Governments are key in emerging markets

Swiss Re sees growth opportunities for the insurance industry in emerging markets if it can help reduce the protection gap in conjunction with governments.

Supported by government initiatives, China’s insurance market has experienced rapid growth, according to the latest Swiss Re Sigma report. Total premiums have increased at a compound annual growth rate (CAGR) of around 15 percent over the past decade.

Government subsidies and public-private partnerships (PPPs) have boosted agriculture insurance growth in China.

Government support in the form of loan guarantee schemes written for banks to promote consumer spending has also supported the credit and surety insurance growth.

“What we find in emerging markets is that governments become key for getting markets off the ground,” said Swiss Re’s chief economist Kurt Karl at a press conference at the 2017 Monte Carlo Rendez-Vous.

In order to increase the insurance penetration in emerging markets, Swiss Re wants to increase awareness and expand the tools to get the risks into the insurance system.

Jayne Plunkett, Swiss Re CEO Reinsurance Asia, said: “Mitigation is the first step. But whatever you can’t mitigate or handle yourself, needs to flow into the insurance system.

“When we talk with governments, we talk about financial resilience,” Plunkett said.

The programmes tend to be parametric covers in the space around weather perils or natural catastrophe perils, such as a rice scheme in Thailand or an earthquake scheme in China.

Swiss Re is talking to governments around the world to persuade them to earmark part of the country’s budget and protect the country’s assets and population in the time of need, instead of post-event having to find the funding to cover the losses.

Governments in emerging markets can expand the availability of risk transfer solutions via the introduction of mandatory insurance, but also by providing a supportive policy environment. Public and private sector stakeholders need to work together to increase awareness of risk issues and financial literacy, and promoting inclusive finance programmes.

“Our motivation is to grow the insurance market,” Plunkett said. “We do not do it pro bono, it’s a business for us.”

Get the latest re/insurance news sent to your inbox every day -  Sign up to our free email newsletters

Today’s Monte Carlo stories

Hurricane losses may stop softening, says Wallin as he mulls new Lloyd’s launch

Traditional reinsurers have the edge over ILS Down Under

‘Pre-emptive finance’ deals in pipeline

Funds unaware of onshore US tax breaks

Alternative thinking: the historic rise of ILS

Insurtech revolution will live up to the hype as companies invest

Cyber offering must evolve into new risks: Guy Carpenter

Discipline illustrates tight margins

Brexit logistics ‘almost unachievable’

Buyers demanding bespoke products

Hard times for global reinsurance sector

Hardships faced by many put industry’s problems into perspective

Sciemus widens its scope into new risks including weather

Don't miss our insurtech email newsletter - sign up today