the growth rate of India’s insurance market, says A.M. Best’s Essen.

What’s more, P&C insurance coverage is often greeted with skepticism. In 2011, insurance penetration for the non-life segment reached only 0.78 percent.

And for the past five years, combined ratios have been upward bound in the P&C sector, moving from 106.9 in 2007 to 122.3 in 2011, due to increased loss ratios and intense competition among insurers.

Which is not to say that India is wholly unattractive to insurers: Berkshire Hathaway in 2011 became a licensed corporate agent of Najaj Allianz policies and now distributes motor and travel insurance via the Web.

And last year, Japan’s Tokio Marine Holdings and India-based financial-services company Edelweiss Capital Ltd. established a joint-venture life-insurance company that will also offer P&C coverage.

Adds Liberty Mutual’s Bonell, “We also have operations in India through our joint venture, Liberty Videocon General Insurance, and we are targeting to begin writing business in the third quarter of this year.” 


The challenges in India hint at a reality shared, sotto voce, by several major carriers: Their ventures into emerging markets have not proven especially profitable, at least in the short term.

While insurance premiums in emerging markets have grown by 11 percent per year over the last decade—compared with 1.3 percent in industrialized economies—this premium expansion has not translated into profitable growth, says the Swiss Re emerging-markets report.

For example, out of a Swiss Re sample of emerging Asian and Latin American markets, 49 percent of non-life insurers between 2006 and 2009 recorded negative underwriting margins—and an additional 36 percent reported margins in the range of zero to 10 percent.

This low profitability may signal an aggressive focus by insurers on top-line growth and an investment in the future— rather than looking for a short-term, bottom-line return. And overall, insurers are bullish on the long-term prospects and importance of emerging markets.

“As a leading global line for Allianz, the world is our market,” says Burgess. “Currently, 12 percent of our premium volume comes from emerging markets, but we expect this share to reach more than 30 percent in a midterm perspective.”

Click here to see a map of Emerging Markets for 2010

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