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The global insurance industry is set to grow more strongly at 4.5 percent per annum on average (3.0 percent in real terms, or adjusted for inflation) during 2017 and 2018, according to Munich Re.
While premium income is likely to grow only nominally this year, slightly higher real growth of 3.0 percent is expected for 2018, said statistics issued by the reinsurer.
Premiums in the insurance sector therefore are 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, said the company, noting that premium growth will be slightly higher than that of 2016, and “significantly exceed the average growth rate of almost 2 percent for the past 10 years.”
Munich Re attributed growth outlook to better economic prospects in the U.S. and in many emerging markets, which will offset negative factors such as declining growth in the Chinese market.
The Asian emerging markets are expected to have the greatest potential for growth. Indeed, Munich Re said that primary insurance premiums are expected to be equal to that of Western Europe within the next few years.
“The economies of many emerging markets, such as Brazil, but even Russia, are experiencing a significant recovery,” said Michael Menhart, chief economist at Munich Re. “This is leading to increased growth in property-casualty insurance. In most of the industrialized world – in the eurozone, the U.S. and Japan – demand has been bolstered by a solid economic environment.”
During 2017 and 2018, premium volume in property and casualty insurance will grow an average of 4.0 percent (almost 2.5 percent in real terms), said Munich Re, explaining that projected inflation-adjusted growth will be about half a percentage point below global economic growth.
The emerging markets of Asia, and increasingly the Middle East and North Africa (MENA) region, are likely to show the strongest growth rates, while the established markets of Europe and North Africa will see a much lower rate of expansion.
In life insurance, premium growth, which is driven by growth markets in Asia and Latin America, is expected to increase by over 4.5 percent on average (3.0 percent in real terms), or somewhat more than economic growth.
In the Asian emerging markets, growth will weaken following last year’s surge in premium volume in China, but it still will be significantly above 10 percent in real terms, Munich Re continued. In Latin America, premiums in life insurance are likely to grow by almost 8.5 percent (more than 6.5 percent in real terms) this year and next.
“Prospects in the industrialized countries continue to be clouded by persistently low interest rates,” the company went on to say. “Premium growth here is likely to fall short of economic growth. However, strong premium expansion in the emerging markets will almost fully compensate for the moderate development in the industrialized countries.”
With strong economic growth rates, the emerging markets are gaining more weight in the international insurance industry with emerging markets’ share of anticipated premium volume expected to rise from 20 percent in 2016 to 47 percent by 2025.
Munich Re explained that rising standards of living and increasing insurance coverage needs are two contributory factors in the growth outlook in emerging markets.
“Interest rate increases and demographic trends could revitalize the life insurance segment in the industrialized countries as well,” the company said.
It is expected that, by 2025, the market share of emerging markets in Asia will – at 21.4 percent – draw close to that of Western Europe (24.5 percent), while North America will remain clearly in the lead at 27.8 percent.
Source: Munich Re