The global insurance industry entered 2020 in good shape: In 2019, premiums increased by +4.4%, the strongest growth since 2015. The increase was driven by the life segment, where growth sharply increased over 2018 to +4.4% as China overcame its temporary, regulatory-induced setback and mature markets finally came to grips with low interest rates. P&C clocked the same rate of growth (+4.3%), down from +5.4% in 2018. Global premium income totaled EUR 3,906 billion in 2019 (life: EUR 2,399 billion, P&C: EUR 1,507 billion). But Covid-19 hit the world economy like a meteorite, causing a sudden stop of economic activity around the globe that will batter insurance demand, too.
The German group's analysts expect the world economy, including the insurance industry, to follow a U-shaped scenario. They forecast the premium growth will rebound in 2021 to +5.6%, thus returning the total premium income to the pre-crisis level. "The losses against the trend, however, may never be recouped: although long-term growth until 2030 may reach +4.4% (life: 4.4%, P&C: 4.5%), this will be slightly below previous projections," the report reads.
Allianz's expectations for the emerging Europe's insurance markets are somewhat optimistic, considering that thanks to early lockdown measures the region has suffered less from the Covid-19 pandemic than Western Europe. "However, the pandemic put the real economy in lockdown and our growth estimates are subdued for the region for 2020 as we expect the total insurance market in emerging Europe to be stagnant. However, we expect a swift recovery and a CAGR of +6.1% from 2020 to 2030. We expect the total insurance premium income volume to increase by EUR 58 billion to reach EUR 122 billion in 2030", states the report. Life insurance will probably see a -1.0% decrease in income, in 2020 and to swiftly recover to a CAGR of +6.2% (2020 - 2030). "We expect insurance density to increase almost 40% to EUR 97 in 2030 as some of the markets like the Czech Republic and Slovakia mature. Over the course of the next decade, we expect insurance penetration to remain stable at 0.5% in the region."
A similar evolution is to be expected also in non-life insurance, with a stagnant year in 2020 (just about 0.4% increase in the P&C income) and a return to an aggregated growth rate of +6.0% (2020 - 2030). "Non-life insurance represents around 69% of emerging Europe's premium income. We expect the line of business distribution to remain the same over the course of the next decade. In terms of expenditure per capita, we estimate that it will almost double from last year's EUR 115 to EUR 220, driven by Turkey and Poland."
As many other, Allianz's analysts see Covid-19 as a game-changer but in insurance it may rather reinforce existing trends, namely digitalization and the pivot to Asia, which will emerge faster and stronger from Covid-19.
With growth of +8.1% p.a. until 2030, Asia (ex Japan) is expected to grow almost twice as fast as the global market. It will add a massive EUR1,277bn to the global premium pool, twice as much as North America and four times as much as Western Europe. Asia's rising middle class will increasingly play the role of the consumer of last resort with huge pent-up demand, reflecting weak social security systems and protection gaps in natural catastrophes, health, retirement and mortality. As a consequence, the region's share (without Japan) of the global premium pool will rise from 24.2% (2019) to 35.3% (2030), is one of the Report's conclusions.
Beside the direct financial consequences, the Report draws attention to the increased need of resilience put under the limelight by the Covid-19 crisis. "Increasingly, ESG (Environmental, Social and Governance) will be seen not only as an indispensable tool to screen long-term risks to improve investment returns but also as an insurance business-enabler. As more and more companies implement ESG strategies, the demand for accompanying products and services is set to rise rapidly. A new era of "impact underwriting" emerges."