Analysts predict premium growth, increased investment for insurance sector in 2014

Global economic outlook on insurance for 2014 is favouring most emerging markets particularly sub-Saharan Africa where premium growth is expected to rise over 8 percent against 2 percent in advanced market in the non-life business and 6 percent against 4 percent in life business.

Analysts from Old Mutual, Swiss Re and others have seen a growing flow of investment into the emerging market in the medium and long term, expressing confidence that the growing need to protect assets by individual and households would increase.

This would be strongly supported by increasing awareness campaign by all stakeholders in the financial services market including insurance, banking operators and regulators to encourage savings culture through financial inclusion.

Specifically Swiss Re predicts that global economic growth will continue to strengthen in 2014, Swiss Re says in its “Global insurance review 2013 and outlook 2014/15”. This will support on-going premium growth in the non-life primary market, particularly in emerging markets, with reinsurance premiums following suit. Find below details of the Swiss Re forcast.

Global premiums in the life market are expected to grow by around 4 percent in real terms in 2014 and 2015. However, life reinsurance premiums are expected to continue to decline in advanced markets, while rising by about 6 percent annually in emerging markets.

Alternative capital has increased in recent years, putting pressure on prices and margins, particularly in the US catastrophe business. The alternative funds are expected to maintain a focus on established natural catastrophic markets.

The momentum in global economic growth achieved this year will continue into 2014. The US economy is still growing and the euro area, while not expected to accelerate rapidly, has returned to growth. The weaker yen has boosted growth and increased inflation in Japan, but the sustainability of this recent economic strength is uncertain. China’s growth trend is close to 7.5 percent down from 10 percent previously.

Emerging markets to drive non-life insurance sector growth

The gradual improvement in economic activity in key markets has supported continued growth in non-life premium rates. Real (after-inflation) premium growth in the primary market is projected to be around 2 percent in the advanced economies, and close to 8 percent in the emerging markets in 2014.

Premium growth in the reinsurance sector will follow suit, but be a little stronger. The low interest rate environment has weighed on investment returns in the primary life market. Reinsurers have been similarly impacted, with sector profitability estimated to be close to 10 percent in 2013, down from 14 percent in 2012.

Kurt Karl, Swiss Re’s, chief economist says: “A return to economic growth in the mature markets is a good sign for insurance and we see a positive outlook for the next two years. Emerging markets, especially in Africa and Asia, will definitely provide some of the more spectacular growth figures in non-life business as cities grow and people look for financial protection for their property.”

 Global life sector recovery to continue, but reinsurance premiums in advanced markets expected to shrink

Global primary life premiums have continued to recover this year, with emerging market real premium growth above 6 percent and advanced market growth at 2.3 percent. Global life premium growth is projected to rise to around 4% in 2014 and 2015, fuelled by robust emerging market growth on the basis of rising incomes and increased insurance awareness.

Life insurance premium growth has rebounded sharply in emerging Asia, growing by about 6% in real terms this year.

Karl says: “The figures for emerging markets this year have been robust and this is expected to continue. In Latin America, we saw 18 percent growth in 2012 and in 2013 we are looking at 10 percent growth, which is still very good.”

Economic activity in the stable countries of the Middle East and North Africa region is supporting above-5 percent growth in life premiums, but from a very low base.  In the life reinsurance sector, premiums in the emerging markets are expected to grow by 6 percent  annually over the next few years. In these markets, reinsurers’ main value proposition will be to support their primary insurance clients in product development, underwriting and claims management.

However, in the advanced markets, life reinsurance premiums are expected to continue to decline as regulatory changes reduce demand in the US and to a lesser degree in the UK. Other advanced markets are expected to fare better.

By: Modestus  Anaesoronye