The ninth edition of the Aon Benfield annual insurance risk study, entitled Growth, profitability, and opportunity, has reported that the property and casualty (“P&C”) industry achieved a global underwriting profit last year, helped by relatively light catastrophe losses in comparison with 2011 and 2012. Combined ratios varied significantly by country, and the study revealed many profitable areas of growth in the global insurance market.

For P&C business, the average insurer combined ratio for 2013 across the top 50 global markets was 99.1 percent, with 21 markets achieving a combined ratio below 95 percent, and 10 markets achieving a combined ratio below 90 percent.

The study highlighted that global insurance and reinsurance premium reached a record US$4.9 trillion in 2013 – a 0.9 percent increase over 2012 – driven primarily by growth in the P&C and health insurance segments. Global insurance and reinsurance capital reached a record US$4.0 trillion.

For many insurers, “big data” is the presumed answer to the question of how to grow profitability in an environment with record capital levels. The study discusses big data and its potential transformative effects on the insurance industry, and also discusses other emerging trends including: the effects of technology on motor insurance, new capital demands in the U.S. health insurance market, rising frequency of cyber attacks, and advanced modeling capabilities for China crop insurance.

Stephen Mildenhall, global chief executive officer of analytics for Aon, said, “There are many bright spots within today's rapidly evolving insurance marketplace. The overall global combined ratio under 100 percent, and the variation in results by country, clearly show there are many desirable areas for profitable growth in the market today. In addition, the continued flow of cheaper alternative capital into the industry provides a competitive cost-advantage to early adopters. The potential pay-off to innovation is higher today than it has been for many years.”

The Aon Benfield study includes a “country opportunity index” which ranks the desirability of the top 50 markets based on a mix of profitability, growth potential, and political environment. Saudi Arabia leads the index with a combined ratio of 91.5 percent and strong projected growth of 8.1 percent, followed by the Ecuador and Singapore markets. Hong Kong, China, and Australia were all new entrants to the top quartile of the index this year.

Aon Benfield forecasts that global P&C insurance premium will increase by 18 percent over the next five years to reach US$1.6 trillion by 2018, driven by strong growth in China.

Insurance risk remains core to the study. The ninth edition contains Aon Benfield's comprehensive view of risk by product line for 49 countries using techniques it has applied consistently since 2005.

Victoria Spears

Victoria Spears

Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].

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