Primary non-life

Market overview

The global primary non-life industry generated around USD 2 400 billion of premium income in 2019, of which 22% came from emerging markets. Non-life insurance ranges from standardised motor and household to sophisticated tailor-made liability and property covers, including specialty, commercial and industrial risk insurance.

Market performance

Premiums rose modestly in most countries and regions in 2019 on the back of moderating economic growth. Global non-life premiums were up an estimated 3% in real terms, after a similar 3% gain in 2018.

Emerging markets were the main driver of global premium growth, expanding by an estimated 7% in 2019. Non-life business in China and India was particularly strong, with premiums up 9% and 11%, respectively, in real terms. Agriculture and health/private medical insurance were the main drivers of growth. Motor also boosted growth in India, but the segment slowed in China due to weaker car sales and intensified competition after market liberalisation. Premium growth in Latin America and Africa was significantly below the long-term trend, reflecting a difficult economic environment in both regions.

Advanced market premiums grew by around 2% in 2019. Rate hardening in commercial insurance supported premium growth in North America and Asia Pacific in particular. In Western Europe, insurance premiums increased by around 1% alongside more moderate economic growth.

Pricing in commercial non-life insurance strengthened again. The third quarter of 2019 marked the 8th consecutive quarter of rate improvements after almost five years of softening. The upswing broadened across lines of business and regions. Overall profitability in non-life insurance, as measured by return on equity (ROE), improved slightly in Europe and Asia Pacific in the first half of the year compared with 2018. In North America, ROE was boosted by significant equity market gains during the first months of 2019.

Generally, underwriting results in the largest non-life markets improved slightly, based on lower catastrophe losses and moderately improving underwriting conditions.

Exceptions were Japan, due to high natural catastrophe losses, and Australia, where double-digit claims growth in all major lines of business led to a significant deterioration in underwriting results. Overall, the reversal of the soft market trend of the recent years was not enough to significantly narrow the profitability gap that still besets the non-life insurance sector.

Market outlook

Against the backdrop of an expected slowing global economy in 2020 and 2021, demand for non-life insurance is expected to increase only moderately, but premium growth will be further supported by positive rate developments.

The profitability outlook remains challenging. We believe interest rates will continue to be very low, with 10-year US Treasury yields likely to remain below 1% over the next two years. As such, any improvement in sector profitability will depend on underwriting performance, highlighting the need for more rate increases and improved underwriting discipline.