Ending two years of shrinking premium income, the
world’s life insurance market moved back on to a growth path in
2010, led, as has become the norm, by developing insurance markets
as a group. However, there were also strong showings from a number
of major developed markets in Europe and Asia.
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Ending a two-year losing streak, the world’s life insurance
market rebounded last year, reports Swiss Re in the study World
Insurance in 2010. After recording a decline of 0.8% in 2008
and almost 3% in 2009, global life premiums lifted by 3.2% on an
inflation-adjusted basis in 2010 to $2.52trn, a new all time high.
In nominal dollar terms, life premium income was up 6.4% in
2010.
Leading the way for the first time
since 2007, life insurance premium income in 2010 grew at a faster
pace than non-life premiums which reflected an inflation-adjusted
increase of 2.1% (4.4% nominal) to $1.189trn. This left total life
and non-life premium income up 2.73% (5.58% nominal) at
$4.339trn.
“The dominating picture is that the
industry is on the way back to the long-term growth trend,”
observed one of the study’s authors Daniel Staib.
Developed life markets presented a
mixed picture in 2010. In the US, life premium income of $506.23bn
was 0.7% down on an inflation adjusted basis compared with 2009,
though this decline was markedly lower than the almost 15% recorded
in 2009. Premium income in the world’s second-largest life market,
Japan, recorded a 6.6% increase in nominal terms in 2010 at $441bn,
although in local currency terms it was 0.3% down.
In the world’s third-largest life
market, the UK, further weakness was evident with a 3.3%
inflation-adjusted fall in premium income to $214bn recorded. In
local currency terms premium income was virtually unchanged at
£138.3bn. It was not all bad news from developed life markets.
“In some continental European
countries, growth in the past year could be said to be very strong
because sales of single premium products with comparatively
attractive guarantees increased strongly,” noted Staib.
However, Swiss Re warned that once
interest rates in Europe begin to rise, growth is likely to
“evaporate”. Coming through particularly strongly, Germany recorded
a 6.6% rise in inflation-adjusted premium income to $115bn. Growth
in the euro was stronger at 6.8%. Also coming through strongly was
Italy which recorded an inflation-adjusted increase in premium
income of 9.6% (5.6% nominal) to $122.06bn.
Among other Western European life
markets to perform particularly well was the region’s
eighth-largest market, Sweden, where life premium income in 2010
rose 8.1% in inflation-adjusted terms (16.5% nominal) to $29.41bn.
The worst performer in the region was the Netherlands where life
premium income fell 13.1% on an inflation-adjusted basis (16.3%
nominal) to $25.1bn in 2010. This left the Dutch market in eleventh
position in Europe, down from fifth position which it held as
recently as 2003.
Among developed Asian markets, Hong
Kong, Singapore and Taiwan put in the strongest showings in 2010,
recording respective nominal increases of 12.6%, 13.4% and 16.9% in
local currency terms.
Emerging markets
shine
Despite solid performances from
some developed markets, growth was primarily driven by emerging
markets, especially those in Asia. Total life premium income from
developing markets came in 27.7% ($79bn) up in nominal terms at
$364bn
Heavyweight among developing
markets in the region, China, again confirmed its dominance,
lifting life premium income in 2010 in inflation-adjusted terms by
25.6% (31% nominal) to $143bn. China is now the world’s
fifth-largest life market and is expected by Swiss Re to move into
second place behind the US within a decade. This year, however,
first quarter results disappointed, with the China Insurance
Regulatory Commission reporting life premium income of CNY321.04bn
($49bn) in the first quarter of 2011, down from CNY329.18bn in the
first quarter of 2010.
India’s life market, which has been
plagued by sweeping changes in the unit linked business sector, put
in a modest showing in 2010 with premium income in
inflation-adjusted terms rising 4.2% to $68bn. In nominal local
currency terms premium income was up 16.7%. There is no sign of an
accelerating growth pace so far this year, with India’s Insurance
Regulatory and Development Authority reporting that life premium
income in the quarter ending May 2011 was up 12.3% compared with
the same period in 2010.
A number of smaller developing life
markets in Asia recorded significant growth in 2010. In nominal
terms the fastest pace was set by Indonesia where premium income
increased by almost a third to $7.2bn. In inflation adjusted terms
the increase was a more subdued 8.6%.
In inflation-adjusted terms
Thailand shone, recording a 16.1% rise in premium income to $8.31bn
in 2010. In nominal terms the increase was 29.8%. Malaysia also
performed well, lifting life premium income by 10.6% in nominal
terms to $7.9bn. In real terms the increase was 8.3%.
Outside of Asia, a number of
developing life markets performed well in 2010. Among them was
Russia where an inflation-adjusted increase in life premium of
33.9% (41.7% nominal) to $901m was recorded. Lithuania excelled,
lifting life premium income in inflation adjusted terms by 26.6%
(31.3% nominal) to $207m.
Among larger Central European
markets Czech Republic did the best, recording an inflation
adjusted 15.7% (16.9% nominal) increase in life premiums to $3.69bn
in 2010. Poland, the region’s largest life market, recorded an
inflation adjusted 1.9% (8.3% nominal) increase in premiums to
$8.9bn.
The road ahead
Swiss Re noted that despite
lingering uncertainty, the economic recovery should continue and
bolster premium growth in the life and non-life sectors globally in
2011.
Staib commented: “In terms of the
mature markets, growth in life insurance is expected to turn
positive in the US, while in Western Europe premium growth could
slow down slightly, as rising interest rates will make life
policies with interest rate guarantees less attractive.”
Over the longer term, Swiss Re believes an ageing society’s
increasing need to provide for old age will be positive for life
insurers. In the non-life sector the reinsurer noted that the trend
in 2011 is towards higher premium growth and is likely to be
supported by a strengthening in premium rates.
