India, China to drive global insurance premium income, says Swiss Re

India, China and Taiwan are today the key drivers of growth in global insurance premium income among emerging markets, according to a Swiss Re's study on world insurance premium 2002 released yesterday.

Emerging markets showed about 13 per cent growth against 2 per cent in industrialised countries in life insurance premium, the study said.

At 12.7 per cent, life insurance premium growth exceeded the long-term average economic growth of 10.3 per cent. Indeed, in most emerging markets, premium income increased at a faster pace than the respective country's gross domestic product (GDP).

"Demand for life insurance products soared in most markets at the expense of the low interest rates on bank deposits, with India and China registering staggering growth of 14.1 per cent and 62.2 per cent. In non-life business, premium rose by over 21 per cent in India," stated the study.

The global reinsurer stated that in emerging markets increasing income, social security reforms and further opening up of the markets are spurring the growth in life insurance premiums.

Swiss Re officials further pointed out that where policies have guaranteed returns "" and this makes up a large percentage of insurance portfolios "" insurers are battling with the problems of negative interest rate spreads. The falling interest rates have seen investment income declining below the returns guaranteed.

The study indicated that South and East Asia is the most important region among emerging markets, with a collective premium income of $ 167 billion, followed by Latin America & the Carribean ($ 40 billion), Central & Eastern Europe ($ 25 billion), Africa ($ 24 billion) and Middle East and Central Asia ($ 11 billion).

The study spanning across 91 countries, stated that global premium volume in 2002 amounted to $ 2,627 billion, of which $ 1,536 billion was attributable to life insurance and $ 1,091 billion to non-life insurance.

This translated into 5.5 per cent growth over the previous year, with life insurance showing a three per cent growth and non-life insurance 9.2 per cent, mainly on the back of rising premium rates.

While emerging markets showed phenomenal growth rates in premium income compared to their counterparts in developed nations such as the US and Europe, they generated only 10 per cent of the total global premium income during the period under review.

This is even as emerging markets collectively accounted for 22 per cent of global GDP and over 85 per cent of world population. India has a meagre share of 0.59 per cent of global premium income.

"Emerging markets still have considerable ground to make up before they can draw level with the insurance markets of industrialised countries," stated the report.

The average life insurance penetration in emerging markets is as low as 2.2 per cent and that in the case of non-life insurance at 1.4 per cent.

The average per capita spend on insurance amounts to $31 for life and $20 for non-life coverage. "A large number of the population remains uncovered and has no protection whatsoever," stated the study.