Cyclical upswing in global economy is set to continue in 2018 and 2019, supporting insurance premium volume growth, according to Swiss Re Institute’s Global insurance review 2017, and outlook 2018/19 report.
Global non-life premiums are forecast to grow by at least 3% and life premiums by about 4% in real terms annually in 2018 and 2019. Emerging markets will remain the driver of global non-life and life premium growth.
Emerging market’s non-life premiums are forecast to rise by 6% to 7% in real terms annually over the next two years, little changed from 2017. The overall non-life premium growth reflects the stabilising economic conditions in most regions. In addition, non-life business will continue to benefit from urbanisation, and rising home and car ownership. Concerns about environmental protection, food safety and underinsurance in property are also expected to start to filter through to sturdier demand for associated liability and property covers.
Life premiums in emerging markets are expected to grow by around 10% in 2018 and 2019. China will continue to dominate, supported by a favourable policy environment. The Chinese government has a target to grow total insurance (life and non-life) penetration to 5% by 2020 from around 3% in 2014. Supportive policies include tax incentives, and a drive to promote protection, health and pension products, which could result in a changing portfolio mix for insurers. Chinese insurers are also making increased use of digital technology to improve efficiency and customer experience.
Emerging Asia is main driver of premium gains
Growth in emerging Asia was stable at an estimated 6.5% in 2017, which was based largely on sustained vigorous expansion in China, with GDP up 6.8% despite increasing government efforts to de-risk the financial sector and reduce excess industrial capacity. The 19th Communist Party Congress reaffirmed China’s ambitions to become a “moderately prosperous society” by 2020, which would require a doubling of GDP from 2010. To achieve this, China will need to maintain growth at around 6.3% annually to 2020.
Growth in India slowed to an estimated 6.6% in 2017 from 7.1% in 2016, likely due to a one-off impact from the government’s demonetisation programme initiated in November 2016. Growth is expected to improve to around 7% in the coming years as the government continues to implement economic reforms to energise the industrial and manufacturing sectors.
Other regional emerging markets are also strengthening, in part due to a recovery in commodity prices and export demand.
Slower growth in Middle East, Turkey and Pakistan
Growth in the Middle East, Turkey and Pakistan (METP) overall slowed in 2017. In real terms, GDP expanded by an estimated 2.7% in 2017, down from 3.9% in 2016, mainly due to a contraction in Saudi Arabia and a slowdown in the UAE and Iran. Stronger-than-expected growth in Turkey partly offset declines elsewhere. Continued low oil prices, coupled with cuts in output by the OPEC countries, have put the external and fiscal balances of oil-exporting countries under significant pressure.
With respected to inflation, conflicting forces are at work. On the one hand, inflation pressures are being contained by low energy prices and slowing economic activity. On the other hand, the removal of fuel subsidies in the Gulf countries and currency depreciation, for those not pegged to the US Dollar, are exerting upward pressure on prices.
In the Middle East, non-life business has registered little growth in 2017 after a healthy 11% increase in premiums last year, while life premium growth is estimated to have eased to 5% this year from 13% in 2016. M