For the first time in recent history, Asia has surpassed Europe in terms of Gross Written Premiums, according to SWISS Re. Could this be the beginning of a new era or just a glitch?
In 2016, the global insurance industry wrote 3.1% more premiums, thus reaching 4.448 billion EUR, the most recent data kindly provided by SWISS Re shows. Out of this, 44% represented non-life business and around 56% life.
However, the global premium growth was lower than the 4.3% recorded in 2015, although still higher than the increase of the real global Gross Domestic Product of 2.5%. Interestingly enough, the slowdown in the growth of insurances was mainly driven by a slowdown in the growth of advanced markets. Experts still debate whether this can be taken as a sign of temporarily “fatigue” or just that developed economies finally peaked with the combination of resources and market structures in existence. Above all else however, insurance as we know it is risks losing relevance in developed markets – and this idea tends to appear more and more in high-level discussions, it seems.
Going back to the emerging markets, according to the same data source, SWISS Re, robust premium growth in China is a major factor that supported their development. Actually, China is currently the second largest insurance market in the World and is considered by experts to have tremendous potential for the future, also given the cutting edge technologies at its disposal and the availability of resources in existence.
Europe, which according to SWISS Re also includes Russia, produces something around 31% of global premiums – but the continent was surpassed last year, for the very first time, by Asia, who had the biggest growth of all continents. In fact, Asia is now responsible for 31,5% of the entire global GWP.
For Europe, this translates into total GWP of 1.382 billion EUR, of which the Life sector produced some 58,4%while the N/L one 41,6%. However, there are no surprises at country level: the biggest markets are the United Kingdom, followed by France, Germany, Italy and the Netherlands. Interestingly, the first 3 markets mentioned above produce over 51% of Europe’s premiums and the 7 around 70%.
But Europe is a diverse market. There are important differences between the West and East of the continent. Countries such as Russia and the Central and Eastern European ones have a lower penetration of insurances (GWP/GDP). This is where the true potential lie, experts say. CEE, in example, is a developing and exciting region, with important business potential.
These 17 CEE markets (according to the OECD) produced in 2016 premiums of 31.3 billion EUR out of which 37% life, 33% motor and almost 10% property – as can be seen in the pages of XPRIMM Insurance Report. Claims paid last year were around 15 billion EUR. So, to put it mildly, there is plenty of room for development – as you can also see in the pages of this Report.
But the CEE is special from many other points of view in comparison with the more mature markets of Western Europe. First of all: the average insurance penetration is 2.5% (GWP/GDP) which is low in comparison to the European average of 7,4% (IE, 2015). The best performance in penetration terms – Slovenia (5.11%). Second of all:the average insurance density in the CEE: 258 EUR/capita (yearly per capita expenses for insurance). This is, of course, very low as compared to the EU average, which is above 2.000 EUR (Insurance Europe, 2015). Slovenia is once more the positive example, as it is the only country with an insurance density close to the European average (985 EUR/capita). At the same time, Romania and Hungary are the only 2 relevant markets where the insurance density increased constantly in the last 5 years. Last but not least: the region is driven by the all so powerful yet despised motor insurance segment that was the root cause of turmoil in many markets, including Poland and Romania, but not only.
But the CEE, and Europe altogether, are changing. One doesn’t has to search too far than his own pocket. Technological advances, digitalization in general are fundamentally reshaping the industry. In example, InsurTech players have emerged across lines of business, with concentration on distribution.
But this is probably just the beginning of the whole movement. Digitalization is inevitable, demanded by the consumers. It is a must; otherwise, the traditional insurance industry might lose its relevance even more and enter “the land of Kodak”, the famous company that believed the digital photography will never replace film.
It is exactly this resistance to new ideas, the legacy core systems still employed by some traditional insurers and, sometimes, even excessive regulation that can put a break on the technological development thus bringing the industry closer to a perfect “Kodak moment”… And this is exactly why Asia, in an effort spearheaded by China, is about to win in the global fight for world insurance supremacy.