Munich Re Shares Insurance Market Outlook for 2017/2018

2 October 2017

GLOBAL INSIGHTS

Munich Re Shares Insurance Market Outlook for 2017/2018

By Jennifer C. Rankin

The global economic environment continues to be a key driver for the insurance markets, according to a recent Munich Re white paper. It estimates that worldwide insurance premiums will grow as strongly as the global economy during the next two years, predicting an average rate of 4.5 percent (2.9 percent in real terms—that is, adjusted for inflation). Worldwide premium volume is likely to expand from almost 4.18 trillion (US$ 4.65 trillion) in 2016 to more than 4.56 trillion (US$ 5.07 trillion) in 2018. Economic recovery in a number of large-volume emerging markets should be a major growth engine for the insurance industry, in particular for global property-casualty business. Munich Re expects that demand for life insurance in the emerging markets will remain at a high level, but growth in industrialized countries will be rather moderate. Global GDP growth is likely to accelerate somewhat in the next two years, according to Munich Re, which projects real growth of 2.9 percent in 2017 and 3.1 percent in 2018. The main drivers of this trend are stronger growth in the U.S., the anticipated end to the recessions in Brazil and Russia, a recovery in commodity-exporting countries owing to increased prices, and a slight rise in global trade. For the Eurozone and Japan, Munich Re projects continued solid growth, but believes the U.K. is likely to start feeling the first impacts of Brexit. Growth momentum will presumably continue to slow in China. The outlook remains subject to high economic risks, particularly owing to political uncertainties. Moreover, in 2016 many markets showed a significant decline in particular in sales of unit-linked and single-premium savings products—in Japan, Germany and Italy, for instance. For the years 2017 and 2018, Munich Re projects that industrialized countries will see premium growth of around three percent on average (1.5 percent in real terms), which is likely to continue to fall short of GDP growth. In most emerging markets, by contrast, Munich Re projects relatively stable premium development at a high level. It expects premium growth for 2017 and 2018 to average 6.5 percent (five percent in real terms) in Eastern Europe; almost 8.5 percent (6.5 percent in real terms) in Latin America; and eight percent (around 6.5 percent in real terms) in the MENA region. The forecast for the countries in sub-Saharan Africa is almost four percent (a good two percent in real terms), which is substantially below the other regions, mainly because premium growth for South Africa is likely to be low. The emerging markets of Asia are another exception, as premium development in China influences them. Munich Re anticipates that premium growth here will be down by more than 50 percent in 2017, compared with almost 16 percent (14 percent in real terms) last year. One reason for this is that shorter-term savings products in life insurance are suffering from decelerated economic dynamism and lower investment results. In addition, recent regulatory measures have dampened the aggressive sale of these products as companies designed them primarily for asset management purposes and they offered virtually no insurance coverage. However, globally speaking, the region will probably still exhibit by far the highest growth in life insurance premium volume, at an average rate of 13 percent (almost 11.5 percent in real terms) for the years 2017 and 2018. For more insights and a long-term outlook, visit www.munichre.com

Source: LOMA – Resource Magazine, August 2017

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