Emerging markets to drive re/insurance growth in 2017/2018

The main driver of premium growth in both the life and non-life sectors is expected to come from emerging markets, in particular Asia, according to Swiss Re.

Emerging market life premiums are forecast to grow by 14.9 percent in 2017 and by 10.9 percent in 2018, which Swiss Re suggested will be sustained by robust growth of savings products, particularly in emerging Asia.

In terms of non-life premiums, Asia as an emerging market will likely have the strongest growth, forecast to be nearly 8 percent in 2017 and 9 percent in 2018.

China’s One Belt One Road programme will be a contributing factor, as it is expected to generate an increase in demand for commercial insurance.

Overall, premium growth in emerging markets is expected to increase from an estimated 5.3 percent in 2016 to 5.7 percent in 2017, and 6.7 percent in 2018.

In non-life insurance premium volumes are expected to grow 2.2 percent in real terms in 2017, after 2.4 percent in 2016, and by 3.0 percent in 2018 in emerging markets.

The report suggested an improvement in commodity prices and strengthening economic activity will stimulate increased demand for insurance from the emerging regions.

Globally, non-life premium growth is forecast to fall slightly from 2.4 percent in 2016 in real terms to 2.2 percent in 2017, and rise to 3.0 percent in 2018.

Growth in global life premiums is forecast to expand by 4.8 percent in 2017 and 4.2 percent in 2018.

"The insurance industry faces headwinds, with moderate economic growth, and still ample capacity in the markets creating a challenging pricing environment," says Kurt Karl, chief economist at Swiss Re.

Over the next two years, the US economy is expected to grow slightly more than 2 percent in inflation-adjusted (real) terms annually.

The UK and the euro area are forecast to grow by 1.5 and 1.0 percent, respectively.

"Nevertheless, premium volumes continue to grow, in both the advanced and emerging markets along with economic activity and an increase in the insurance penetration rate, particularly in emerging markets," Karl said.

Global premium growth in non-life reinsurance is expected to be 2.7 percent in 2017 and 2.9 percent in 2018, based on increasing cessions from emerging markets.

Global life premium volumes are forecast to grow by 5.4 percent, 4.8 percent and 4.2 percent in 2016, 2017 and 2018, respectively.

Swiss Re attributes this to very low growth in the advanced economies where the bulk of cessions originate.

Swiss Re forecasts reinsurance premium growth in the emerging markets to be 8 percent or higher in the years 2017 and 2018.