The Asia-Pacific region will be the major driver of growth for the world’s insurance sector by the year 2020, but the catastrophe-vulnerable area will remain underinsured, Munich Re said Wednesday.
Premium income for the industry in that region will double by 2020, according to a study from Munich Re’s Economic Research Department. Almost half of the estimated additional global primary insurance premiums, or €1 trillion, will be generated in Asia-Pacific until that year, the company said.
About 70% of that will be from “emerging Asia,” which includes China and India, Munich Re said. Property and casualty primary insurance premiums in those markets currently grow 11% annually on average, Munich Re said.
“China, India and Indonesia will be the top-three growth countries in P&C, with average growth of above 12% over the forecast period (2012-2020) in China and India, and almost 10% in Indonesia,” Michael Menhart, Munich Re’s chief economist noted in a statement.
Indonesia’s primary P&C volume will more than double in size by 2012, to €7.3 billion, the company said. “Average growth rates of other emerging countries such as Vietnam, the Philippines, Malaysia and Thailand range between 6% and 8%,” Munich Re said.
“This is driven by increasing risk awareness and a growing middle class. Rising consumer savings are fuelling demand for life and health insurance, changing regulations and greater consumer protection will increase demand for motor and liability insurance, while large infrastructure investments will boost the demand for industrial insurance.”
Additionally, Munich Re said half of the expected global top 10 primary insurance growth markets will be in the region (both in P&C and life insurance), adding that it expects China to be the country with the highest increase of primary insurance premiums worldwide until 2020 (additional €425bn), followed by the United States (additional €350bn) and Japan (additional €157bn).
However, emerging markets in Asia will continue to be underinsured, especially against natural catastrophes, Munich Re said. The region is particularly vulnerable to natural disasters. Weather-related catastrophes there have tripled over the past 30 years, Munich Re added, a trend that’s likely to continue.
“Loss mitigation measures are cost-effective instruments for protecting communities on a sustainable basis,” Ludger Arnoldussen, a Munich Re board member responsible for the Asia-Pacific region noted. “Analysing and reducing risk – and offering adequate insurance against it – helps to considerably reduce the human and financial impact of natural disasters,” he added.
“Closing the existing gap of insurance coverage is a very powerful instrument in supporting long-term growth. At the same time, effective catastrophe-risk financing solutions need to be introduced by governments.”
Apart from implementing long-term risk mitigation strategies (such as improving building codes), Munich Re said the insurance industry needs to improve its risk assessment in the region, taking into account fast development, new peak exposures and hot-spot locations that can have a major impact on global supply chains.