The world's 10 largest insurance markets are cumulatively expected to see their gross domestic product (GDP) decrease by 4.5% in 2020 compared to 2019 because of COVID-19 pandemic according to a new report from Insurance Information Institute (Triple-I).
The 10 largest insurance markets, in order, as defined by total premium written in 2018-2019 are - US, China, Japan, UK, France, Germany, South Korea, Italy, Canada and Taiwan.
Triple-I’s projection of a 4.5% GDP decrease was weighted based on the total premium written in 2018-19 in each of the 10 markets.
Triple-I vice president and senior economist Dr Michel Léonard said, “All things being equal, higher economic activity drives premium growth higher while lower economic activity drags premium growth down. Going into the fourth quarter, economic activity, expressed as year-over-year change in GDP for the world’s 10 largest insurance markets, is expected to decrease by 4.5% in 2020.
“The extent of new lockdowns, the success of vaccine trials and the efficacy of vaccine distribution will determine the pace of economic recovery in 2021, with consensus pointing to third quarter or fourth quarter of 2020 as rounding the corner out of the pandemic part of the recession.”
Dr Léonard said, “Economic activity, however, will not heal and recover until well into 2021 and early 2022. Under best scenarios, economic growth will not start to fully recover until the second or third quarter of 2021 in advanced economies and third and fourth quarters in developing economies.”
GDP represents the value of the total goods and services an economy produces in a single year whereas premium is the price paid for an insurance policy. Beyond premiums, insurers also generate revenue through investment income.