Primary non-life
Market overview
2 100
Market size in USD billions
Estimated global premium income in 2013
The global non-life industry generated around USD 2 100 billion of premium income in 2013; 18% of this came from 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
The global non-life insurance sector was stable in 2013, with overall premium growth slightly up from 2012 to 3% in real terms. In the advanced markets, premium growth likewise remained steady at 1.4%. This mostly reflected moderate rate increases in some markets plus, to a lesser extent, growth in exposure – weakened, however, by the slow-growing global economy. Southern Europe saw significant declines in premium income for the second year in a row.
3%
Market performance
Estimated global premium growth in 2013
Emerging market premiums grew by 7.8%, down from 8.0% in 2012: a reflection of the economic slowdown in many export-dependent countries in Southeast Asia and Central and Eastern Europe. That said, China non-life premiums rose by about 13%, largely due to new car sales and infrastructure investments. Premium growth in Latin America, Africa and the Middle East was also estimated to be stronger in 2013 than it had been in 2012.
Underwriting profitability improved marginally, thanks to a gradual strengthening of premium rates in the US, Europe and other selected markets, and also because claims growth remained benign. Canada and Germany among others, however, bucked this trend with an increase in natural catastrophe claims.
While 2013 underwriting results improved from the previous year, non-life earnings remained under pressure from weak investment returns. Six years after the financial crisis, the investment environment continues to challenge the insurance industry.
Overall non-life insurance profitability remains subdued by historical standards. The return on equity (RoE) for the main non-life markets is estimated to have been about 7% in 2013, only slightly better than 2012 and well short of the industry’s cost of capital.
Outlook
Global growth forecasts for 2014 are more positive, which is expected to lead to increased demand for non-life insurance. Premium growth in the emerging markets will likely remain strong, at about the same levels as 2013.
Marine and airline insurance
Global marine and aviation insurance premiums have roughly doubled over the past decade, reaching an estimated USD 44 billion in 2012. These premiums are projected to expand on average by 4% to 5.5% per year over the next decade.
Transportation risks are often large and complex, leaving great potential for unpleasant surprises about the severity of losses. Insurers must continue to develop their understanding of marine and airline risks, especially with regard to accumulated losses from the same event.
Insurers are also innovating on the product side by offering new or amended types of cover, as well as novel product features. Swiss Re Corporate Solutions is promoting aviation safety by discounting insurance for airlines that implement flight training and comprehensive threat mitigation strategies. Room for further technology enhancements is ample (eg, in tracking ships, aircrafts and cargo) as is the room to adopt underwriting insights from different insurance classes.
Ultimately the long-term prospects for marine and airline insurance are tied to growth. If the world economy continues to recover, and the global rebalancing of trade and capital flows proceeds smoothly, marine and airline premiums should follow suit.
Further reading:
Swiss Re’s 04/13 sigma on navigating recent developments in marine and airline insurance.