The global insurance premium volume last year rose to 3.66 trillion euros or US$4.07 trillion (excluding health insurance), according to projections by Allianz Research. Compared to 2017, the nominal increase adjusted for exchange rate effects is 3.3%.
It was the third year in a row (and the 12th in the last 15 years) that global premium growth has lagged behind the expansion of economic activity (+ 5.7% nominal growth in 2018). Insurance penetration (premiums as a percentage of GDP) has thus fallen to 5.4% – the lowest value in the last 30 years.
"It is actually a paradoxical situation," comments Michael Heise, chief economist of Allianz SE."On the one hand, the risks in the world are constantly increasing – just think of climate change, demography, cyber or politics – but on the other hand, people worldwide are spending an ever smaller proportion of their income on insurance. A great joint effort by politics and industry is needed to close this 'protection gap'."
It was also an unusual year for Asia. Premiums rose by a meagre 2.3% in Asia (ex Japan), only the second time since the turn of the millennium that it trailed behind global growth. Moreover, with an increase of 4.0%, even Japan grew faster. The upshot: In 2018, the region accounted for only 16% of global growth (after a whopping 81% in 2017). The global growth engines for 2018 were two old acquaintances: the US (42%) and Japan (11%).
The culprits for this dismal performance are easy to pinpoint: Life markets both in China and Korea – which together account for 40% of the total regional premium pool (ex Japan) – shrank in 2018. In China, this was mainly due to a regulatory crackdown on insurance intermediaries selling wealth management products.
“2018 does not mark the end of the Asian growth story,” comments Michaela Grimm, economist at Allianz Research. “On the contrary. The stricter oversight in China is more than welcome, signaling the next phase of a more balanced and sustainable development. Coupled with the breathtaking technological progress in the market – it is the clear frontrunner in the application of AI or innovative payment solutions – China is the market to watch. It’s the best place to learn about the future of our industry. ‘Sold in China’ is the new gold standard in insurance.”
Accordingly, Allianz Research expects this year a rebound in Asia (ex Japan), propelling premium growth to almost 11%.
Turning to insurance segments, 2018 was the third year in a row in which property-casualty insurance outgrew life insurance worldwide (4.7% vs 2.5%). The gap was even more pronounced in Asia (ex Japan). The property-casualty (p-c) market clocked an increase of 7.5% whereas the life market stagnated (+0.2%). Last year’s growth in p-c, however, was the weakest since 2013.
Long-term prospects look a little brighter. Allianz Research expects insurance markets to continue to recover, with global premium growth forecast to reach around 5% in the next decade. Given the accelerating demographic change, particularly in emerging markets with underdeveloped social security systems, life insurance should again grow a tad faster than the p-c business (5.5% vs. 4.4%).
Growth expectations for Asia (ex Japan) are notably higher – the region should achieve growth of 9.4% p.a. over the next decade (life: 9.8%, p-c: 8.5%). All in all, around 60% of additional premiums will be generated in Asia (ex Japan).