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Tapping into emerging markets

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The Annual Insurance Executive Conference, held Dec. 17 and 18 in New York, had sessions on a range of insurance topics, from the global regulatory landscape to big data to social media and its effect on insurance. One particularly interesting session focused on emerging markets (EM). On hand to speak to the opportunities and risks within EMs was Rodney Lester, senior consultant with the World Bank. 

In Latin America, increased economic development and improvements in wage levels and living standards has made capitalizing on this region a necessity, not a luxury, for insurance organizations. This session gave attendees a comprehensive update on the high potential of emerging insurance markets in Latin America and insight to the challenges of other emerging markets, including China and East Asia.

In the last decade, EMs have accounted for most of the world’s growth. So what is the attraction of EMs?

According to Lester, EMs have:

  • Provided the most recent growth;
  • Have still-growing middle classes, although this is very country specific (i.e., China vs. Equatorial Guinea);
  • Some EMs need to face up to growing fiscal gaps (i.e., medical insurance);
  • New distribution strategies being pioneered in EMS as they leapfrog with communication technology (i.e., going straight to cell phones in Kenya).

Lester noted that there is little relationship between population and premium revenues in EMs. However, there is a strong relationship between income level and premium revenues, as one might guess. 

He also listed the policy drivers of residuals in EMs. For the life insurance industry, those are:

  • Industry concentration;
  • Private credit;
  • Private insurer SOM;
  • Bond market; and
  • Legal rights.

Lester noted, however, that Sharia Law can be a challenge for foreign companies in EMs and should be studied and dealt with carefully. 

In terms of the middle market, he stated that, “controlling for income, the share of global premium is highly correlated with middle class development.”

As for the idealized country filters, they are:


  • Size and growth of middle class (based on absolute consumption in monetary terms);
  • Inflation outlook;
  • Population density (especially large cities); and
  • Oil (a negative except for health insurance).


  • Private credit development;
  • Strong institutions (legal system, etc.);
  • Regulatory system encourages healthy structure, especially the exit of insolvent insurers; and
  • Infrastructure development (cell phones, etc.).

In closing, Lester warned about being unprepared for business in EMs. 

“You must carefully think through your entry tactics once your target markets have been identified,” he said. “And you can’t enter an emerging market with a traditional insurance model.”


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