BY Ben O. de Vera
Global reinsurance giant Swiss Re expects developing Asia to be the primary driver of insurance growth worldwide despite the persistence of high interest rates due to elevated inflation.
In a July 10 report, Swiss Re projected that the combined premium volumes of the global life and non-life industries would grow by 1.1 percent this year to $7.1 trillion. The company further forecasts a continued growth rate of by 1.7 percent next year, aiming to reverse the 1.1 percent decline experienced in the previous year.
The global non-life insurance sector is expected to expand by a faster 1.4 percent this year (than 0.5-percent growth last year), mainly as personal and commercial lines such as motor vehicle insurance sales growth would reverse a three-year decline, offsetting a decrease in health premiums as governments wind down pandemic support policies.
The life sector, on the other hand, is seen to grow 0.7 percent this year—a reversal of last year’s 3.1 percent contraction—on the back of prevailing high interest rates and bigger demand for annuity business and pension risk transfer deals, especially in the United Kingdom and the United States.
Amid an economic slowdown that has been “milder than anticipated,” Swiss Re said the global economy would expand by 2.3 percent this year and next year, although below market expectations.
“The cumulative effect of over 18 months of rising interest rates, deteriorating credit conditions and further central balance sheet reductions will continue to dampen growth prospects,” Swiss Re said in a statement.
“Global economic growth is largely supported by emerging Asian markets, including countries such as India, Thailand, Indonesia and Malaysia, which are set to boom in the coming years. Given the reopening of China’s economy from lockdowns in December last year, China is forecast to be one of the few countries to register stronger growth this year than in 2022,” Swiss Re said.
The reinsurer forecasted economic growth in emerging Asia in the next two years at a compounded rate of 5.4 percent, outpacing global expectations.
In the case of the Philippines, the report showed increasing premium volumes despite the prolonged COVID-19 pandemic. Local insurance sales rose 3.3 percent to P420.5 billion in 2022, following a 22.1-percent jump to P406.9 billion in 2021 from P333.1 billion in 2020.
This was despite a 1.4 percent contraction in domestic life insurance sales to P292.9 billion last year from 2021’s over P297 billion. Last year’s lower life sales were offset by non-life insurance, whose premiums climbed 16.1 percent to P127.5 billion from P109.9 billion in 2021.
Last year, the Philippines retained its rank as the 45th-largest insurance market in the world, accounting for 0.1 percent of total global premium volume in US dollar value. The US, China, UK, Japan, and France were the world’s top insurance markets in 2022.
The Philippines ranked 37th globally in terms of life insurance sales (down from 35th in 2021), while keeping the 52nd spot in non-life.
In terms of insurance density measured by premiums per capita or spending per person, the Philippines ranked 78th globally with only about $67 on average — $46 on life and $20 on non-life — spent by each of the 116 million Filipinos on insurance products last year. In emerging Asia, insurance density in 2022 stood at a much higher $229; the global average was $853.
As such, there remained growth opportunities for local insurers to expand in the country, where premiums accounted for just 1.9 percent of gross domestic product (GDP) in 2022. This insurance penetration rate of the Philippines ranked 64th worldwide, and was below the average of 3.6 percent of GDP among its emerging Asian peers, and 6.8 percent globally.