Better economic growth and strong competition in industrialised countries determine the global insurance market in 2015
12:00 AM CEST 2015/05/04
In 2015, the global insurance market will benefit from an improved economic climate in industrialised countries. However, strong competition in property-casualty insurance and the continuing low-interest-rate environment with its effects on life insurance are suppressing expected premium growth, even if the low interest rates there particularly affect income.
Munich. This year, nominal premium growth is expected to be 3.2% (3.0% when adjusted for inflation), which is approximately the same as that forecast for the global economy in Munich Re’s current Insurance Market Outlook. Next year, nominal growth is likely to be 4.3% and correspond roughly with the level of 2015 when adjusted for inflation (3.0%).
Competition is on the increase for property-casualty business in industrialised countries in particular, whereas this year and next year primary insurance premiums in emerging markets are likely to grow by just under 7.5% on average (6.5% adjusted for inflation). In life insurance, premiums in industrialised countries are only expected to grow by around 3% (just over 2% when adjusted for inflation) by 2016. Emerging markets will also remain the growth engine for global life insurance, even if the era of double-digit growth rates looks to be drawing to a close.
“The global economic environment will improve this and next year, even if growth expectations in emerging markets weaken”, commented Michael Menhart, Munich Re’s Chief Economist. “In industrialised countries in particular, competition and the low-interest-rate environment are hitting earnings and profits in the insurance market. Despite a slight weakening, growth prospects for the insurance industry in the emerging markets of Asia, South America and Africa remain good.”
Long term up until 2025, growth in property-casualty primary insurance will remain slightly below that of the economy overall. Premiums in life insurance may grow more strongly than anticipated because there is a high demand for old-age provision in ageing societies, and because increasing prosperity is the driving force behind life insurance business in emerging markets.
In the period up to 2025, 41% of absolute premium growth in property-casualty insurance will come from emerging markets, far more than previously. In life insurance, this figure will be even higher at 44%. In 2025, the largest primary insurance market will still be the USA, followed by China, which will oust Japan and the United Kingdom to third and fourth places in the ranking of the largest insurance markets.
“Transferring a higher share of risks to insurers helps people and makes economic sense. The world is still significantly underinsured”, said Nikolaus von Bomhard, CEO of Munich Re. “The spectrum of underinsurance ranges from insufficiently covered liability risks in industry to uninsured natural catastrophe losses in emerging markets. For broadly diversified international insurance groups in particular, the global insurance market thus offers great potential for profitable growth.”
This press release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.