World insurance in 1998
No. 7/1999
World insurance 1998: Deregulation, overcapacity and financial crises curb premium growth
In the new edition of sigma, Swiss Re presents the most recent data on the global insurance industry. The report gives an overview of premium income in the 88 largest national markets (listed by region and subdivided into life and non-life business) and analyses the main trends. The report includes an extensive appendix with premium figures in national currencies and USD, per capita insurance expenditures and premiums as a percentage of gross domestic product (GDP).
Global growth is slowing
Global premium volumes in 1998 totalled USD 2155 bn., compared to USD 2131 bn. in 1997, resulting in 1.1% growth in 1998. However, there are major differences between the life and non-life sectors. Non-life premiums fell by 0.8% in US dollars to USD 891 bn., while life premiums increased by 2.5% to USD 1264 bn. In considering these figures, it is important to note that the depreciation against the dollar of important currencies such as the yen and the EMU currencies in itself slowed down growth in US dollar terms. Expressed in national currencies and adjusted for inflation, global premium receipts grew on average by 2.3% over the preceding year. This is nonetheless a significant drop in growth compared to 1997 (4.4%).
Non-life premium volumes remain stagnant
Development in non-life insurance is characterised by economic problems in the emerging markets and fierce competition in the industrialised countries, causing worldwide premium income to stagnate (-0.1% in real terms). On the demand side, the currency and economic crises in Japan and Southeast Asia as well as in Russia led to a major fall in premium volume. In addition to this there were rate reductions. Most importantly, the deregulation and opening of the European and Japanese insurance markets led to falling prices. Secondly buoyant stock exchanges and falling interest rates in the USA and Europe significantly increased capital resources, thereby increasing underwriting capacity and exerting further downward price pressure . In contrast, those emerging markets not directly affected by the crisis - China, Taiwan, India, the Middle East, Eastern Europe, Latin America and Africa - posted strong growth rates.
The currency and economic crises in Asia are affecting premium growth in life insurance - in other countries the market is still booming
Growth in life insurance in real terms was 4.1% in 1998, which exceeded economic growth worldwide despite some significant adverse effects. This increase is much lower than in 1997 (7.6%) and is below the long-term average (5.1%). As life insurance is especially important in Asia, the currency and economic crises in Japan and Southeast Asia had a particularly strong adverse effect. However, excepting those countries affected by the currency crisis, there is evidence of a continuing boom in life business. In North America (9.8%), Western Europe (6.2%) and Oceania (14.6%) life business grew strongly, as it did in most of the emerging markets.
Worldwide insurance expenditure in 1998 came to USD 271 per capita
The industrialised countries dominate the market with 90.7% of premiums worldwide due to their high per capita expenditures on insurance: USD 1805 on average , equivalent to 8.5% of GDP. In the emerging markets expenditure on insurance is much lower, at USD 37 per capita on average, or 3.0% of national income. Market leaders in per capita expenditure are the USA (USD 1400) for non-life and Switzerland (USD 3400) for life insurance. The differing rates of insurance expenditure give an indication of the enormous long-term potential in emerging markets. However the catching up process will take some time, even if the emerging markets grow at twice the rate of the industrialised world.
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