Strong growth in emerging Asia's life insurance sector continued, with premiums rising 18% in 2017 (2016: 23%), supported by broad-based gains in most markets, says the latest Swiss Re Institute sigma study released yesterday and titled "World Insurance in 2017".
The strong equity market performance over the year increased the attractiveness of investment-linked products.
Life premiums rose 21% in China (2016: 29%), supported by higher demand for traditional as well as universal life insurance. Outside China, premiums rose significantly in Indonesia (27%) and Vietnam (24%), on strong increases in both ordinary life and unit-linked policies. Thailand and Malaysia reported relatively stable growth, while premiums in the Philippines recovered in 2017, increasing 7.7% (2016: ?4.9%). In India, life premiums grew by 8.0% (2016: 9.1%) driven by strong immediate annuity sales and group business.
The outlook remains solid; however, in early 2018, GDP growth likely reached a cyclical peak and equity market volatility increased significantly. The pace of interest rate normalisation in the region, as well as ongoing regulatory changes, including solvency reforms (eg RBC II in Thailand), and the adoption of international standards (eg IFRS 17) all have the potential to influence premium growth.
In China, the merger of its banking and insurance regulators should calm concerns about the increasing financial risks from the proliferation of short-term wealth-management type insurance products.
Life insurers largely reported positive profits in 2017, partly driven by higher investment returns, despite low interest rates. However, as equity volatility has increased and regional central banks may need to adjust rates, profitability is expected to revert from last year´s high level.
Non-life premiums grew by 10% in 2017, compared to a 10 year trend rate of 15%, due to slower growth in China, which accounts for more than 80% of the region´s total non-life premiums. In China, premium growth dropped from 20% in 2016 to 10% in 2017.
Motor premiums were held back because of ongoing tariff liberalisation, but A&H, liability and agricultural insurance grew more strongly.
Outside China, non-life premiums grew by 9.7% (2016: 12%). India benefitted from strong crop insurance growth, while the motor business in the Philippines was robust. Indonesia managed to rebound from a contraction in 2016 to increase by 3.7%, underpinned by a strong pipeline of government-sponsored infrastructure projects. In Malaysia, premiums fell by 3.8% due to a fall in transport insurance.
Profitability is estimated to have remained positive in 2017 due to higher investment income and the absence of major natural catastrophe losses. The biggest regional loss event in 2017 was the flooding of the Yangtze River in China, which is estimated to have resulted in total economic losses of around $6 billion. Similarly, severe flooding in South Asia and Nepal resulted in major economic losses. However, due to low insurance penetration, insurance claims were negligible.
Swiss Re Institute predicts that premiums will remain stable in 2018, due to modest growth and ongoing soft rates. This will in part be countered by supportive government policies eg. fostering innovation and digitalisation, promoting market liberalisation, building up national resilience against natural catastrophes and supporting growth of agricultural and health insurance. In addition, the gradual implementation of China's Belt and Road Initiative will likely result in more investment in infrastructure projects across the region.