New Swiss Re sigma study: Growing insurance industry in emerging markets – great potential for well-designed liability insurance products

02 December 2005, Zurich

In an environment of strong insurance growth in the emerging markets, liability insurance outperformed overall non-life business: while overall non-life insurance premiums grew by 5% per year between 1999 and 2003, liability premiums increased at an annual average of 13%. Swiss Re's new sigma report analyses the recent trend and the opportunities and threats it poses for insurers, particularly in Asia, Latin America and Eastern Europe.

Economic growth favours insurance development

Robust economic performance was observed in the emerging markets in 2004. Together with the implementation of compulsory insurance and changes in taxation and pension systems, this boosted insurance growth: life and non-life business grew by 7.5% and 8.9% in real terms, respectively, to a premium total of USD 372.2 billion. This trend is seen to continue in the medium term. The emerging insurance markets are expected to grow by 8% and 5% per year in life and non-life business, respectively, in the period 2005–2010.

Trade and political integration drive liability insurance demand

In most emerging markets, demand for liability insurance was fuelled by increasing globalisation, regional cooperation, capital inflow and changes in the legal, social and corporate sphere. According to Swiss Re's sigma study "Insurance in emerging markets – focus on liability insurance", regional liability premiums went up from USD 1.3 billion in 1999 to USD 2.8 billion in 2003. Albeit from a low base, average annual liability growth for the period was 12.9%, or more than double the total non-life business growth rate. Asia accounted for almost 50% of total emerging market liability premiums, followed by Latin America and Eastern Europe (25% and 16%, respectively). Trade development in Asia and political integration in Eastern Europe were specific growth drivers, whereas Latin America benefited from foreign capital inflow.

Opportunities and threats for insurers

Economic and technological progress and a changing social landscape open up great potential for well-designed liability protection. In the medium term, liability insurance in the emerging markets is expected to grow twice as fast as GDP. However, the benefits of progress and of trade integration might be obscured if trends such as escalating litigation costs spill over. Insurers and regulators in the emerging markets should thus take advantage of experience elsewhere and ensure a liability environment that is both sustainable and equitable.

Notes to editors

Swiss Re is one of the world's leading reinsurers and the world's largest life and health reinsurer. The company operates through more than 70 offices in over 30 countries. Swiss Re has been in the reinsurance business since its foundation in Zurich, Switzerland, in 1863. Swiss Re offers a wide variety of products to manage capital and risk. Traditional reinsurance products, including a broad range of property and casualty as well as life and health covers and related services, are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated "AA" by Standard, Poor's, "Aa2" by Moody's and "A+" by A.M. Best.

How to obtain a copy of this sigma study:
The English, German, French, Italian and Spanish versions of the sigma study 'Innovating to insure the uninsurable' are available electronically on Swiss Re's publications section. Printed editions of sigma No 6/2005 can now be ordered: English and German versions are now available, those in French, Italian, Spanish, Chinese and Japanese will be available soon.