China will be biggest influence on global premium growth now: sigma

China will represent the most significant factor in insurance growth in the coming years though profitability will remain under pressure as long as interest rates remain low, economists from Swiss Re have said in the annually published "world insurance" sigma report in a segment specifically examining the data over the last 50 years.

For 50 years, sigma has been publishing data on the global insurance markets showing the changing growth patterns and developments of insurance penetration. It noted that Asia has been an important contributor to premium growth on two occasions since 1960. In the late 1970s and early 1980s, life insurance in Japan was in high demand due to the soaring levels of household saving and the country's less developed social security system for old age provision.

Since the global financial crisis of 2008/2009, Emerging Asia, led by China, has become the largest source of growth in the global insurance markets, although penetration levels have been gradually increasing across all regions. The regional structure of global insurance markets has shifted from Europe and North America to Advanced and Emerging Asia since 1960.

Jérôme Haegeli, Swiss Re group chief economist, said: "Back then, Advanced and Emerging Asia accounted for 5 percent of global insurance premiums versus 22 percent in 2017. For the next decade, the shift to China is likely to continue. Given the impressive number of infrastructure initiatives underway in China, China's contribution to world insurance premiums could yet again exceed expectations. In the following decades, other markets such as India, Indonesia, Brazil, Mexico, Pakistan, Nigeria or Kenya could become more important."

Penetration (premiums/GDP) has increased consistently in emerging economies over time. Meanwhile, non-life penetration has virtually stagnated in the advanced markets since around the turn of the century, while it has been on a declining trend in the life sector of advanced markets.

Over the next few years, the Swiss Re Institute predicts that global life insurance premiums will rise, driven by strong growth in China. However, profitability continues to be under pressure due to low interest rates, increasing competition and regulatory changes.

Haegeli said: "The ongoing low interest rate environment remains a major concern for life insurers' profitability and their ability to offer attractive long term life insurance products, particularly in combination with Solvency II types of regulatory frameworks."

The Swiss Re Institute also expects global non-life premiums to increase, led by advanced markets such as the US, where the economy is strengthening. Although the insurance markets in emerging countries have solidly outperformed the corresponding economies for decades, the Swiss Re Institute estimates that, in the years to come, advanced markets will contribute more than half of the additional premiums in absolute terms.

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