Premium income in Asia-Pacific to double by 2020

Despite premium growth, Asia will continue to be underinsured against CATs: Munich Re

The Asia-Pacific region will be the leading driver of world insurance growth in the coming years.

According to a new report by Munich Re’s Economic Research Department, premium income for the insurance industry in the region will double by 2020.

With more than €1 trillion, nearly half of the estimated additional global primary insurance premiums will be generated in Asia-Pacific until 2020 (worldwide €2.2 trillion).

The contribution from “emerging Asia” – markets such as China or India – to this figure will be nearly 70% (about €670bn).

Read: Asia-Pacific region must focus on disaster preparedness

Five of the expected global top-ten primary-insurance growth markets will be in the Asia-Pacific region, both in property/casualty (P&C) and in life.

Munich Re expects China to be the country with the highest increase of primary insurance premiums worldwide until 2020 (additional €425bn), followed by the United States (additional €350bn) and Japan (additional €157bn).

In emerging Asia, P&C insurance premiums currently grow on average by 11% annually—twice as high as the second-placed region, Eastern Europe.

“China, India and Indonesia will be the top-three growth countries in P&C, with average growth of above 12% over the forecast period (2012-2020) in China and India, and almost 10% in Indonesia,” said Michael Menhart, chief economist at Munich Re, in a press release.

Read: China insurance market report

Indonesia’s P&C primary insurance volume will more than double in size from almost €3 billion in 2012 to €7.3 billion in 2020. Average growth rates of other emerging countries such as Vietnam, the Philippines, Malaysia and Thailand range between 6% and 8%. Increasing risk awareness and a growing middle class is driving this growth.

But despite these substantial premium growth expectations, emerging Asia will continue to be severely underinsured, especially against natural catastrophes.

According to Munich Re’s GeoRisksResearch, since 1980, 40% of all natural catastrophes worldwide took place in Asia-Pacific, 45% of all economic losses, but only 18% of all insured losses. By way of comparison, the share of insured losses in North America amounted to 64%. Also, more than 50% of all fatalities from natural catastrophes occurred in Asia-Pacific.

Weather-related catastrophes have tripled over the past 30 years in the region, and this trend is likely to continue, notes Munich Re. With an increase in population, higher value concentration in exposed areas and climate change, affecting the weather pattern, the loss potential is increasing. As insurance density is not expected to rise at the same pace, this will leave the region with a growing uninsured disaster-loss bill.

“Loss mitigation measures are cost-effective instruments for protecting communities on a sustainable basis. Analysing and reducing risk – and offering adequate insurance against it – helps to considerably reduce the human and financial impact of natural disasters,” said Ludger Arnoldussen, Munich Re board member responsible for Asia-Pacific. “Closing the existing gap of insurance coverage is a very powerful instrument in supporting long-term growth. At the same time, effective catastrophe-risk financing solutions need to be introduced by governments.”

Copyright © 2017 Transcontinental Media G.P.
Transcontinental Media G.P.