Rapid growth markets offer the prospect of considerable opportunities for global re/insurers, but players will need to consider each market carefully, balancing prospects for growth with potential regulatory and economic pitfalls.
That is the picture painted by EY’s new report on emerging markets entitled Waves of Change, the Shifting Insurance Landscape in Rapid Growth Markets. The report argues that re/insurers will need to consider opportunities in the light of associated risks, with the most significant opportunities evident in China, Mexico and Thailand.
Commenting on the potential of China, the report found the country “continues to boast extraordinary income growth that spurs auto and home ownership. In addition, an aging population will drive the development of life and health markets. However, while some regulatory restrictions have been relaxed, market entry remains difficult for foreign firms.”
Mexico has undergone rapid market liberalisation in recent years, leading to it being considered the most open insurance market in EY’s study, according to its metrics. The report cautioned that the pace and unpredictability of regulatory change within Mexico could however prove a challenge.
Thailand also offers strong growth prospects, with limited downside risk, the report found.
Not that opportunities are only limited to those markets. Turning to other emerging geographies, the report found that Brazil, India and Colombia all offer considerable potential for growth, with limited downside risk.
Brazil is the third largest emerging insurance market and following the liberalisation of its economy, is the most accessible of the BRIC countries. The report found that challenges nevertheless remain regarding acquiring licenses, encouraging firms to pursue acquisitions as the main route of entry.
India is the second largest emerging insurance market after China and is anticipated to grow strongly, but the regulatory environment remains “extremely challenging”, reports EY. Insurers there will need to tread carefully.
Finally, EY sees considerable opportunities in Colombia, which has achieved 10 percent annual growth in its insurance market over the past four years and is predicted to offer high growth potential in the coming years. Regulatory liberalisation will provide further impetus.
Commenting on the report Shaun Crawford, EY’s global insurance leader, comments: “The overall contribution of rapid-growth markets to insurance premium growth will continue to be very significant. Some of the larger economies, such as Brazil, Russia, India and China, appear to have entered a period of slower growth but they continue to possess high, long-term potential.”
EY, Brazil, China, emerging economies, insurance, reinsurance