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Allianz predicts recovery for slumping insurance market

Jun 12. 2019
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By The Nation

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According to Allianz Research, the global insurance premium volume last year rose to 3.655 trillion euros (Bt129.4 trillion), excluding health insurance.

The annual increase adjusted for exchange rate effects was 3.3 per cent, marking the third year in a row – and the 12th out of the last 15 –  that global premium growth lagged behind economic growth (5.7 per cent nominal growth in 2018). Insurance penetration (premiums as a percentage of GDP) thus fell to 5.4 per cent – their lowest value in the last 30 years.

“It is actually a paradoxical situation,” said Michael Heise, chief economist at Allianz SE. “On the one hand, the risks in the world are constantly increasing – just think of climate change, demography, cyber or politics – but on the other hand, people worldwide are spending an ever-smaller proportion of their income on insurance. A great joint effort by politics and industry is needed to close this ‘protection gap'’.”

It was also an unusual year for Asia: Premiums rose by a meagre 2.3 per cent in Asia (excluding Japan), marking only the second time since the turn of the millennium that they trailed behind global growth. Moreover, with an increase of 4 per cent, even Japan grew faster. In 2018, the region accounted for only 16 per cent of global growth in insurance premiums (after a whopping 81 per cent in 2017). The global growth engines for 2018 were two old acquaintances: the US (42 per cent) and Japan (11 per cent).

Michaela Grimm, economist at Allianz Research, said that premiums in Thailand grew by 5.2 per cent in 2018, more or less in line with last years’ development. The composition of growth, however, has slightly changed: In 2018, property-casualty (P-C) premiums clocked growth of 5.8 per cent, after two years of stagnation. On the other hand, growth in life premiums slowed to 5 per cent, the lowest increase in more than a decade. Nonetheless, the life market remains – as in most other Asian countries – the dominant segment: It accounts for 70 per cent of the premium pool (without health).

For this year, Allianz Research expects an acceleration to around 7 per cent premium growth, with P-C insurance and life segments growing in sync. Thailand’s insurance market is one of the most developed in the region: Premiums per capita stood at 292 euros in 2018 (on par with China), and penetration at 4.7 per cent – the highest ratio for emerging markets in the region and well ahead of China’s 3.7 per cent.

Allianz Research expects insurance markets to continue to recover, with global premium growth forecast to reach around 5 per cent in the next decade. Growth expectations for Asia (excluding Japan) are notable higher – the region should achieve annual growth of 9.4 per cent over the next decade. Meanwhile in Thailand, market growth of 7.5 per cent is foreseen (7.7 per cent in life and 7.1 per cent in P-C). All in all, around 60 per cent of additional premiums will be generated in Asia (excluding Japan).

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