Primary life

2 600

Market size in USD billions

Estimated global premium income in 2012

Market overview

Global life insurance premiums totalled about USD 2 600 billion in 2012, of which around 15% was generated in emerging markets. About 85% of premium income derives from savings and retirement products. Protection products, which cover mortality and morbidity risks, have a declining share in premium income.

Market performance

Global life insurance premium income stagnated in 2012 in real terms, declining in most advanced markets. The only advanced markets with strong growth were in Asia: Japan, Hong Kong, Singapore, South Korea and Taiwan. In emerging markets, premium income increased: growth was strongest in Latin America and Eastern Europe, followed by Africa. In emerging Asia, aggregate premium income remained unchanged, mainly due to a slight decline in China and India: in both countries, regulatory changes constrained sales.


Market performance

Estimated global premium growth in 2012

Sales of protection products are traditionally much less volatile than insurance savings products. Protection products held up relatively well during the crisis, with stable premiums in the UK and US after years of contraction, and increased volumes of new business in other important markets, particularly in Asia.

Most companies reported respectable results, but the situation remains challenging. Low interest rates, volatile financial markets, regulatory changes and weak demand – especially for life insurance savings and accumulation products – have created a demanding business environment. Nevertheless opportunities remain for life insurers able to generate sales from the large and persistent protection gap.

Despite its recovery after the financial crisis, profitability has declined steadily since the end of 2009. Average return on equity is now close to 10%, down from 12% in 2010 and 2011.


The future of the life insurance industry depends principally on the macroeconomic environment, financial markets and interest rates. In the short term, the outlook is clearly challenging: premium income is expected to recover only slowly and profitability is not expected to improve soon, not only because of low interest rates and weak sales, but also because of high hedging costs and more onerous capital requirements.

Savings and retirement products under pressure from low interest rates

The current low interest rate environment has reduced profitability throughout the industry, particularly in long-term business where investment income is a major source of earnings.

Life insurers are more affected than non-life insurers, especially in savings products that provide performance guarantees to policyholders. Policy terms such as the option to withdraw money without penalty also increase the strain on profits.

Insurers have limited room to respond to low interest rates for in-force business because policy terms cannot be changed. However, new life insurance products need to be adapted to the current investment environment. Appropriate pricing and guarantee levels should be supplemented by product redesign that aids hedging against interest rate risks, so that all parties are better prepared for any future interest rate scenario.