sigma 1/2019: Emerging markets: the silver lining amid a challenging outlook
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Economic power shift from west to east continues
The emerging markets will be the engine of growth for the global economy and insurance markets over the next 10 years. While the emerging markets face certain structural and cyclical challenges, they remain an attractive growth proposition, particularly relative to the advanced markets. The China story remains all-pervasive: China will account for more than a quarter of global output of the next decade, and is set to become the largest insurance market in the world by the mid-2030s.
Among the key messages in our latest sigma are:
- The transfer of economic power from west to east is ongoing and we project that together, the emerging markets will contribute 60% of global growth in 2028.
- Growth in some maturing emerging economies will moderate, but this will be accompanied by more stable economic growth. This represents a move from growth quantity to growth quality. Irrespective of the moderation, the five-year-ahead growth differential between emerging and advanced markets is a still-strong 3.5%.
- On the insurance side, we forecast that emerging market premiums will more than double over the next 10 years, and outpace advanced market premium growth by four times.
- Emerging Asia, particularly China, will drive global insurance market growth. We forecast that premiums in emerging Asia will grow three times faster than the global average over the next two years.
- Industry-specific factors such as introduction of international best practice in regulation, improving market access and early adoption of technology will support insurance sector development in emerging markets. Given the heterogeneity of the markets, insurers which look to diversify by line of business and take a long-term view stand to benefit most from the opportunities that the emerging markets present.
Emerging markets: the engines of growth
The emerging markets will drive the global economy and insurance markets over the next 10 years. The China story remains all-pervasive: China is set to become the largest insurance market in the world by the mid-2030s.