World insurance in 1997
No. 3/1999
World insurance in 1997: Booming life business, but stagnating non-life business
This sigma study provides an overview of the development and importance of the insurance industry in 86 countries, thus furnishing the most comprehensive analysis of the global insurance industry.
Global insurance premium volume rose by 4.5% in real terms in 1997
In 1997, worldwide premium volume rose to USD 2129 billion, from USD 2106 billion in 1996, representing an increase of 1.1% on a US dollar basis. This modest growth rate is somewhat deceptive, as the development in some countries was, on average, clearly positive. Measured in original currencies, premium volume in 1997 increased by 4.5%, after adjustment for inflation. The direct insurance sector thus experienced clearly higher real growth than the global economy (+3.1%). The increase of 4.5% came entirely from the life insurance sector (+7.7%). Non-life business in contrast remained virtually stagnant (+0.2%). Whilst life business grew at its highest rate for nine years, non-life business recorded its lowest growth in ten years. Life business contributed 58% to the total premium volume of USD 2129 billion, and non-life 42%.
High growth rates in the life business in Europe, North America and the emerging markets
In Western Europe, life business grew after adjustment for inflation by 10.5%, and in North America by 6.9%, fuelled by growing concerns about the capacity of the pay-as-you-go state systems to provide adequate pension provision. The high growth rates were spurred in particular by dynamic business in unit-linked and index-linked insurance products, which profited from lower interest rates and higher share prices. Japan's life insurance market - the world's biggest, with 32% of global market share - only achieved modest growth of 2.1% in 1997, chiefly because of Japan's ongoing economic recession. Emerging markets performed extremely well, with high growth rates in the life business: Latin America expanded by 15.6% and South and East Asia by 21.9%.
Overcapacity is a prominent feature of the major non-life markets
In 1997, non-life business shrank by 0.1% in Western Europe and by 0.2% in North America, after adjustment for inflation. The capital resources held by insurers increased sharply both in Western Europe and North America, thanks to the very strong performance of financial markets. This led to extended capacity, which in turn intensified competition and put pressure on premium rates. In Western Europe, this development can be explained by the subdued economic growth in many countries, as well as the effects of deregulation which tended to push down premium rates, especially in the important motor line. The Japanese non-life business shrank by 4% in 1997, after continuous growth of around 3% in previous years. The non-life business performed very well in Latin America (10.3%) and South and East Asia (7.1%), but still did not match the dynamic growth of the life sector.
The importance of the insurance industry is most pronounced in Japan
Regional comparisons show that in 1997 insurance penetration, defined as premium volume as a percentage of gross domestic product, was once again highest in Japan (11.9%), followed by Oceania (8.7%), North America (8.4%) and Western Europe (7.4%). In contrast, the emerging markets still have considerable growth potential. Japan also showed the highest insurance density, with per-capita spending of USD 3900 on private insurance cover in 1997. In North America, the average per-capita spending on insurance was USD 2470, and in Western Europe USD 1640.
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