11 October 2016 Insurance

Emerging economies to outperform advanced markets despite slowdowns

Emerging economies are expected to outperform advanced markets over the next five years despite recent slowdowns, according to a report from JLT Re.

The report, ‘Emerging Markets: Moving Ahead’, examines the significant opportunities there are for the re/insurance industry in emerging markets over the next five years.

David Flandro, global head of analytics, JLT Re, said: “Whilst it is true that some emerging markets have suffered downturns since 2014, projected economic forecasts over the next five years remain encouraging and overall, emerging market economies are expected to expand by more than 4 percent in 2016, which would represent the first acceleration in growth since 2010.

“Of course, not every emerging economy will flourish, but emerging markets, in aggregate, will be growing at between two and three times the pace of developed markets in this time.”

JLT Re examined seven emerging markets, which it believes are set to see significant non-life premium growth over the next five years, outpacing advance markets’ growth.

Flandro added: “Our research has compared recent and forecasted GDP growth rates for these seven emerging markets with projections for advanced economies. India, Kenya and China are the standout future performers, with GDP expected to grow at three to four times the rate of developed countries over the next five years.”

The report suggests that the emerging markets are also expected to gain an increasing share of the global non-life insurance market as insurance penetration and insurance density levels rise.

Stuart Beatty, CEO of JLT Re Asia Pacific, said: “Positive fundamentals such as urbanisation, rising employment and income levels and favourable population trends are set to drive this expansion. Our analysis shows that emerging markets are, on average, likely to outperform key advanced countries (including the United States, Japan, Germany and France) in the next five years.

“This expected strong performance represents an important shift in momentum, driven by a faster insurance penetration rate compared to mature markets and a renewed recognition that, despite on-going challenges, emerging markets are crucial in driving long-term insurance sector growth as carriers seek new and profitable revenue streams.”

Flandro concluded: “At JLT Re we see this ‘new world order’ as a huge opportunity, the seven emerging markets in our study are set to see significant non-life premium growth over the next five years and outpace advanced markets’ growth.

“Perhaps even more crucially, they are also expected to gain an increasing share of the global non-life insurance market as insurance penetration and insurance density levels rise.

“The catch-up potential associated with insurance penetration and density rates in emerging markets emphasises the genuine growth opportunities that exist. But let’s not forget that competing successfully in emerging markets calls for expert, local knowledge which we can offer at JLT Re.”

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