Global Insurance Market Trends

8/6/2019 Global Insurance Market Trends

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Indeed, with capital and surplus overflowing for many if not most multinational insurers, there are tantalizingopportunities for prudent investment in other foreign markets, depending on the region. In Asia-Pacific, for instance,significant opportunities beckon.

Domestic markets in many countries are growing fast now that a middle class has burgeoned. More people arebuying homes, cars and other seeming luxuries beyond their grasp a few years ago. And more businesses havesprung up to provide these goods and services.

While more mature markets in the region are saturated from an insurance penetration standpoint, emerging marketsand those continuing to develop offer varying opportunities for growth, especially for early movers willing to investnow for long-term potential. Strategically, such insurers might consider investments that seize upon the evolvingdistribution strategies in the region, especially for life insurance sales.

Customers are seeking to buy insurance products outside the established agency and independent financial advisor channels, which will require insurers already in certain markets to retool their existing distribution models. For insurers entering the markets, they might consider adopting more flexible sales approaches that leverage theInternet, mobile platforms and other evolving technologies.

Asia-Pacific insurance outlook

Industry highlightsy More people and businesses are equipped to buy insurance and the regulatory systems in many locales have

become more sophisticated.

y While insurance penetration in more mature markets is hindered by relatively high saturation, fast-growing developingand emerging markets offer important growth prospects over the long-term.

y Insurers seeking opportunities will need to consider strategies that address the fast pace of local and globalregulatory and accounting developments.

y Access to reliable capital sources to support investments in specific regions and developing distribution strategiesthat take into account consumer buying patterns and demographic trends are other avenues for growth.

Growth prospects in Asia-Pacific

Asia-Pacific presents significant opportunities for insurers seeking growth, as many markets in the region haveenlarged due to an increasing number of consumers looking to purchase insurance. Additionally, the regulatorysystems across much of the region have become more sophisticated.

Growth drivers vary on market-by-market basis

Some challenges, of course, remain. Since Asia-Pacific is a highly diverse super-region with respect to differentcountries' economic development and insurance penetration, the rate and drivers of growth vary on a market-by-market basis. Mature markets, for example, are more saturated.

Developing and emerging markets, on the other hand, offer greater growth opportunities for companies prepared toinvest for the long haul.

We anticipate further regional evolution, but not revolution, in Asia-Pacific markets in 2011. Each insurer's strategicprioritization and response to the opportunities presented may reap significant rewards. Early movers may especiallybenefit by their immediate actions, while the insurers who wait to discern the short-term mistakes of others maysimilarly attain valuable traction.

Poised for opportunity

Indefinitely postponing a response to the current market opportunities seems ill-advised, given the chief attraction of the Asia-Pacific market and its remarkable growth rate. This alone helps explain why many multinational insurers areeither preparing plans for further investment in the region, or are in the thick of implementing them.


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B y 2015, approximately 39% of the world's economy is predicted to be in Asia-Pacific

E urope insurance outlook

Industry highlightsy Europe in 2011 offers a financially stronger insurance market than in 2010, given strengthening of the credit and

equity markets and improvements in the insurance industry's capitalization, solvency and profitability.

y While GDP is expected to decrease slightly in 2011, inflation should remain steady at 1.5% to 1.6% levels thatpose no immediate threat to growth.

y Litigation, fraud and catastrophe-type exposures also are increasing in the region.

y As insurers prepare for the implementation of Solvency II and Basel III, they must develop ways to maintain, if notincrease capital.

To seize growth in 2011, insurers will need to quickly address and adapt to the changing regulatory and accountingenvironments, enhance the flexibility of their distribution systems, develop new markets and products and improvemanagement of capital.

E uropean insurers challenged to prosper amid uncertainty

The European insurance industry entered 2011 financially stronger than it was at the beginning of 2010. As the creditand equity markets recover combined with reductions in claims frequency in 2009 and 2010, the industry'scapitalization, solvency and profitability are improving. Efforts to maintain and increase capital will continue in 2011,as insurers prepare for the impending implementation of Solvency II and Basel III.


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Macroeconomic conditions indicate that 2011 will likely be another year in Europe of low GDP growth, low interestrates and moderate equity market performance. Even if the economic recovery continues, insurers may find that theassets underpinning their balance sheets have decreased in value.

Questions concerning the impact of the European sovereign debt crisis also remain, albeit the effect may vary for individual countries. Certainly, the macroeconomic conditions will challenge the skills and resources of insurers togenerate superior investment returns and maintain balance sheet strength.

