Non-life premium growth increased by 2.6 percent in 2012, buoyed by economic expansion in emerging markets and selective price increases in advanced markets that are overriding depressed interest rates, a recent study shows.
“Premium growth held up well given the challenging economic environment,” says Daniel Staib, one of the authors of the latest Swiss Re sigma study.
Worldwide non-life premiums hit $1,992 billion last year, although the figure was still well under the growth rate experienced prior to the decade's economic crisis. Non-life insurance premium growth dropped to nearly five percent in 2008 before it began to rebound and grow by about 2.5 percent in 2010 — still far from the 10 percent premium growth seen by the non-life insurance sector in 2002.
“Premium growth expectations for the short-term remain below pre-crisis trends,” says study co-author Mahesh Puttaiah. “The non-life side is more positive since the sector will benefit from the strong economic performance of emerging markets and selective rate increases in advanced markets. However, rate increases will likely be moderate given the prevailing surplus capacity in the markets.”
The non-life insurance industry in emerging markets outperformed industrialized nations in 2012 with a growth rate of 8.6 percent, owed to mounting urbanization, an expanding middle class and increased market penetration in those countries.
“The rise in importance of emerging Asia in the global economy and insurance markets witnessed over the past 20 years is set to continue for at least another decade,” says Kurt Karl, Swiss Re's chief economist.
The sigma study of 147 insurance markets found that non-life premiums in the U.S. jumped by 1.5 percent from 2011 to 2012, by 2 percent in the U.K. and by 8.2 percent in Hong Kong. However, Italy and the United Kingdom experienced a 3.9 percent and 0.3 percent decline, respectively. Overall, non-life premiums for the U.S., UK, Western Europe and Hong Kong totaled $1,648 billion last year.
Meanwhile, premiums in Latin America and the Caribbean grew by 7.8 percent in 2012, by more than 10 percent in Russia and India, and by 9 percent in the United Arab Emirates. Of the five developing regions listed in the study — Latin America and the Caribbean, Central and Eastern Europe, South and East Asia, Africa, and the Middle East and Central Asia — which held $344 billion in non-life premiums last year, only Africa's market saw a slight decrease in 2012.
However, says Karl, “Demographic patterns suggest that by 2062, Asia's share in the world population will actually decrease from 60 percent to 53 percent, mainly due to the developments in China, where the working age population will start to contract from 2018. At the same time, Africa's population share is projected to increase from 15 percent currently to roughly 27 percent. This positions Africa well, from a demographic point of view, to become an important part of the global insurance markets over the next fifty years.”
Non-Asian emerging market share in non-life insurance is expected to increase by 2 percent by 2023, reports the study, while the North American and Oceania market is predicted to shrink slightly by five percent.
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