The outlook for the global insurance industry has improved slightly over the last year despite some economic gloom. We expect global insurance premiums to grow by around 4% on average in the next two years (3% in real terms, i.e. adjusted for inflation). The reason for this is that life insurance in many emerging countries has a lot of ground to make up, while in the industrialised countries life insurance will probably continue to suffer from low interest rates. Premiums in property-casualty insurance are likely to benefit from stabilising economic conditions in the industrialised countries, but we see the weakness of some important emerging economies having a negative impact there.
Economic outlook: growth steady in industrialised countries, weakness in some emerging countries
With continuing low growth in investment and sluggish world trade, the global economy is likely to show only moderate growth in 2016 and 2017, with the divergences persisting between the steady growth in many industrialised countries and the continuing weakness of many emerging economies. We expect robust economic growth in the USA and continuing recovery in Europe, but a further slowing of growth in China. The economic risks remain generally high.
Property-casualty insurance: moderate growth in the industrialised countries; gloomier prospects for many emerging countries in 2016 due to weak economies, slow recovery expected in 2017
Premium growth in property-casualty insurance should average close to 4% (2.8% in real terms) in the next two years, roughly in line with global economic growth. Due to the high degree of saturation and fiercer competition, we expect premiums in North America and Western Europe to grow moderately by just under 3% in the next two years (a little under 2% in real terms). Higher growth of between 3% and 4% could result in the developed markets in the Asia-Pacific region (2% to 3% in real terms).
The picture is mixed for the emerging countries. In Asia, the continuing high demand for insurance is likely to lead to growth rates of over 10% in 2016 and 2017 (9.5% in real terms). In the other regions, the difficult economic situation in some countries is likely to adversely affect premiums in 2016, but we anticipate slow recovery from 2017. In Latin America for example, premiums will probably only grow by close to 1% in 2016 (0.5% in real terms) because of the recessions in Brazil and Venezuela, with a recovery to around 4% (slightly above 2,5% in real terms) in the following year. Eastern Europe is affected by the recession in Russia, which is continuing in 2016, and we expect growth rates there of just under 4% in 2016 (about 3.5% in real terms) and almost 5.5% in 2017 (real: ~4%). Unlike in Russia and Venezuela, the fall in commodity prices has so far hardly affected premiums in the oil-exporting countries of the Middle East. We expect growth to be somewhat above 5% in 2016 (~4.5% in real terms) and to exceed 6.5% in 2017 (real: 5.5%) in the MENA region.
Life insurance: industrialised countries still labouring under low interest rates, solid growth in emerging coun-tries despite economic weakness
Low interest rates continue to pose a major challenge for life insurers in many industrialised countries and are also holding back premium growth – notwith-standing the first increase in key interest rates by the US Fed. Consequently, despite the high levels of growth seen in some Western European countries such as France, Italy and Spain in 2015 due to special effects, we still expect generally moderate premium growth of only around 3% (2% in real terms) in 2016 and 2017.
As the economic weaknesses have so far had little effect on life insurance in the emerging countries, we expect growth to remain relatively stable in 2016 and 2017 at 7% on average (6% in real terms) in the emerging regions outside Asia. The Asian emerging countries are an exception – we anticipate growth rates in double figures to continue in many countries. We expect growth in investment-based products to remain strong, especially in China.