According to the latest Swiss Re Institute Sigma report, global insurance premiums went up by 3.1 percent in real terms in 2016, a fairly solid outcome in an environment of moderate global economic growth.
Swiss Re attributed the main reason for weaker global premium development compared to 2015 as being down to the advanced economies but growth in many emerging markets – excluding China – slowed also. Global life premium growth slowed to 2.5 percent in 2016 from 4.4 percent in 2015 as advanced market premiums contracted, while life premiums in the emerging regions together grew by more than double the long-term average.
On the non-life side, global premiums grew 3.7 percent in 2016, reflecting relatively solid expansion among the emerging countries and another exceptional performance in China.
The emerging markets will likely fuel improvement in life premiums in the coming years, with China and India being the main growth drivers. Non-life premium growth is expected to remain moderate, with stronger economic activity in the advanced markets supporting momentum.
"The life sector in China is growing very rapidly," said Kurt Karl, chief economist at Swiss Re. "Sales of traditional life products were very strong in 2016, benefitting from further liberalisation of interest rates and government efforts to encourage growth of protection products."
According to the report, the total direct insurance premiums written grew by 3.1 percent in real terms in 2016, down from 4.3 percent growth in 2015. The increase in 2016 came despite global economic growth – a key driver of insurance demand – of just 2.5 percent. In nominal USD terms, global insurance premiums were up 2.9 percent. Nominal growth was lower than real due to currency depreciations, particularly in the UK and some emerging countries.
Global direct life insurance premiums went up 2.5 percent in real terms. This was slower than the 4.4 percent expansion in 2015 but still above the 10-year average of 1.1 percent growth. Emerging markets remained the main source of global growth, with premiums up 17 percent, more than twice the 10-year average of 8.4 percent, and primarily driven by rapid growth in China.
Excluding China, overall emerging market life premium growth was significantly lower but still a hearty 5.7 percent, driven by gains in India, Indonesia and Vietnam. It was a different story in the advanced markets, where premiums contracted by 0.5 percent in 2016, extending a 10-year period of stagnation in premium development.
In non-life, global premiums grew by 3.7 percent in 2016, down from the 4.2 percent gain in 2015 but more than the 10-year average of 2.0 percent. Once again, premium growth in the emerging markets was solid at 9.6 percent, above the 10-year average of 8.3 percent. However, the emerging market outcome was heavily skewed by China, where non-life premiums were up 20 percent.
A surge in demand for health insurance and sustained but slowing demand in motor insurance underpinned non-life premiums in China. Excluding China, emerging market premiums overall increased by just 1.7 percent. Non-life premium growth in the advanced markets slowed to 2.3 percent in 2016 (2015: 3.3 percent), but that was well above the 10-year average of 1.0 percent. Growth weakened in all major advanced regions (except Oceania) due to lower economic growth and softer rates.
In 2000, China was the 16th largest market globally in terms of total insurance premiums written. By 2016, it was the world's third largest market with $466 billion in total premiums, not much smaller than the second largest market, Japan ($471 billion), but still much smaller than the US ($1.35 trillion).
Swiss Re Institute Sigma, Report, Insurance premium, Global