Commercial-Insurance Premium Growth Nearly Three Times Higher in Emerging Markets

Commercial insurance premium growth was nearly three times higher in emerging markets compared to advanced markets from 2000-2010, and insurers are expected to seek more growth opportunities in these regions as economic growth slows in advanced markets, a new report says. 

In its latest sigma study, titled “Insuring Ever-Evolving Commercial Risks,” Swiss Re says average annual premiums in emerging markets grew by 14 percent from 2000-2010, compared to 5.4 percent annual growth during that period in advanced markets. 

Looking forward, the study notes that slower premium growth in advanced markets relative to emerging markets will likely continue into next year. “In 2013, commercial-premium growth in advanced economies is expected to remain subdued due to the sluggish economic recovery in North America and Europe,” says Swiss Re.

Consequently, “Insurers are now increasingly focusing on emerging markets for commercial-insurance growth,” the study adds.

Speaking to the reasons behind the rapid growth in emerging markets, Swiss Re notes that emerging-market economies are growing at a faster rate. From 2000 to 2010, Swiss Re says the emerging markets achieved nominal GDP growth of about 12.4 percent, compared to 4.9 percent for advanced economies. The faster economic growth has produced more insurnce needs, and therefore more opportunies for insurers. Demand is further increased as developing nations transform their economies from agriculture-based to industry- and service-based. “Penetration...has risen as companies demand more insurance to protect themselves against more complex risks and as risk awareness improves among smaller companies,” says Swiss Re.

Focusing on China, Swiss Re says the market there has grown at an annual average rate of 32 percent since 2000, establishing China as the third-largest insurance market worldwide. 

Swiss Re says the emergence of Asia, and China in particular, as a major trading power has increased demand for coverages such as marine and transport, export credit, and product liability. Spending on infrastructure from regional governments in Asia has also grown segments of the commercial-insurance business there. More sophisticated Asian corporations and rising risk awareness will further increase demand in the future, the study predicts.

Furthermore, regulatory changes in China have also led to opportunities for insurers. “For example,” says Swiss Re, “the Beijing Municipal Government made employers’ liability and public liability insurance mandatory for certain high-risk industries beginning July 1, 2011."

The introduction of compulsory motor insurance has greatly aided insurance penetration in China as well. Commercial auto accounts for about 65 percent of commercial-premium volume in China, says Swiss Re, adding that excluding commercial auto, China would rank as the seventh-largest commercial insurance market rather than the third-largest.

In Latin America, property insurance is the biggest commercial-insurance line as buyers seek protection for infrastructure projects from natural catastrophes that impact the region.

While emerging markets are enjoying strong economic growth, and therefore growth in their commercial-insurance markets, the advanced markets still dominate the $600 billion in global premiums. Swiss Re notes that of the 10 biggest commercial-insurance markets, eight are advanced countries. The U.S. alone accounts for $237 billion of the global-premium figure. China, the largest of the emerging markets, accounts for $31 billion by comparison. Swiss Re notes that the advanced markets continue to dominate despite slower growth "because of the sheer size of their commercial-insurance sector."

Interestingly, changes in advanced-market economies has brought changes in demand for commercial-insurance products, Swiss Re points out. “Structural developments in advanced economies, such as the expansion of the services sector at the expense of manufacturing, are shifting the demand for commercial insurance toward liability insurance,” the study says.

Liability lines are growing faster than the overall economy in advanced markets, while property-insurance lines are growing more slowly. By contrast, in China, liability lines make up just 6 percent of commercial premiums.

About the Author
Phil Gusman,

Phil Gusman,

Phil Gusman is Managing Editor of Prior to joining National Underwriter in 2008, he was Editor of Insurance Advocate. Gusman has also served as Associate Editor of Crackdown!, an insurance fraud publication, and Assistant Editor of Empire State Report, which covers New York politics. He graduated in 2002 from Plattsburgh State University in New York. Gusman may be reached at Follow him on Twitter: pgusman and PC360_Markets


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