Allianz Global Insurance Report 2023: Anchor in turbulent times

18 May 2023 — Daniela GHETU
Allianz Global Insurance Report 2023: Anchor in turbulent times
Allianz has published its latest Global Insurance Report, analyzing the development of the insurance market in the world. Here, in brief, the report's findings, as summarized in its introductive chapter.

  • Total global insurance premium income amounted to almost EUR 5.6 trillion in 2022. Life remains the largest segment (EUR 2.6 trillion), ahead of P&C (EUR 1.8 trillion) and health (EUR 1.1 trillion). Last year, the premium pool grew by EUR 259 billion or +4.9% - against the backdrop of a global inflation rate of 8.6%.
  • However, the three segments fared very differently: While property and casualty (P&C) clocked robust growth of +8.7%, health expanded by a more modest +4.9%, and life insurance market growth was a dismal +2.4%: squeezed real household incomes took a toll on private savings.
  • The rise in P&C premiums was driven by all regions around the globe. However, with EUR 77.5 billion (+9.9%), more than half of the global increase in 2022 came from North America alone; with premium income of EUR 860 billion, the region remains by far the largest market worldwide. Asia, too, saw healthy growth of +8.4% last year (+EUR 31 billion). With total premium income of nearly EUR 403 billion, the region overtook Europe for the first time (+4.0% or EUR 15 billion to EUR 397 billion).
  • Life insurance markets suffered last year, particularly in Western Europe: Premium income declined by almost -3% in 2022 (-EUR 21 billion to EUR 740 billion). Growth was disappointing in Asia, too, recording a modest increase of +3.6% (+EUR 33 billion to EUR 952 billion). As in P&C, North America was the main growth driver in 2022, adding EUR 61 billion in new premiums (+7.8% to EUR 840 billion). America's dominance is even more pronounced in health, where the US market accounts for around two-thirds of all premium income worldwide.
  • North America - i.e., the US, which accounts for 94% of the region's premium pool - dominated the global insurance market not only in 2022, but over the last decade: More than half of the increase in global premium income in P&C and health was generated there. In life, the share is still slightly below one-third, while Asia commands the biggest slice of the cake. As a result, the region's global market share rose from an already impressive 39.6% in 2012 to a whopping 43.9% in 2022. This is in sharp contrast to Western Europe, which lost more than 6pps to reach 23.8%. The other clear "loser" is Japan (-3.7pps to 5.5%), while China was able to almost double its global share to 11.4%; the rest of Asia stood at 10.1%.
  • In economic terms, navigating an inflationary environment will be the biggest challenge in the coming years. Five structural drivers will determine inflation (the "Five Ds"): demographics, deglobalization, decarbonization, digitalization and debt. Overall, the five Ds might significantly lift annual inflation by up to 1pp.
  • Despite higher inflation - or perhaps precisely because of it - premiums are set to increase by +5.2% p.a. over the next decade, adding EUR 4,190 billion to the global premium pool. In 2033, premium income will reach EUR 4.3 trillion in life, EUR 3.1 trillion in P&C and EUR 2.3 trillion in health.
  • With EUR 1.726 billion, most of the increase will be in the life segment. However, annual growth (+4.7%) over the next decade is likely to lag well behind general economic growth (+5.2%). Insurance penetration will thus fall by 3pps to 2.8%. Asia will remain the growth engine for the global life business, with annual growth (ex. Japan) expected to rise to +7.5%. The region should account for half of absolute premium growth (EUR 866 billion), more than North America (EUR 377 billion) and Europe (EUR 276 billion) combined.
  • In the P&C segment, additional premiums will amount to EUR 1.282 billion by 2033. This represents an annual growth rate of +5.0%, roughly in line with the previous decade (+5.1%) and general economic growth (+5.2%); insurance penetration will therefore decrease only slightly by 1pp (to 2.0%). As in the life segment, Asia (ex. Japan) is the clear growth champion among the major regions, with an annual rate of +8.1%. In absolute terms, however, the importance of the region is lower than in the life segment: "only" around 35% of the expected premium growth (EUR 448 billion) is attributable to Asia, against EUR 357 billion in North America and EUR 168 billion in Europe
  • In view of the major technological upheavals and new and rising risks, this forecast - which suggests continuity - may come as a surprise. However, this applies only to the surface of premium growth. The underlying changes are dramatic.
  • Technology will change how insurers operate. Ecosystems, for instance, will play a decisive role in customer access, offering not only individual products but comprehensive "solutions" for customer needs, be it for mobility, living, travel, wealth or health. Artificial intelligence opens unimagined possibilities in data analytics and could revolutionize the entire value chain from underwriting to claims handling.
  • Preserving its social relevance - and with it its billion-dollar premium pool - the industry is facing a fundamental change in its business model: The value proposition of insurers will evolve, from pure financial compensation to risk management and holistic service offerings to prevent and mitigate risks. This follows an inescapable logic: To close the huge protection gaps - in NatCat, cyber, health or pension - mobilizing more premiums might not be enough; avoiding risks in the first place will become more and more important.
  • However, this transformation will play out over a long time. In the meantime, insurance can prove their worth in turbulent times of high inflation and low growth. The insurance industry cannot undo inflation, but it can smooth out the impact, acting as a kind of buffer. Its resilience in terms of liquidity and credit makes it a bellwether for the investments needed to finance the green transition. Insurance is an essential shock absorber as it flattens the curve of the economic cycle.
The full report is available here.