Asia to drive insurance growth in 2017/18

Emerging Asia will be the main driver of insurance growth in the next two years, according to a new report by Swiss Re: Global insurance review and outlook for 2017/18.

Growth in global non-life premiums is forecast to fall slightly from 2.4% in 2016 in real terms to 2.2% in 2017, and accelerate to 3.0% in 2018.

Emerging Asia is one of the key regions driving the growth. It will likely have the strongest growth in non-life premiums, forecast to be nearly 8% in 2017 and 9% in 2018, Swiss Re said. China is expected to grow by about 6.5%.

A contributing factor will be the investment opportunities presented by China’s One Belt One Road program, which is expected to generate an increase in demand for commercial insurance. An improvement in commodity prices and strengthening economic activity is also expected to stimulate demand for insurance from the emerging regions.

“The insurance industry faces headwinds, with moderate economic growth, and still ample capacity in the markets creating a challenging pricing environment,” says Kurt Karl, Swiss Re’s chief economist.

“Nevertheless, premium volumes continue to grow, in both the advanced and emerging markets along with economic activity and an increase in the insurance penetration rate, particularly in emerging markets.”

Cyber to buck pricing trend

According to the report, pricing in the global non-life sector remains challenging.

Pricing in commercial lines continues to deteriorate across all regions, but at a slower pace.

Cyber insurance appears to be bucking the trend, however. Rates in the business line continue to harden but at a slowing pace and could level out soon, the report said.

Increased awareness of the risks associated with cyber attacks and data breaches is boosting demand for related insurance solutions, and represents a significant growth opportunity for the non-life sector.

To date, profitability in non-life has been sustained by low natural catastrophe losses and reserve releases. Assuming average natural catastrophe losses and shrinking reserve releases, return on equity (RoE) is forecast to decline from 8% in 2015 to around 6% in 2016-18.