Other emerging Asia - Life insurance more resilient to recession than non-life
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- Robust performances in Vietnam and India in 2019 offset slower premium growth in other markets in the region.
- Indonesia and Thailand reported negative premium growth in 2019 for the first time in a decade due to: (1) prolonged low interest rates affecting sales of guaranteed savings products in Indonesia; and (2) tighter rules governing bank sales, the dominant distribution channel in Thailand. Sales in the Philippines also eased due to the contraction in variable unit-linked business.
- We estimate that life premiums in India grew by more than 7% in 2019, mostly down to sales of traditional non-linked products. The government’s focus on financial inclusion has also led to the introduction of premium subsidies for low income households. This boosted uptake in rural areas.
- While premium growth in 2020 will slow, the outlook for the life insurance sector in emerging Asia remains relatively favourable despite the COVID-19 crisis. Increasing risk awareness and alignment of sales channels to the distribution of protection products will help to support growth. We forecast that life premiums in emerging Asia will rise on average by 3.4% in both 2020 and 2021.
- Profitability will remain challenged by a low interest rate environment, as all regional central banks leverage aggressive monetary policies to support economic growth.
- In the near term, regulations will continue to focus on improving consumer protection and strengthening solvency measures. The conversion to economic solvency regimes like RBC may generate more capital demand and trigger market consolidation.
- Non-life premium growth in India slowed to below 6% in 2019.
- In Vietnam, premium growth slowed but was still in double-digit territory (+12%). Indonesia continued the strong trajectory seen in the previous year, supported by gains (+8.4%) in property.
- Thailand and the Philippines showed solid growth in the 5% range, but Malaysia barely grew (+0.9%) due to motor de-tariffication.
- The near-term outlook is clouded by the COVID-19 crisis. We forecast that non-life premium growth in emerging Asia in 2020 and 2021 will average 3% each year, well below the historic trend of 8%. Falling car sales and ongoing de-tariffication will continue to hold back growth in motor premiums.
- In comparison, personal A&H insurance, which has performed well in recent years, is expected to continue to grow steadily. Reforms in public health systems are being implemented in several countries including India, Indonesia, the Philippines and Vietnam. These will open more opportunities for private health insurance participation. Growth is accelerating from a low base for agriculture, liability and credit insurance.