Robust increase in emerging markets supports global premium growth

Robust increase in Emerging Markets supports Global Premium Growth August, 2013 BLOG POST

Growth in emerging economies will be the key driver for global insurance market Emerging Economies Vs Advanced Economies

Source: IMF

As per IMF, growth in emerging markets and developing economies picked up the pace in the mid2000s, leading to argument in the public that it is disassociating from advanced economies. The great recession did not spare developed as well as emerging economies and most of them experienced negative growth in 2009. However many have recovered and are growing at or above precrisis rates, despite continued weakness in advanced economies. As a result, they now account for almost all global growth.

Over the next five years growth in emerging markets is expected to continue outpacing that of the advanced economies. Emerging markets are expected to make up around 40 percent of the world economy by 2017, according to the International Monetary Fund.

The rapid expansion of wealth in these regions, particularly among the middle classes, has created opportunities for many companies, including insurers and reinsurers. The focus of Asian emerging economies on service-based growth, along with strong demand in Latin American markets, will drive this growth.

Robust increase in emerging markets supports global premium growth

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Insurance markets are adapting to the repercussions of the economic crisis Insurance companies across the globe has been conserving capital and cutting down on expenses all through the economic crises and are now ready to invest particularly in emerging markets that are poised for significant growth.

As per the latest reports by Swiss Re and Munich Re, global premium growth for the primary insurance market was just under 2.5% in 2012. However this growth is still behind the average pre-crisis growth rate. All key emerging markets have witnessed robust growth in the range of 6.5-7% and have outpaced advanced markets in 2012.

Life premiums have grown globally with around 2-2.5% in 2012 and the growth was driven by emerging markets which grew by just under 5%. India and China drove the growth in emerging markets while advanced Asia (Japan) and the USA accelerated the growth in advanced markets with growth rate just around 2%.

Globally, non-life premium witnessed moderate growth in the range of 2-3%.Emerging markets posted robust growth of around 8-9% in 2012 while advanced markets grew with just under 2%. Price increase in some advanced markets has supported the growth.

Protracted low interest rate across the globe has severe impact on life insurers’ profitability. P&C insurers’ underwriting performance improved fairly from selective rate increases and continued reserve releases.

Note: Advanced economies include North America, Western Europe, Japan and Oceania. Emerging economies include Asia, Commonwealth of Independent States (CIS), MEENA, Sub-Saharan Africa and Central and Eastern Europe.

Source: Swiss Re, sigma No3/2013, IMF, Munich Re

Robust increase in emerging markets supports global premium growth

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