Emerging market growth sees non-life premiums expanding by 2.6%

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Swiss Re’s latest sigma study reveals that total global insurance premiums written increased by 2.4% in real terms in 2012 to $4.61trn.

Life premiums expanded by 2.3% unwinding some of the contraction in 2011, thanks to improvements in emerging markets and solid demand in the US and advanced Asian markets.

In non-life, premiums rose by 2.6% on the back of continued economic expansion in emerging markets and selective price increases in some advanced markets.

In emerging markets, non-life premiums expanded by 8.6% in 2012 (2011: 8.1%). The recovery in the advanced markets gained momentum with growth picking up to 1.5% (2011: 0.9%), the fourth consecutive year of rising premiums following the decline in 2008.

One of the authors of the study Daniel Staib said: “Premium growth held up well given the challenging economic environment. The non-life market was supported by steady increases in risk exposures in emerging markets and by selective premium rate increases in some advanced markets, particularly in Asia.”

He continued: “Alongside increases in revenues, profitability in non-life improved moderately backed by benign catastrophe losses and reserve releases. At the same time, the industry remains well capitalised, even though GAAP figures overstate current capital levels because of low interest rates.”

The outlook is for premiums to continue to increase but at a moderate pace.

Economic growth and rising penetration will continue to increase the emerging market share of total premiums in the next 10 years, predicts the study. While the shift to Asia continues, Africa is set to become an important insurance market in the next 50 years.

“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,” said Swiss Re’s chief economist Kurt Karl. “However, demographic patterns suggest that by 2062, Asia’s share in the world population will actually decrease from 60% to 53%, 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% currently to roughly 27%. 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.”