Swiss Re sigma study on World insurance in 2006: Premiums came back to “life”

World insurance premium growth in 2006 accelerated further, driven by the strong expansion of the life insurance sector. According to a sigmastudy, worldwide premiums written amounted to USD 3 723 billion, an increase of 5% over prior year. The performance of the insurance industry has further improved in terms of capitalisation and profitability.

Worldwide insurance premiums amounted to USD 3 723 billion in 2006. This translates into 7.7% of global economic value generation (GDP), unchanged to 2005. According to the Swiss Re sigma study, growth in total premium volume accelerated further to 5% (adjusted for inflation). Both life and non-life premiums increased over prior year by 7.7% and 1.5% respectively.

Real premium growth in the emerging markets of 16% continued to outpace the growth of 4% experienced in the industrialised countries.

Looking at insurance spending, the industrialised countries spent about 9% of the gross domestic product on insurance in 2006, while in the emerging markets this ratio varies from 1.4% in the Middle East and Central Asia to 4.7% in Africa.

Life insurance: wealth accumulation products drive growth

With real growth of 7.7%, the life insurance market expanded faster than overall economic activity in most countries, with the clear exception of Japan. Booming stock markets favouring unit-linked products, in combination with regulatory changes and tax incentives, were the main contributors to 2006�s strong growth rate. Moreover, higher demand for retirement provision in countries with ageing populations, together with the efforts of governments to shift from public to private pension schemes, boosted demand for the life industry�s products.

In the US, the world�s largest life insurance market, growth recovered to positive territory, largely driven by strong sales in wealth accumulation products. In the large European Markets (UK, Germany and France), too, buoyant stock markets led to strong sales of unit-linked policies. Stock-market strength, together with efforts to reduce costs, significantly enhanced the overall profitability of life insurers. Thanks to the good results, the capital position of life insurers improved further in 2006.

Non-life insurance: low growth, higher profits

Recovering from last year�s stagnation, global non-life business grew by 1.5%, below the growth in GDP. However, this headline figure masks a sharp divergence in performance between the industrialised world, which saw only tiny growth of 0.6%, and the robust 11% delivered by emerging markets. In the industrialised world however, downward pressure on premium rates, particularly in non-catastrophe lines of business, was the salient feature of the market and could not be offset by higher demand. Strong underwriting discipline and the absence of major catastrophes delivered record profits in 2006.

Outlook: healthy growth in life, stagnant in the non-life sector

The outlook for 2007 suggests a mixed picture; while healthy growth is expected in life insurance, with strong development of savings and pensions products, premiums in non-life are likely to stagnate. The outlook for profits remains robust, however, with the life sector also making further progress on profitability. Non-life insurance combined ratios are expected to deteriorate slightly, as premium growth is sluggish.

Note: Swiss Re�s sigma study “World insurance in 2006” examines the insurance markets of 147 countries, making explicit reference to 88.

About Swiss Re

Swiss Re is the world�s leading and most diversified global reinsurer The company operates through offices in over 25 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable the risk-taking essential to enterprise and progress. The company�s traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated �AA-� by Standard & Poor�s, �Aa2� by Moody�s and �A+� by A.M. Best. www.swissre.com

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