80 percent of growth comes from emerging economies

Insurance markets in 2017

  • Global insurance premiums increase in 2017 by 3.7 percent to 3.66 trillion euros

  • Property-casualty grows by 5.0 percent, almost twice as fast as life

  • After a lost decade, premium growth should return to pre-crisis level – China is set to become the biggest market worldwide

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According to projections by Allianz Research, the global premium volume last year rose to a new record sum of 3.66 trillion euros (excluding health insurance). Compared to 2016, the nominal increase adjusted for exchange rate effects is 3.7 percent.

Although the growth rate of premium income accelerated slightly compared to the previous year (+ 2.9 percent), it lagged behind the expansion of economic activity (+ 5.9 percent nominal growth) for the second year in a row. Insurance penetration (premiums as a percentage of GDP) has thus fallen to 5.5 percent – the lowest value in the last 30 years. At the beginning of the millennium, before the great financial crisis, this figure was on average one full percentage point higher.

"It is actually a paradoxical situation," commented Michael Heise, Chief Economist of Allianz SE. "On the one hand, the risks in the world are constantly increasing – just think of climate, 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'."

Property-casualty set the tone last year: At 5.0 percent, it not only grew almost twice as fast as life insurance in 2017, but also recorded the largest increase since 2012. Almost all regions contributed to the positive premium development; nevertheless, the growth discrepancy between emerging and industrialized countries remains striking: while premiums in the former soared by 11.6 percent, mature markets only managed an increase of 3.5 percent. Western Europe, however, is also lagging significantly behind this figure: premium growth in 2017 reached only 2.0 percent – but still the second highest value since 2007; in the previous year, the Western European markets recorded zero growth.

The significantly lower global growth in life insurance premiums in 2017 (+2.8 percent) is primarily due to the still weak development in Western Europe, where almost 30 percent of global premium income is written. After a minus of 2.2% in 2016, there still is a red zero in 2017. At the end of last year, the regional premium volume was thus still almost 5 percent below the pre-crisis peak in 2007; insurance penetration fell from 5.6 percent to 4.4 percent during this period.

"Although the life insurance markets have become significantly more volatile in recent years, the trend is clear – and disturbing," commented Michaela Grimm, economist at Allianz Research. "While the unrelenting demographic change leaves no doubt about the necessity of private provision, long-term savings efforts are obviously decreasing. The severe economic crisis in many European countries is certainly one reason for this. But the ECB's low-interest policy also plays an inglorious role here. It is therefore time to exit the crisis mode – in the interest of the younger generation, which will be much more dependent on private reserves in old age than the current generation of pensioners."

Some other developed economies also experienced declines in premiums in 2017, for example, Australia (-18.2 percent), Japan (-11.3 percent) or South Korea (-4.9 percent). Overall, therefore, premium income in life insurance in industrialized countries shrank by 0.5 percent in 2017. The emerging markets, on the other hand, increased their premiums by a total of 17.2 percent.

In particular, one country stood out: China.

Of the approximately 60 billion euros in additional premiums in life, around 80 percent were attributable to the Chinese market. In both lines combined, last year's global premium growth totaled just under 130 billion euros. Emerging markets accounted for almost 80 percent of the increase, with China accounting for two-thirds of this.

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Allianz Research expects the insurance markets to continue to recover in the future. After global premium growth disappointed since the financial crisis with a nominal rate of just over 3 percent p.a., growth should accelerate to around 6 percent in the next decade – almost reaching the pre-crisis pace.

This upturn reflects more stable economic growth as well as higher inflation and interest rates. This development is particularly pronounced in industrialized countries, not least in Western Europe: after zero growth of the last ten years, premiums should increase again in the future by an average of just under 3 percent per year. The life line of business (+6.4 percent p.a.) should again grow somewhat faster on a global level than the property-casualty line of business (+5.4 percent p.a.).

The shift in weight towards the emerging markets will continue unabated in the coming years. At the end of the 2020s, around 40 percent of global premium income should be written in this country group; 10 years ago, this figure was still below 10 percent. 

At the top, there will be a historic change of guard: China will overtake the USA as the largest insurance market. Today, the USA still dominates without restriction: With 1.1 trillion euros or just over 30 percent of global premium income, it is still the largest insurance market worldwide, far ahead of the number two, China, with around 420 billion euros.

"Long-term forecasts are currently particularly difficult, the insurance markets are undergoing fundamental change," said Kathrin Brandmeir, economist at Allianz Research. "However, from our point of view, this disruption also offers great opportunities. With new technologies, insurance cover can be made accessible and tangible for more people, and insurance products can become more attractive. If we succeed in getting customers so enthusiastic about insurance that they again spend as much of their income on insurance cover as they did before the crisis, global premiums could be about 1 trillion euros higher at the end of the next decade than in our baseline scenario.”

About Allianz

The Allianz Group is one of the world's leading insurers and asset managers with more than 86 million retail and corporate customers. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit in-surance and global business insurance. Allianz is one of the world’s largest investors, managing over 650 billion euros on behalf of its insurance customers while our asset managers Allianz Global Investors and PIMCO manage an additional 1.4 trillion euros of third-party assets. Thanks to our systematic inte-gration of ecological and social criteria in our business processes and investment decisions, we hold the leading position for insurers in the Dow Jones Sustainability Index. In 2017, over 140,000 employees in more than 70 countries achieved total revenue of 126 billion euros and an operating profit of 11 billion euros for the group.

These assessments are, as always, subject to the disclaimer provided below.

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