AsPac insurers to account for half of world’s premium income in 2020

MANILA, Philippines - The Asia Pacific region will be the dominant driver of world insurance growth by 2020, according to Munich Reinsurance Co. (Munich Re), one of the leading global insurance and re-insurance institutions.

Premium income for the insurance industry in the Asia-Pacific region will double by 2020 to over one trillion euros, or nearly half of the total premium income of 2.2 trillion euros.

According to a study published by Munich Re’s Economic Research Department, the contribution from “emerging Asia” – markets such as China or India – will account for nearly 70 percent or about 670 billion euros.

Five of the expected global top-10 primary-insurance growth markets will be in the Asia-Pacific region, both in property/casualty (P/C) and in life.

Munich Re expects China to be the country with the highest increase of primary insurance premiums worldwide until 2020 (additional 425 billion euros), followed by the United States (additional 350 billion euros) and Japan (additional 157 billion euros).

In emerging Asia, P/C primary insurance premiums currently grow on average by 11-percent annually. This is twice as high as the second-placed region, Eastern Europe.

Munich Re chief economist Michael Menhart said that China, India and Indonesia will be the top-three growth countries in P/C, with average growth of above 12 percent over the forecast period (2012-2020) in China and India, and almost 10 percent in Indonesia.

“This means Indonesia’s P/C primary insurance volume will more than double in size from almost three billion euros in 2012 to 7.3 billion euros in 2020,” Menhart added.

Average growth rates of other emerging countries such as Vietnam, the Philippines, Malaysia and Thailand range between six to eight percent.

Increasing risk awareness and a growing middle class will be the principal drivers of growth in these areas.

Rising consumer savings are fuelling demand for life and health insurance, changing regulations and greater consumer protection will increase demand for motor and liability insurance, while large infrastructure investments will boost the demand for industrial insurance.

Despite these substantial premium growth expectations, emerging Asia will continue to be severely underinsured, especially against natural catastrophes, the report said.

Since 1980, 40 percent of all natural catastrophes worldwide took place in Asia-Pacific, resulting in 45 percent of all economic losses, but only 18 percent of all insured losses.

By way of comparison, the share of insured losses in North America amounted to 64 percent. Also, over 50 percent of all fatalities from natural catastrophes occurred in Asia-Pacific.

Weather-related catastrophes have tripled over the past 30 years in the region, and this trend is likely to continue. With an increase in population, higher value concentration in exposed areas and climate change, affecting the weather pattern, the loss potential is increasing.

“As insurance density is not expected to rise at the same pace, this will leave the region with a growing uninsured disaster-loss bill,” Munich Re said.

Munich Re Board member responsible for Asia-Pacific Ludger Arnoldussen said that loss mitigation measures are cost-effective instruments for protecting communities on a sustainable basis. Analyzing and reducing risk – and offering adequate insurance against it – helps to considerably reduce the human and financial impact of natural disasters.

“Closing the existing gap of insurance coverage is a very powerful instrument in supporting long-term growth. At the same time, effective catastrophe-risk financing solutions need to be introduced by governments,” Arnoldussen said in a statement.

Long-term mitigation strategies include decisions on where to build, improve building codes, or extend infrastructure such as dams, but also on where to increase incentives to prevent non- or under-insurance in the private and commercial sector.

The insurance industry needs to improve its risk assessment in the region, taking into account the fast development that creates new peak exposures and hot-spot locations, and can have an impact on worldwide supply chains.