Emerging markets
No. 4/2000
Emerging markets: the insurance industry in the face of globalisation
Since the beginning of the nineties, major international primary insurers have been intensively expanding their activities in emerging markets. The average market share of these companies in Latin America and Central and Eastern Europe has already surpassed the 40% mark, and has reached 12% in Asia. High growth and liberalised conditions for market entry make the emerging markets an attractive investment opportunity for foreign primary insurers.
In this edition of sigma, the background to the globalisation process in the emerging markets is examined. In particular it looks at which markets are being targeted for investment by global primary insurers.
The most important findings of the study are: The high growth potential in the emerging markets is one of the major factors attracting foreign primary insurers. Despite the repercussions of the Mexican and Asian crises, real growth in the nineties reached 9% p.a., almost twice as high as in the industrialised countries. International primary insurers are able to take advantage both of the high growth rates and the liberalised conditions for market entry. Foreign primary insurers have been able to more than double their market share in the emerging markets since the beginning of the nineties through acquisitions or start-ups; their growth averaged more than 20% p.a. in real terms. Most of the global primary insurers examined in the study currently generate between 3% and 5% of their premium income in the emerging markets; for some companies, such as AIG or Aetna, this figure is already higher than 10%.
The globalisation process in Latin America and Central and Eastern Europe is already quite advanced, while it is still in the initial stages in Asia. Since the financial and economic crisis at the end of the nineties, the liberalisation process has speeded up markedly, increasing the interest of international insurers in this region.
In life business, the market share of foreign primary insurance companies in the regions examined is generally higher than it is in non-life. Given the long-term nature of life insurance, a global brand and a companys financial stability is far more significant than in non-life business.
The significance of foreign insurers in the emerging markets will continue to grow over the next few years, due to several favourable developments, namely: further measures towards liberalisation particularly in Asia, where the opening up of the Chinese market is being keenly followed by foreign investors; the privatisation of former state monopolies in various Central and Eastern European countries; and growing competition, which is accelerating the trend towards consolidation in many markets.
There does not seem to be a natural limit on the extent of foreign market penetration. In Hungary and some market segments in Argentina and Chile, for example, over 80% of premium volume is already attributable to foreign companies. Domination by foreign primary insurers is not inevitable, however. Well-capitalised local insurers, with a clear strategic focus, also have a chance of survival in the future market environment. Despite growing competition from abroad, these companies should be able to take advantage of high premium growth rates and expand their market position.
This publication can be downloaded in English, German, Spanish, Italian and French.
Download "Emerging markets: the insurance industry in the face of globalisation"
Download "Emerging Markets: Die Versicherungswirtschaft im Zeichen der Globalisierung"
Download "Los mercados emergentes: el sector del seguro bajo la estrella de la globalización"
Download "Mercati emergenti: il settore assicurativo nel segno della globalizzazione"
Download "Marchés émergents: le secteur de l'assurance à l'heure de la mondialisation"
For further questions and copies of Chinese or Japanese versions, please contact sigma@swissre.com.
