The global insurance industry is likely to see slightly increased growth by 2018, according to a report from Munich Re.
The company said that better economic prospects in the United States and in many emerging markets would offset negative factors such as declining growth in the Chinese market. In the longer term, Munich Re added, the emerging markets of Asia will have the greatest growth potential, and their share of primary insurance premium is expected to be on a par with that of Western Europe in the next few years.
Munich Re said that, overall, the international primary insurance sector would grow by 4.5 percent per annum on average (3.0 percent in real terms, i.e. adjusted for inflation) in 2017 and 2018. While premium income is likely to grow only nominally this year, Munich Re expects slightly higher real growth of 3.0 percent for 2018.
Premiums in the insurance sector, therefore, are likely to evolve in line with the global economy, which should show real growth of 2.9 percent in 2017 and 3.1 percent in 2018. Projected premium growth thus will be slightly higher than that of 2016, and significantly exceed the average growth rate of almost two percent for the past 10 years, according to the Munich Re report.
Michael Menhart, chief economist at Munich Re, said, “The economies of many emerging markets, such as Brazil, but even Russia, are experiencing a significant recovery. This is leading to increased growth in property-casualty insurance. In most of the industrialized world – in the Eurozone, the U.S.A., and Japan – demand has been bolstered by a solid economic environment. We project that life insurance there will see only marginal growth owing to the low-interest-rate environment. By contrast, demand in the emerging markets will continue to rise appreciably. Growth prospects for insurers are therefore looking a little brighter worldwide.”
Munich Re said that, in the property/casualty business, premium volume will grow by an average of 4.0 percent (almost 2.5 percent in real terms) this year and next. Projected inflation-adjusted growth thus will be roughly half a percentage point below global economic growth. The emerging markets of Asia, and increasingly also the MENA (Middle East and North Africa) region, are likely to exhibit the strongest growth rates. The established markets of Europe and North Africa will see a much lower rate of expansion.
According to Munich Re, there are many different reasons for the weaker pace of growth in property-casualty insurance: The insurance industry now is beginning to respond to mounting pressure in a number of industrialized countries; companies have been consistently developing their business models; new products, sales channels, and coverage concepts have been cultivated for new risks such as cyber attacks; and IT systems have been modernized. As a result, Munich Re said, new business opportunities are gradually opening up in these markets.
Munich Re expects that premium growth in life insurance, driven by growth markets in Asia and Latin America, would increase by over 4.5 percent on average (a good 3.0 percent in real terms) – somewhat more than economic growth. In the Asian emerging markets, growth will weaken following what Munich Re characterized as “last year's extraordinary surge in premium volume in China,” but still will be significantly above 10 percent in real terms. In Latin America, Munich Re expects premiums in life insurance to grow by almost 8.5 percent (over 6.5 percent in real terms) this year and next.
Finally, Munich Re said that, by 2025, the market share of emerging markets in Asia will – at 21.4 percent – draw close to that of Western Europe (24.5 percent). North America will remain clearly in the lead at 27.8 percent.