Personal lines business has led recent growth in many of the markets in Southeast Asia and India, notes A.M. Best in its latest annual commentary on the global reinsurance sector.
Personal lines typically require less reinsurance as a risk transfer tool. Classes of business that do require reinsurance in this traditional sense, such as commercial fire, have lagged.
India’s non-life market is a prime example (despite its rising importance for the global reinsurance market), where growth over the past five years has been led by personal lines business. Until the Prime Minister’s Crop Insurance Scheme took off in India during the fiscal year ended March 2017, the domestic reinsurer’s premium growth lagged that of the leading primary non-life insurers in India.
While India is an extreme example, the growth trend led by personal lines can also be seen in other markets in the region, including Thailand, Indonesia, and Vietnam. In some cases, it has been due to declining energy prices that have reduced commercial insurable values and delayed asset growth. At the same time, consumers continue to do well and add to their insurable assets, especially automobiles. In other cases, expected government-led infrastructure projects or proposals to insure government assets have not materialised or have been delayed. The global challenge of abundant capital and soft pricing, of course, also is a factor.
Personal lines growth may be part of a longer-term insurance and economic development trend in these emerging markets. Insurance demand is no longer limited to corporate entities looking to insure their plants and equipment to protect their earnings capacity. Increasingly, workers insure their health (to protect their increasingly valuable capacity to earn higher salaries) or their automobiles (as these vehicles represent a major household asset and may also be income-producing). Indeed in some of the more industrialised, large markets in Asia, such as South Korea and Japan, property insurance accounts for less than 20% of non-life gross premiums, while consumer-related business lines dominate.
For reinsurers doing business in Southeast Asia and India, portfolio rebalancing may be needed if they want to participate in the primary market’s shift in premium mix.
The small ticket size of personal line products makes traditional risk transfer less of a priority, notes the report. Instead, insurers realise that they need to strengthen capabilities such as efficient underwriting, automation, and process optimisation, as these are paramount in generating a margin in such lines. In some markets, this need is critical because market leaders have traditionally focused on commercial business lines and are now looking to grow premiums in personal lines or from small business segments. In other markets, de-tariffication and slow or even negative premium growth is making insurers more receptive to reinsurance solutions, rather than merely risk transfer for large risks.