Global Insurance Market Barely Grew In 2001

Swiss Re said of the $2.408 trillion total, $1.439 trillion is attributed to life insurance, and $969 billion to the non-life sector. The rise of 1 percent over both sectors in 2001 is the lowest growth rate recorded since the beginning of the 1980s, the company said.

Adjusted for inflation, Swiss Re said, the life markets, which had performed well in recent years, suffered a rare decline in premium income of 1.8 percent in 2001 compared with 2000.

The company contrasted this with the fact that, non-life insurance premiums rose by 5.4 percent in 2001, a higher growth rate than the previous 10 years had delivered.

Swiss Re said the report is a comprehensive analysis of 2001?which covers developments in individual regions and provides detailed premium information from 89 key countries?showing how insurers were hit by falling investment returns and low profitability.

The researchers found that a recent boom in the life insurance market ended abruptly, with business progress considerably stymied by the stock market downturn in 2001 which, in turn, hindered demand for unit-linked insurance products. The decline in the sale of these policies was only partially offset by increased demand for life insurance with guaranteed returns and pension provisions, Swiss Re said.

The company's study found that the drop in premium income in 2001 was particularly evident in the industrialized countries. In contrast, the emerging markets recorded strong insurance premium growth as they continued to catch up with the industrialized countries. However, growth rates were found to be mostly below the levels seen in previous years.

For 2002, the sigma authors said they expect premium volume to have increased, albeit not in the same levels seen during the 1990s. The stock market losses experienced since the middle of 2000 have dampened not only premium growth, but also the profitability and capital bases of some life insurers, Swiss Re said.

European companies in particular, Swiss Re said, have seen the value of their investments plummet, as a result of the large equity component of their investment portfolios.

Swiss Re noted that, on top of this, interest rates have persisted at historically low levels and poor economic conditions have prompted write-downs on defaulting credit and corporate bonds. In combination, these factors have led to significant equity losses and weakened life insurers' balance sheets, the company said.

In the non-life insurance market, the recovery seen in 2000 accelerated through 2001 in terms of premium income, the study found.

Researchers said that property-casualty rate increases were achieved in the highly competitive commercial insurance and motor lines, where premiums saw a considerable boost, and the trend has continued into 2002.

In the industrialized countries, Swiss Re said, premium growth in 2001 was clearly above the long-term average. In the emerging markets, too, premiums overall were up on previous years.

Despite clear price increases, non-life insurers' profitability suffered significantly in 2001, it was stated.

Swiss Re said claims from the 9/11 attack, reserve-strengthening from the days of the soft-market and falling investment returns on the back of share price collapses all took their toll on insurers' financial results.

Swiss Re said these factors considerably depleted equity in the non-life markets, thereby weakening insurers' balance sheets.