The insurance industry is likely to see growth around the globe due to better economic prospects in the United States, as well as in emerging markets, according to a Munich RE press release issued April 20.
The international primary insurance sector should see an average growth rate of 4.5 per cent (3 per cent in real terms when adjusted for inflation) in 2017 and 2018. Premium income is expected to only grow nominally in 2017, however real growth of 3 per cent is forecast for 2018. “Premiums in the insurance sector are therefore likely to evolve in line with the global economy, which should show real growth of 2.9% in 2017 and 3.1% in 2018. Projected premium growth will thus be slightly higher than that of 2016, and significantly exceed the average growth rate of almost 2% for the past ten years,” states the reinsurer.
Emerging markets experiencing significant recovery
Michael Menhart, Chief Economist at Munich Re, says, “The economies of many emerging markets, such as Brazil, but even Russia, are experiencing a significant recovery. This is leading to increased growth in property-casualty insurance. In most of the industrialised world – in the eurozone, the USA, and Japan – demand has been bolstered by a solid economic environment. We project that life insurance there will see only marginal growth owing to the low-interest-rate environment. By contrast, demand in the emerging markets will continue to rise appreciably. Growth prospects for insurers are therefore looking a little brighter worldwide.”
Life insurance growth
Driven by expansion in Asia and Latin America, life insurance premiums are likely to see average growth of 4.5 per cent (3 per cent in real terms), which is above the rate of overall economic growth. “In the Asian emerging markets, growth will weaken following last year’s extraordinary surge in premium volume in China, but it will still be significantly above 10% in real terms. In Latin America, premiums in life insurance are likely to grow by almost 8.5% (over 6.5% in real terms) this year and next,” says Munich RE.
Due to their strong growth rates, emerging markets are increasingly important to the international insurance industry. “The emerging markets’ share of the anticipated additional premium volume is expected to rise from 20% in 2016 to 47% by 2025. Rising standards of living and increasing insurance coverage needs are two major contributory factors. Interest rate increases and demographic trends could revitalise the life insurance segment in the industrialised countries as well,” says the reinsurer.