‘Global economic growth good sign for insurers’

The positive vibes that the global economy will witness some growth in the coming years, particularly in the emerging markets are good signs that insurers would benefit, analysts have said.

Kurt Karl, Swiss Re’s Chief Economist said this is especially so in the emerging markets, where urbanisation and growing wealth will support overall sector growth.

“We’ve said for some years now that emerging markets are the growth engines for the insurance industry – and this is expected to continue for at least several years more.”

Non-life premium growth will improve along with economic activity, while demand for primary non-life insurance should increase in the next two years.

Global primary non-life premium growth is forecast to improve to 3 percent in 2016 and 3.2 percent in 2017, from 2.5 percent this year. Growth in advanced markets is expected to slow slightly due to the generally softening prices and only modest improvement in economic growth.

The emerging markets will be the main drivers in non-life, with premiums up an estimated 7.9 percent and 8.7 percent in 2016 and 2017, respectively, after a 5.6 percent gain in 2015. Premium growth is expected to be strongest in emerging Asia (12 percent annually), and a recovery is expected in Central and Eastern Europe after contraction in 2014 and 2015.

Despite the challenging pricing environment, underwriting profits in primary non-life insurance have been sustained by low natural catastrophe losses and a continuation of reserve releases from past years. The non-life reinsurance sector underwriting result has likewise been strong so far this year, also based on low natural catastrophe losses.

However, with falling prices, profit margins have eroded over the past two years. Property catastrophe reinsurance rates are currently close to bottoming out and the rate softening in most lines is expected to moderate or come to a standstill. In casualty and specialty, significant differences in pricing developments by market and line of business are expected.

Life insurers face major challenges but premiums will grow, while primary life insurers face significant downside risks in the short to medium term from the modest global growth outlook, persistently low interest rates, volatility in financial markets and regulatory changes. Nevertheless, in the advanced markets, real premium income is forecast to rise by about 2.5 percent in 2016 and 2017, up from about 2 percent this year. In emerging markets, premiums will grow by an estimated 10.7 percent in both 2016 and 2017. This improvement will in part be attributable to improved use of currently available technologies, such as wearable devices and cloud computing. Again, emerging Asia is expected to have the most robust growth of about 13 percent each year. A key issue in many emerging markets will be the implementation of risk-based solvency regimes.

Modestus Anaesoronye