New Swiss Re sigma study on world insurance in 2011 shows non-life insurance premiums continued to grow in 2011 despite an overall decline in premiums

  • Non-life insurance premiums continued to grow 1.9% in 2011, on the back of solid economic growth in emerging markets and selective rate increases in some advanced markets.
  • Life insurance premiums declined 2.7%. Premiums dropped sharply in Western Europe, China, and India, while growth resumed in the US.
  • Going forward, non-life premiums are expected to continue expanding moderately in the advanced markets. Life insurance premium growth in the emerging markets will revive.

Zurich, 27 June 2012 – Swiss Re’s latest sigma study reveals that global overall premiums declined 0.8% in real terms in 2011.1 While non-life premiums expanded 1.9% on solid economic growth in emerging markets and selective rate increases in some advanced markets, global life insurance premiums fell 2.7%. Capital and solvency remained solid despite extraordinarily costly natural catastrophe events and historically low interest rates that lowered insurers’ overall profitability.

Non-life premium growth continued in 2011

Global non-life insurance premiums grew 1.9% in 2011. In the emerging markets, non-life premium growth remained robust at 8.6%, backed by strong economic expansion. The advanced markets recorded marginal 0.5% growth, supported by rate increases in some regions and lines of business. However, the unfolding recession in Europe and the weak economy in the US dampened demand for insurance cover. Daniel Staib, one of the authors of the study, says: “Non-life premium growth in the advanced markets has been supported by gradual rate increases in personal lines of business and in regions affected by large natural catastrophes. Despite the adverse environment in 2011, non-life insurers’ capital position remained sound, putting the industry in a strong position to grow steadily in the future.”

Life premiums decreased 2.7% worldwide

Life insurance premiums declined overall. However, many markets continued to show firm growth. In fact, the decline was primarily caused by a few large markets where insurance premiums fell steeply.

In the advanced markets, premiums dropped 2.3% overall, even though premiums grew in the US and Japan, the two largest markets. In the US, premiums from new life insurance business rebounded, led by strong demand for variable annuity products with guarantees. In Japan, sales of individual whole life policies strengthened and annuity products recovered. However, the advanced markets suffered from a steep decline of in-force life insurance business in Western Europe.

Tighter regulations on bancassurance distribution in China and India, the two largest emerging markets, led to an overall decline in emerging market life premiums of 5.1%. However, other emerging regions such as Latin America and the Middle East showed healthy, continuing growth, even though insurance penetration in the Middle East still remains very low compared with other emerging markets.

Regarding profitability, Staib explains: “The profitability of the life insurance industry has stabilized, but remains low. Low interest rates remain the key issue for the life insurance sector, affecting investment returns and eroding the profitability of guarantee products.”

Outlook: non-life insurance ready for take-off

Going forward, moderate premium growth overall is expected in 2012. In non-life, robust growth in the emerging markets and hardening prices are expected to support premium growth. However, the turn of the pricing cycle will likely be gradual and limited to certain markets and lines of business.

Slower economic growth in the advanced markets will weigh on insurance demand for life and non-life insurance. However, life insurance premium growth is set to revive in the emerging markets. In India and China, insurers are already adapting to the new regulations by consolidating their distribution channels and restructuring products.

Elsewhere in the emerging markets, life premium growth is set to continue to benefit from rising income and increasing risk awareness. Savings products and credit life insurance in particular are expected to make further inroads into Latin America. Very low interest rates will continue to be a challenge for the entire insurance industry.

“Last year was not a great one for premium growth, but 2012 should be a lot better as rates continue to improve in non-life markets and India and China return to robust growth in life markets,” says Kurt Karl, Swiss Re’s Chief Economist.

This sigma study is the first public assessment of the performance of global insurance markets in 2011. The 84 markets where data or estimates for 2011 are available, account for 99% of global premium volume. Overall, the report is based on 147 insurance markets.

About Swiss Re

The Swiss Re Group is a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. Dealing direct and working through brokers, its global client base consists of insurance companies, mid-to-large-sized corporations and public sector clients. From standard products to tailor-made coverage across all lines of business, Swiss Re deploys its capital strength, expertise and innovation power to enable the risk taking upon which enterprise and progress in society depend. Founded in Zurich, Switzerland, in 1863, Swiss Re serves clients through a network of over 60 offices globally and is rated “AA-” by Standard & Poor’s, “A1” by Moody’s and “A+” by A.M. Best. Registered shares in the Swiss Re Group holding company, Swiss Re Ltd, are listed on the SIX Swiss Exchange and trade under the symbol SREN.

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