While the global insurance premium volume fell 1.1% on an inflation-adjusted basis in 2009, the premium growth in emerging markets remained positive, mainly driven by China and India. Though the global industry?s profitability and capital recovered significantly, they have not yet reached pre-crisis levels.
According to the latest Swiss Re sigma study, in most countries, insurance premiums grew faster than GDP in 2009, which shows the robustness of the industry. As credit and stock markets recovered, the industry?s profitability and capital improved. For 2010, the overall global premium growth is expected to turn positive. Profitability and capital will, in all likelihood, continue to improve.
Clarence Wong, Swiss Re?s chief economist for Asia, said in a note, ?The resilience demonstrated by Chinese and Indian economies during the global financial crisis helped to restore consumer confidence. While demand for investment-linked products has slowed, this has been more than offset by the growth of other traditional life products as well as by the rising demand for medical and healthcare products.?
Non-life insurance business was only marginally affected by the global recession. Global premiums in non-life dipped just 0.1% in 2009 to $ 1 735 billion, mainly due to the sluggish demand for cover and softening rates, said the study.
Non-life premiums fell in Japan, but rose in Australia and other Asian economies. Asia saw an especially strong growth in non-life premiums by 14% to $ 75 billion, supported by strong growth in China (+19%). Interestingly, the growth in India was more modest at 2.2%.
?Aggressive government fiscal support in South and East Asia has helped create a pipeline of infrastructure construction projects, which in turn, has benefited the non-life insurance sector. However, external trade has been weak, which has reduced demand for marine insurance. Natural catastrophe losses were not expected to be a major factor impacting on overall profitability, even though a series of typhoons hit China and Southeast Asia in mid-2009,? Wong added.
As the world economy continues to improve, premiums are expected to rise. ?Overall premium growth in the worldwide industry will turn positive in 2010 and the industry?s profitability and capital should continue to improve,? said Wong. The life business in particular will benefit. ?If financial markets continue their rally, the hard hit unit-linked business will also show a strong upward trend. Over the longer term, life insurance will benefit from the ageing population, which will boost the sales of pension, disability, critical illness and long-term care products.?
?Nevertheless, accelerating inflation in some Asian economies could be a major challenge if regional governments hike interest rates aggressively, which would erode the competitiveness and attractiveness of insurance products. Regulators tightening solvency requirements will also be a key challenge to the industry, which requires better and more sophisticated capital management of insurance companies.?
Most Asia-Pacific markets which saw recession in 2009 are on track towards a a sound economic recovery in 2010, which will support non-life insurance business. Government efforts to stimulate domestic consumption in view of lingering weakness in external trade will also impact on the business of non-life insurers. ?The major challenges are continuous price pressure and rising inflation in some regional markets?, he said.