Asia's insurance industry is forecast to see average growth of 9.1% as a whole in the next 10 years, based on today's euro exchange rates, says Allianz Research in its Trend Watch report subtitled "Global insurance markets - Current status and outlook". This would be faster than average growth rate of 7.5% a year between 2008 and 2016.
Life insurance is expected to show stronger growth than P&C insurance in the long term (9.7% as against 7.3%).
If the expected depreciation in the euro is taken into account, growth drops back a bit to 7.0%; based on variable exchange rates, total premium income on the life insurance market will increase by 7.6%, with P&C premiums expected to grow by 5.1%.
Asia markets pulling at 3 different growth paces
On the whole, the Asian markets can be split into three groups in terms of their growth momentum, a situation which is unlikely to change in the foreseeable future given the differences in how developed the individual countries are, says Allianz.
Where total premium income in those countries with the most catch-up work to do is likely to continue to grow at rates stretching into the double digits -- based on both fixed and variable exchange rates -- Allianz expects Japan to continue reporting growth in the low single digits in the future. So if Japan was omitted, the life sector in the other countries in the region is expected to grow at a rate of 11.3% based on today's exchange rates and 9.0% based on variable rates; the life insurance market is predicted to grow by 12.2%, or by 9.9% based on variable rates, with the P&C insurance market expected to report growth of 8.7%, or 6.4% based on variable rates.
Since the 2008-09 financial crisis, the Japanese market has shown average growth of 2.4%. The markets in the middle of the rankings include Malaysia, Singapore, South Korea and Taiwan, as well as Hong Kong and the Philippines. The latter two, however, reported much faster growth than their mid-ranking counterparts, reporting an increase in total premium income of 9.6% each as against an average of 6.2%.
By far the most dynamic group, with total premium income growth of 15.5% a year throughout the period in question, includes China, India, Indonesia, Laos, Pakistan, Sri Lanka, Thailand and Vietnam.
If Japan was left out of the equation, the total average growth in the rest of the countries in this region was 11.1% in euro terms during the period under review.
In 2016, total gross written premiums in the 15 markets included in the analysis amounted to the equivalent of EUR1,153.4 billion (US$1,308.2 billion), with three quarters of this amount attributable to the life insurance business, although the P&C insurance business showed slightly more dynamic growth than the life insurance business in the period under review, expanding by an average of 8.5% a year as against average growth of 7.2% in the life insurance segment. This means that gross written premiums in Asia now account for 32% of total global premium income.
Given, however, that this region is home to 3.7 billion people, average per capita spending on insurance cover comes to the equivalent of EUR312, which is still down considerably on the average value for the rest of the world (EUR 1,170).
China versus Japan
In euro terms, Japan remained the biggest insurance market in Asia in 2016, with a razor-thin lead over China. The Middle Kingdom has increased its market share from 12.1% in 2005 to 31.7% last year, whereas Japan's market share has dwindled from 56.7% to 31.9%. After all, while the Chinese insurance market has been growing at an average rate of 16.8% a year in RMB terms since 2008, gross written premiums in Japan have only been increasing by an average of 2.4% a year.
As the dynamic development in China is likely to continue, while Japan is expected to see growth rates in the lower single digits in the best-case scenario, China is likely to replace Japan as the biggest insurance market in the region in terms of total premium income in the course of this year.