The latest sigma report from Swiss Re Institute shows that emerging markets will remain the growth engine for both the global economy and insurance industry over the next decade. The report indicates that the seven largest emerging markets (China, India, Brazil, Russia, Mexico, Indonesia and Turkey) will contribute more than 40% of global growth in the next ten years – along with insurance premium volume growth. Emerging market premiums are forecast to more than double, outpacing growth in advanced markets by four times.
China is set to take over as the largest insurance market in the world by the mid-2030s. China overtook Japan as the second-largest insurance market in the world in US dollar terms in 2017, with premium volumes of $541 billion. The US is the largest market with premiums of around $1.4 trillion as at 2017.
Emerging markets currently face cyclical and structural challenges, but they remain an attractive growth proposition relative to the advanced markets. The sigma report examines this optimism, with a key finding that the shift to relatively slower growth will be accompanied by more stable economic growth, a shift from quantity to quality. “Prior to the global financial crisis, the five years ahead expected growth differential between emerging and advanced markets was 4.5%. It is now 3.5% and this is still a comfortable growth uptick, especially in light of the lower growth levels in advanced markets,” says Swiss Re Group Chief Economist Jerome Jean Haegeli.
Insurance demand has a strong positive relationship with economic growth. The economic slowdown in emerging markets in recent years has not translated into a corresponding drop off in premium growth, and underlying consumption momentum for insurance has not been fundamentally eroded. This sigma forecasts that the emerging market share of global premiums will increase by about 50% over the next 10 years, with the long-term premium growth rate for emerging markets 5 percentage points higher than that for the advanced markets. The growth rate in emerging Asia is forecast to be three times the world average over the next two years and China remains on course to be the biggest insurance market by the mid-2030s. Growth in the Latin America and Central and Eastern Europe insurance markets is also projected to accelerate. This will be spurred by factors such as growth-enabling regulation, the adoption of technology, ongoing urbanisation, and a push for financial inclusion.
“Insurance has long been a key enabler of economic growth. It is imperative that we continue to support governments, companies, and private citizens to fully unlock growth potential in emerging markets,” says Jayne Plunkett, Chief Executive Officer of Swiss Re Reinsurance Asia. “To do this, we need to strengthen our work creating sustainable, tech-enabled solutions that address increasingly sophisticated and urbanised emerging consumers.”