Allianz has unveiled its latest Global Insurance Report, taking the pulse of insurance markets around the world by looking back at last year’s performance and looking ahead at future developments.
The report states that the global insurance industry entered 2020 in good shape with premiums in 2019 registering an increase by 4.4 percent, the strongest growth in four years. The increase was driven by the life segment where growth sharply increased over 2018 to 4.4 percent, as China overcame its temporary, regulatory-induced setback and mature markets came finally to grips with low interest rates.
Property-casualty insurance clocked almost the same rate of growth (4.3 percent), down from 5.4 percent in 2018. Thus, for the first time since 2015, life insurance outgrew the P&C segment, albeit by a very thin margin. Global premium income totaled EUR 3,906bn in 2019 (Life: EUR 2,399bn, P&C: EUR1,507bn).
According to Allianz. the sudden stop of economic activity around the globe will batter insurance demand, too. Global premium income is expected to shrink by 3.8 percent in 2020, with life insurance probably hit more than P&C business with growth rates of -4.4 percent and -2.9 percent, respectively. Thus, the impact of the Corona pandemic is going to be three times stronger than that of the global financial crisis, when global premium income decreased by 1.0 percent. Compared to the pre-Covid-19 growth trend, the pandemic will shave around EUR 360bn from the global premium pool (Life: EUR 250bn, P&C: EUR 110bn).
“2020 is lost to the virus, no doubt about it,” said Ludovic Subran, chief economist of Allianz. “More interesting is the question about what comes after Covid-19. Basically, we see three trends, already in place before, that will gather steam in the coming years: Digitalization of the business model, the pivot to Asia and the growing significance of ESG-factors. While Asian players lead in technology, European peers are ahead with ESG. But dominance of the global insurance industry will be decided in Asia – Asian households emerge as the consumer of last resort, driving global insurance demand.”
He further pointed that Asia (ex Japan) clocked growth of 6.8 percent in 2019, more than twice the rate of the year before. Both segments, Life and P&C, contributed to the increase in premiums: Life grew by 6.5 percent and P&C by 7.5 percent. Total premiums reached EUR 947bn in the region, almost half of them written in China.
However, 2020 will be challenging for Asia: Premium income is expected to decline by 0.7 percent, with life insurance shrinking by 1.8 percent and P&C still slightly growing by 1.9 percent. Long-term prospects look brighter – the region will return to its “normal” growth and see an average growth rate p.a. of 8.1 percent until 2030; life and P&C are expected to grow at the same speed. This is almost twice the speed of the global market (4.4 percent).
“Asia was the region first hit by Covid-19; it will also be the region that recovers first,” said Michaela Grimm, Allianz SE economist and co-author of the report. “Higher risk awareness and pent-up demand for social protection will drive growth in the coming years, with China in the lead: For the next couple of years, we expect double-digit increases in premiums in the Middle Kingdom. Up to 2030, China’s premium pool will grow by a whopping EUR 777bn – the market size of UK, France, Germany and Italy combined. China and Asia will emerge even stronger than before from today’s crisis.”
Malaysia’s insurance market grew by 4.9 percent in 2019, more or less in line with previous years. Life insurance premiums – accounting for 70 percent of the premium pool (without health) – increased by a healthy 7.4 percent while property-casualty premiums declined slightly by 0.5 percent; in fact, over the whole decade since the great financial crisis, the life segment outgrew P&C by a wide margin.
In 2020, Malaysia should be one of the few markets in the region to avoid contraction, albeit by a hair’s breadth. Premiums are expected to grow by only 0.9 percent (Life: +1.8 percent, P&C: -1.3 percent percent).
The slump, however, will be followed by a swift recovery in 2021, with the market growing by 7.0 percent; over the decade up to 2030, Malaysia is expected to clock growth of 5.8 percent p.a. Malaysia’s insurance market is one of the most developed in the region: Premiums per capita stood at EUR 363 in 2019 (well above China or Thailand), penetration at 3.5 percent.