Primary non-life
2 000
Market size in USD billions
Estimated global premium income in 2012
Market overview
The global non-life industry generated around USD 2 000 billion of premium income in 2012, of which around 18% was generated in emerging markets. Non-life insurance extends from standardised motor and household insurance to sophisticated tailor-made liability and property covers, including specialty commercial and industrial risk insurance.
Market performance
Growth in non-life insurance business further accelerated in 2012. In advanced markets this was due primarily to moderate rate increases in some countries, with exposure growth generally weakening with the slowing global economy. In emerging markets growth remained at a much higher level than in advanced markets, though moderating slightly compared to 2011.
5%
Market performance
Estimated average return on equity in 2012
Underwriting results recovered from record catastrophe losses in 20111. Nevertheless, adjusting for catastrophe losses and positive reserve developments from earlier accident years, underlying underwriting profitability continued to erode due to rising claims and several years of softening rates. The gradual improvement in premium rates in some key markets has not yet been able to change the general soft market picture.
The industry also saw weak investment returns, partly due to record low interest rates and feeble capital gains or capital losses. The eurozone debt crisis also lowered the mark-to-market valuations of some fixed income securities. Squeezed from all sides, the average profitability for the industry was low, with a return on equity for 2012 of only 5%.
Outlook
Global economic forecasts for 2013 are more positive and the demand for non-life insurance should increase. Strong premium growth is expected to continue in emerging markets, although growth will slow due to weaker macroeconomic conditions in Latin America and Asia.
1 See Swiss Re’s 02/13 sigma on natural catastrophes and man-made disasters in 2012; available April 2013.
Commercial insurance grows in emerging markets
The main generator of growth in non-life insurance is the pace of general economic development: when wealth increases, so does insurance demand. As described in Swiss Re’s sigma (issue 5/2012, “Insuring ever-evolving commercial risks”), commercial insurance premiums are growing about three times faster in emerging markets than in advanced markets.
This growth stems not only from an expanding economy, but also from increasing market penetration, as expanding multinationals seek to protect themselves against more complex risks and smaller companies enhance their risk awareness.
In the past three decades, emerging markets in Asia, particularly China and India, have transformed their agriculture-based economies, establishing and expanding manufacturing capacities, and developing domestic and export-led service sectors. Each development stage increases insurance demand.