A soaring demand for liability insurance can be expected overthe next five years in the emerging markets of Asia, Latin Americaand Eastern Europe, according to a new study.

The analysis by Zurich-based Swiss Re also finds that theemerging insurance markets are expected to grow 5 percent innon-life business and by 8 percent in the life sector in the period2005-2010.

Swiss Re said that insurance sales in the growing emergingmarkets have seen liability insurance outperform non-life businessoverall. While overall non-life insurance premiums grew by 5percent per year between 1999 and 2003, liability premiumsincreased at an annual average of 13 percent, the firm said.

The report noted that economic growth, which was "robust" inemerging markets last year, favors insurance development.

Swiss Re reported that the implementation of compulsoryinsurance and changes in taxation and pension systems in emergingmarkets saw non-life business grow 8.9 percent and life increase by7.5 percent for a premium total of $372.2 billion, and it expectsthis trend is to continue in the medium term.

The study found that in most emerging markets, demand forliability insurance was fueled by increasing globalization,regional cooperation, capital inflow and changes in the legal,social and corporate sphere.

According to Swiss Re's "sigma" study, "Insurance In EmergingMarkets==Focus On Liability Insurance," regional liability premiumswent up from $1.3 billion in 1999 to $2.8 billion in 2003.

The company's analysis noted that starting from a low base,average annual liability growth for the period was 12.9percent==more than double the total non-life business growthrate.

Swiss Re found that Asia accounted for almost 50 percent oftotal emerging market liability premiums, followed by Latin Americaat 25 percent and Eastern Europe with 16 percent.

Trade development in Asia and political integration in EasternEurope were specific growth drivers, whereas Latin Americabenefited from foreign capital inflow, Swiss Re said.

According to Swiss Re, economic and technological progress and achanging social landscape open up great potential for well-designedliability protection, and in the medium term, liability insurancein the emerging markets is expected to grow twice as fast as grossdomestic product.

The study cautioned, however, that the benefits of progress andof trade integration might be obscured if trends such as escalatinglitigation costs spill over. Insurers and regulators in theemerging markets should thus take advantage of experience elsewhereand ensure a liability environment that is both sustainable andequitable, Swiss Re advised.