Asia's insurance markets after the storm
No. 5/1999
Over the past two years, Asia has experienced unprecedented financial and economic turmoil that has fundamentally changed the dynamics of its economies, including its insurance markets. Swiss Re's sigma study, "Asia’s insurance markets after the storm", provides an analysis of the impact of the crisis on the region’s insurance markets, focusing on future industry-shaping trends.
The study investigates Japan and 11 emerging insurance markets in Asia covering 15% of global non-life business and 38% of the world's life insurance premiums in 1997. Most of these markets were expanding at a phenomenal rate prior to the economic crisis. Between 1990 and 1997, the emerging Asian non-life and life insurance industries both grew at around 13% pa in real terms, reflecting the region's boom-like economic development.
As a result of the economic turmoil, insurance premiums in many Asian countries have fallen at double-digit rates.
The economic crisis that was triggered by the Thai baht's sharp devaluation in July 1997 has brought this development to an abrupt halt. Asian insurers were faced with sharply declining premium volumes, severe balance-sheet problems caused by the "asset meltdown" and increasing loss ratios. 1998 preliminary premium figures show that real premiums have fallen significantly across the region, with non-life business contracting by around 20% in hardest hit Thailand and South Korea. Life premiums have shrunk by more than 10% in Malaysia, Thailand and South Korea.
Foreign inroads, consolidation, deregulation and shifts in distribution will reshape Asian insurance markets.
More intense foreign competition will emerge in most countries. This is not only driven by the WTO liberalisation process, but also by recapitalisation needs which prompted various countries to liberalise their market access regimes unilaterally. Further, the pace of consolidation will accelerate against the backdrop of fiercer foreign competition, mounting government pressure, the fragmented character of some (especially Southeast Asian) markets and the continuing weakness of many insurers' balance-sheets. Moreover, an increasing number of countries will adopt a more solvency-oriented approach towards regulation, gradually dismantling tariffs and product-related restrictions. And finally, insurers will put more emphasis on cost-effective and innovative forms of distribution (eg bancassurance and direct sales) to hold their own in an increasingly competitive and less regulated environment.
Up to 2005, emerging Asia's non-life and life insurance markets are expected to grow at an annual real rate of 7% and 8%, respectively.
On the back of the unfolding economic recovery, an enormous backlog and heightened awareness of the need for risk protection, the region's insurance industry is set to re-emerge as one of the world's fastest growing markets. Emerging Asia's insurance premiums are expected to grow at a real average rate of 7% pa between 1999 and 2005. Life insurance is forecast to expand at a slightly faster rate of 8%. Japan's growth prospects are bleaker, however, given the nation's prolonged economic slump, the impact of deregulation and other Big Bang-related reforms.
This publication can be downloaded in English, German, French, Spanish and Italian.
Download "Asia's insurance markets after the storm"
Download "Asiens Versicherungsmärkte nach dem Sturm"
Download "Les marchés assurantiels asiatiques après la crise"
Download "El seguro asiático después de la tormenta"
Download "I mercati assicurativi asiatici dopo la tempesta"
For further questions and copies of Chinese or Japanese versions, please contact sigma@swissre.com.
