Asian insurance markets face headwinds
Asia might still be the fastest-growing insurance market in the world, but substantial challenges remain.
Across the entire region, overall insurance premiums grew in real terms by 7.8% for life products and 9.2% for non-life during 2015, driven by strong double-digit growth in Asian emerging markets, according to Swiss Re, which published its 2016 interim review and outlook this week.
The region now accounts for almost 30% of global insurance premiums, compared to 22% a decade ago.
China’s insurance market saw total premium growth of 80% during the last year and Swiss Re expects it to remain a major growth driver, despite increasing concerns about its economic growth outlook.
Between January and May this year premiums collected by Chinese life insurers have risen by a spectacular 50% year on year. This indicates strong insurance demand in the China market.
Nevertheless, significant uncertainty still clouds the outlook for China. Other concerns include structural changes in Asia that could affect demand for insurance, such as weak demand for the region’s exports could result in slower demand for trade-related insurance in the coming years.
Adding to these fears are the very high levels of debt in many Asian markets which will also limit the ability of central banks to use lower interest rates to stimulate growth.
Finally, financial markets remain volatile and low interest rates are likely to persist longer, which continues to affect the investment returns of insurance funds as well as the attractiveness of some life insurance products. However, with these caveats, Swiss Re is generally upbeat for the region’s future as a source of growth for insurance companies.
The positive outlook is underpinned by the belief that the fundamental growth drivers of Asia’s insurance markets are still intact. For example, the rise of middle-income classes, particularly in China and India, will continue to drive demand for personal lines of insurance, including motor, health and other protection insurance.”
Indeed, it is estimated that by 2020 more than half of the world’s middle class will be located in Asia, compared to around 30% today. Likewise the region is investing heavily in infrastructure in order to sustain economic growth.
Urbanisation-led infrastructure spending in China is expected to reach almost US$60 trillion between now and 2030. This will all create business opportunities and additional insurance demand in the coming years.
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