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Life Products Look Great in the 'Emerging Markets': Swiss Re

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Life insurers are doing a lot better, on average, in the emerging markets than they are in the United States and other “emerged” markets.

Analysts at Swiss Re’s Swiss Re Institute have published data on the performance gap in their latest world insurance market review.

The world’s total, inflation-adjusted life premium revenue increased just 0.5% in 2017, to the equivalent of about $2.7 trillion, or about 3.3% of the world’s $80 trillion in 2017 gross domestic product, according to institute analysts.

(Related: The World’s 5 Fastest-Growing Life Insurance Markets)

Inflation-adjusted life premium revenue fell 4% in the United States, to $547 billion, and 1.6% in Europe, to $858 billion.

Here’s what happened to inflation-adjusted life premium revenue in some other markets:

  • Asia: $1 trillion (Up 5.6%).
  • China: $318 billion (Up 21%).
  • Indonesia: $19 billion (Up 27%).
  • Latin America: $78 billion (Up 1.1%).
  • Ecuador: $431 million (Up 24%).
  • Africa: $45 billion (Up 0.3%).
  • Namibia: $686 million (Up 12%).

A copy of the full report is available here.

Why the Report Matters

Swiss Re is a company that sells reinsurance, or insurance for insurance companies.

Reinsurers’ outlook on an insurance sector affects whether the direct writers in that sector can get reinsurance, how much the direct writers might pay for reinsurance, and, in some cases, whether the direct writers can continue to participate in that sector.

What the Numbers Might Mean

Swiss Re institute analysts say they think property-casualty insurance premium revenue mostly moves up and down with the health of the overall economy.

In the life sector, tax rules, other regulations and shifts in distribution strategies tend to have a bigger effect, the analysts write.

In the life sector, in the United States and other emerged markets, low interest rates and changes in financial strength regulations have made guaranteed savings products, such as annuities, less attractive both for consumers and for insurers, the analysts say.

Protecting people against the risk of death, rather than against swings in investment earnings, has been performing better than the savings product business but generates much less premium revenue, the analysts say.

In the emerged markets, “unless life insurers find new ways to profitably offer attractive life insurance savings products, the downturn of the life market could continue for some time,” the analysts warn.

Meanwhile, in emerging markets such as China and Indonesia, relatively low life insurance ownership rates have helped allow for high revenue growth rates, the analysts say.

“In the case of China, the development of insurance markets is strongly supported by government policies,” analysts add.

The analysts note, however, that life sales were weak in 2017 in some emerging markets.

In Mexico, for example, new financial strength requirements similar to those adopted in Europe led to a life sector slowdown.

A drop in interest rates hurt life revenue in Brazil.

— Read North America’s Share of Global Premiums to Decline  on ThinkAdvisor.

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