Global Insurance Review and Outlook

Global Insurance Review and Outlook

The Global insurance industry is hit by the low interest rates and the euro debt crisis is the major reason promoting the headache for the insurance industry. Although at the same time there is a bright yet slow momentum spot seen in the emerging markets.

Slow consumer and business spending and damage to US property/casualty and life insurance segments have caused revenues to fall ever since 2010. The decline in premiums collected were also started to be noticed during the same time and insurers were further pressed by the competitive insurance market and highly regulated market conditions in many countries.

Domestic markets in many countries are growing fast, now that middle class is flourishing. More people are buying homes, cars and other seeming luxuries which were beyond planning a few years before. While more mature markets have saturated from an insurance stand point, emerging markets and those continuing to develop are offering opportunities for growth, especially for early movers with a willingness for long-term investment potential.

Consumers are today looking at buying insurance products outside the established agency and independent financial advisor channel, which will in-turn require insurers in certain markets to retool their existing distribution channels. Insurers entering the markets might consider adopting more flexible sales approaches such as buying and renewing policy premiums on the internet platform, mobile platforms and other evolving technologies.

Industry Highlights:


  • Regulatory systems in developed countries are becoming more sophisticated and more and more businesses and people are equipped to buy insurance
  • Fast growing developing and emerging markets are offering growth prospects over the long-term although insurance penetration in more mature markets is troubled by high saturation
  • Insurers looking for opportunities must consider strategies targeted towards fast paced local and global regulatory and accounting developments
  • Access to reliable capital sources to support investments in specific regions and developing distribution strategies. Taking into account consumer buying patterns and demographic developments are some among the few avenues of growth
  • As global insurers prepare for the implementation of Solvency II and Basel III, they must develop ways to maintain, if not increase capital
  • Insurers will need to enhance the flexibility of their distribution systems, develop new markets and products and thus improvement in capital management


Macroeconomic conditions suggest slow economy


  • The sluggish economy and low interest rates challenges all segments of the European insurance industry to achieve higher and superior growth. Non-Life premiums were poor since 2010, and there will be continued challenge to profitability in both non-life and re-insurance sectors due to soft market, need of expense reductions and the end of loss reserve releases that use to support the profitability.
  • Risks relating to sustained advancements in technology, tragic weather events as well as fraud litigation exposure are increasing
  • On the Life side, premiums improved in Europe and US due to rise in aging population and demographic challenges related to social welfare systems, especially related to retirement benefits
  • The downside is the low interest rate environment, which reduces profitability of guaranteed products
  • High unemployment makes it difficult financially for many individuals to purchase new products
  • Low interest rates and regulations calling for competitive portfolio returns


Challenges for annuity and whole Life insurers


  • Conditions of low interest rates, slow economic recovery and years of price competition
  • Long and exhaustive underwriting procedures and investment income pressures
  • Looming regulatory changes very frequently, pose strategic and competitive challenges to life and annuity insurers


Growth Drivers

According to industry sources non-life segment would experience dampened premium growth. However, this is improving since 2012 and will further strengthen in 2012 when it is likely to accelerate to 3%. During this period, premium growth in emerging markets will be between 7-9%.  Low interest rates and government bond yields would also squeeze profits throughout most of 2013, but an improvement in casualty rates, expected late next year, will help profits.

It is believed that one of the threats for economic stability is the developments in Europe and the U.S. In Europe it can result in the disorderly sovereign defaults or even exist from the monetary union. While in U.S the political standoff is preventing necessary fiscal adjustments which could support growth and bring down the deficit.

Asia-Pacific is a highly diverse region with respect to different countries economic trends and insurance penetration, although the rate and drivers of growth vary on market-to-market basis.

  • To generate top-line growth and widen profit margins, insurers will need to consider expanding their menu of products
  • Innovative services and distribution channels
  • Simultaneously, reduce costs and improve operational efficiency
  • Reasonable earnings momentum and increase in direct premiums, even though at the expense of declining customer base
  • Insurers need to create opportunities to offer innovative products and services in different categories by simplifying product portfolio, improving operational efficiency 
  • Squeezing earnings out of a stagnant customer base as the slowly growing economy makes it extremely difficult to attract new customers and also retain existing ones
  • Superior underwriting and risk assessment  though, number of leading insurers are using advanced analytics to gain competitive advantage
  • The US industry for example is financially strong and has combined policyholder surplus, which is at or near all time high
  • Insurers must maintain adequate loss reserves and should have access to inexpensive capital
  • By maintaining competitive market through: 1. A recovery in value of the industry’s assets 2. Access to relatively inexpensive capital 3. Loss of reverses, to address claim costs


Looking forward to 2012, according to Swiss Re's Chief Economist, Kurt Karl, forecasts of a pick-up in investment yields and improvements in premiums could be the prospects for a improving economy. Multinational insurers are either preparing plans for further investment in the region or are in the deep of implementing them.


According to Ernst & Young, by 2015, approximately 39% of the world's economy is predicted to be in Asia-Pacific.


Worlds’ top 10 insurance companies as per market share


  1. American International Group, Inc. (AIG), a global leader in insurance and financial services from United States
  2. AXA founded in France and today with operations concentrated in Europe, North America and Asia.
  3. The Allianz Group is a leading provider of integrated services across the financial world with head office in Germany
  4. Manulife Financial of Canada is a leading financial services group serving millions of customers in 22 countries and territories around the world
  5. Generali Group is an Italian most important participants in the global insurance and financial products on the market
  6. Prudential Financial, Inc. of United States, is a leading financial services firm and has operations in the United States, Asia, Europe and Latin America
  7. MetLife, Inc., is a leading insurance and other financial services to millions of individual and institutional customers in the United States. MetLife companies have direct insurance operations in Asia, Latin America and Europe.
  8. Aviva, United Kingdom, is a leading provider of life and pension products in Europe and are growing long-term savings businesses in Asia and the United States
  9. Munich Re Group of Germany covers activities around the entire value chain of insurance and reinsurance.
  10. AEGON- Netherlands, is an international company, providing life insurance, pensions and other long-term savings and investment products in the United States, the Netherlands, the United Kingdom and Asia


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