Insurance premiums will continue to grow in emerging economies like China this year, research by Swiss Re suggests, although advanced markets will suffer sharp contractions.
The forecasts indicate that total premium volumes will increase by 1% in emerging economies this year, and by 7% in 2021.
However, advanced markets will see premiums shrink by 4% in 2020, before returning to growth of more than 2% in 2021.
Swiss Re said that emerging economies, led by China, will “underpin the insurance market comeback” from COVID-19.
This comes after China issued new actuarial rules for the pricing of life products in February, and confirmed the removal of all limits on foreign equity ownership in life insurance companies for 2020.
These supportive government policies are expected to buffer any coronavirus-induced slowdown, along with the growing popularity of protection products.
“Demand will benefit from rising risk awareness and increasing focus on protection products, as volatility in the financial markets is undermining the appeal of savings products,” Swiss Re said.
Global life premiums are forecast to contract by 6% this year, and by 0.1% for non-life, however, the research suggests that total premium volumes will return to pre-crisis levels in 2021.
One reason for the better showing in non-life is that the COVID-19 crisis has hit at a time of rate hardening in the sector, which has supported premium growth, according to the research.
Premiums in trade and travel-related insurance business, such as marine, aviation and credit, are predicted to be hit hardest, while property and medical business will be more stable.
Swiss Re said that there is “exceptional uncertainty” around the ultimate claims burden, but that the mid-point of the range of estimates stands at around $55bn, with the insurance industry “very well capitalised” to absorb losses.
"The insurance industry is showing resilience in face of the COVID-19-led economic downturn," said Jerome Jean Haegeli, group chief economist at Swiss Re.
“The magnitude of premium losses will be similar to that seen during the global financial crisis in 2008-09, even though this year's economic contraction of around 4% will be much more severe.
“Unlike for the global economy, we expect a strong V-shaped recovery in insurance premiums, a remarkable showing considering that the world is currently in the throes of the deepest recession ever.”
Author: Chris Seekings
Image credit: iStock
