Global insurance industry tipped for growth by Munich Re
The global insurance industry is likely to see slightly increased growth by 2018 driven by better economic prospects in the US and in many emerging markets which will offset negative factors such as declining growth in the Chinese market, according to Munich Re.
The world’s biggest reinsurer stressed that, in the longer term, the emerging markets of Asia will have the greatest growth potential, and their share of primary insurance premiums is expected to be on a par with that of Western Europe in the next few years.
Overall, it said it estimates that the international primary insurance sector will grow by 4.5 percent p.a. on average (3 percent in real terms, i.e. adjusted for inflation) in 2017 and 2018. Whilst premium income is likely to grow only nominally this year, slightly higher real growth of 3 percent is expected for 2018.
Premiums in the insurance sector are therefore likely to evolve in line with the global economy, which should show real growth of 2.9 percent in 2017 and 3.1 percent in 2018, Munich Re said.
Projected premium growth will thus be slightly higher than that of 2016, and significantly exceed the average growth rate of almost 2 percent for the past ten years.
Michael Menhart, chief economist at Munich Re, said: “The economies of many emerging markets, such as Brazil, but even Russia, are experiencing a significant recovery. This is leading to increased growth in property-casualty insurance. In most of the industrialised world – in the eurozone, the USA, and Japan – demand has been bolstered by a solid economic environment.
“We project that life insurance there will see only marginal growth owing to the lowinterest-rate environment. By contrast, demand in the emerging markets will continue to rise appreciably. Growth prospects for insurers are therefore looking a little brighter worldwide.”
In property/casualty business, however, Munnich Re estimated that premium volume will grow by an average of 4 percent (almost 2.5 percent in real terms) this year and next. Projected inflation-adjusted growth will thus be roughly half a percentage point below global economic growth. The emerging markets of Asia, and increasingly also the MENA (Middle East and North Africa) region, are likely to exhibit the strongest growth rates.
The established markets of Europe and North Africa will see a much lower rate of expansion.
It said there are many different reasons for the weaker pace of growth in property/casualty insurance. The insurance industry is now beginning to respond to mounting pressure in a number of industrialised countries. Companies have been consistently developing their business models; new products, sales channels, and coverage concepts have been cultivated for new risks such as cyber attacks; and IT systems have been modernised.
As a result, new business opportunities are gradually opening up in these markets.
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