Macroeconomic conditions suggest sluggish economy

The sluggish economy and low interest rate environment challenges all segments of the European insurance industryto achieve superior growth. Non-life premiums across the region were poor in 2010, while profitability in both the non-life and reinsurance sectors will continue to be challenged by the soft market, the need for continuing expensereductions, and the end of loss reserve releases supporting profitability.

Business demand for traditional non-life products will remain especially listless in 2011 due to the slow businessgrowth. At the same time, risks relating to continued advancements in technology, catastrophic weather events aswell as fraud and litigation exposure are increasing. A key question is how catastrophic losses in 2010 might affectpricing this year.

Aging population creates opportunities

On the life side, premiums improved modestly in 2010. As Europe's population ages and grapples with demographicchallenges to their social welfare systems, especially those parts related to retirement benefits, it createsopportunities for insurers to provide products and services in the retirement space. The downside is the low interestrate environment, which reduces profitability of guaranteed products.

Continued high unemployment also makes it difficult financially for many individuals to purchase new products. A keyquestion facing life insurers is whether the emerging capital requirements will hinder their ability to meet consumer needs.

USlife insurance outlook: 2011

Industry highlightsy A slowly growing economy, persistently low interest rates and looming regulations that stand to be altered during the

year challenge the development of competitive portfolio returns.

y To generate top-line growth and widen profit margins, insurers will need to consider expanding their menu of products, services and distribution channels, while simultaneously reducing costs and improving operationalefficiency.

Companies that enhance their capital management, respond to changing regulations first and optimize products anddistribution methodologies will be positioned to achieve more profitable traction in 2011.

D riving growth with pared down costs

The US life and annuity insurance industry enters 2011 with a stronger balance sheet, reasonable earningsmomentum and slightly rising direct premiums, albeit at the expense of a declining base. Going forward, the industryconfronts a climate of broad regulatory and economic uncertainty in the coming year and beyond.

Facing regulatory and economic uncertainty


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In this environment, insurers will need to create new products and services and leverage distribution channels toincrease top-line growth, while paring costs and unprofitable risks to drive bottom line earnings. The latter requiressimplifying the business and product portfolio, improving operational efficiency and squeezing earnings out of astagnant revenue base, as the slowly growing economy makes it difficult to attract new customers and retain existingones.

Challenges for life and annuity insurers

Low interest rate conditions compound these problems, challenging life and annuity insurers to generate competitiveproduct returns. Companies that clearly understand these issues and react quickly and prudently in their strategiccore businesses will gain a competitive advantage.

Looming regulatory changes such as those posed by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) are still in the process of being interpreted and implemented not to mention possibly revised.These changes pose strategic and competitive challenges to life and annuity insurers.

Reposition yourself for future earnings

As insurers address these concerns, they must be cautious to preserve their financial strength. Nevertheless, thereare opportunities in deploying rebuilt capital to reposition and grow their businesses and improve future earnings.

US property/casualty insurance industry

Industry highlightsy The key performance driver for insurers in today's environment is superior underwriting and a number of leading

insurers are using advanced analytics to gain a competitive advantage.

y The industry is financially strong and has amassed significant policyholder surplus, which is at or near an all-timehigh.

y The industry maintains adequate loss reserves and enjoys access to relatively inexpensive capital.

y Reduced underwriting profits and investment income will eventually alter the status quo, but this is not anticipated in2011. Consequently, the key performance drivers in the market remain superior underwriting and risk assessment.

Companies that leverage risk modeling and analytical tools, anticipate regulatory developments, and developinsightful methods of managing their excess capital will be better positioned to achieve growth in 2011.

US property/casualty industry outlook

The property/casualty industry outlook in the US is one of continuing challenges for individual insurers. Many of thesame factors that fostered the soft market conditions in recent years remain in play. Nonetheless, the industry isfinancially strong, thanks to an abundance of capital amassed in 2009 and 2010.

Three factors driving the market

Capital positions are at or near an all-time high and continue to drive price competition in the property/casualtyinsurance industry. Three other factors are conspiring to maintain the competitive market through at least 2011:

y A recovery in the value of the industry's assets

y Access to relatively inexpensive capital

y Adequate loss reserves to address claim costs


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These generally positive factors are contrasted with the industry's ongoing underwriting and investment incomepressures. The slow economic recovery, years of price competition and generally low investment returns havecompressed the industry's profit margins and are expected to further squeeze individual carrier operating margins.

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Global Insurance Market Trends