Asia will emerge stronger from the crisis: Allianz Global Insurance Report 2020

• In 2019, global insurance premiums increased by 4.4% to 3,906 b euros – clocking strongest growth in four years
• Asia (ex Japan) was setting the pace with 6.8% and total premiums reached 947 b euros – which China being responsible for almost half of all premiums written in region
• 2020 will be different: Premium income expected to shrink by 0.7% in Asia (ex Japan) and by 3.8% globally – compared with the pre-COVID-19 trend, around 360 b euros in premiums will be missing
• Most markets will recover in 2021 and global growth over next decade should settle down at 4.4%, against 8.1% in Asia (ex Japan) – region will contribute more than 50% or 1,277 b euros to global premium growth until 2030

Asia will emerge stronger from the COVID-19 crisis according to Allianz Global Insurance Report 2020.

The latest report assessed the pulse of insurance markets around the world by looking back at last year’s performance and looking ahead at future developments. 

It said the global insurance industry entered 2020 in good shape: In 2019, premiums increased by 4.4%, the strongest growth in four years. The increase was driven by the life segment where growth sharply increased over 2018 to 4.4%, as China overcame its temporary, regulatory-induced setback and mature markets came finally to grips with low interest rates. 

Property-casualty insurance clocked almost the same rate of growth (4.3%), down from 5.4% in 2018. Thus, for the first time since 2015, life insurance outgrew the P&C segment, albeit by a very thin margin. Global premium income totalled 3,906 billion euros in 2019 (Life: 2,399 billion euros, P&C: 1,507 billion euros).

Then COVID-19 hit the world economy like a meteorite. The sudden stop of economic activity around the globe will batter insurance demand too: Global premium income is expected to shrink by 3.8% in 2020, with life insurance probably hit more than P&C business with growth rates of -4.4% and -2.9%, respectively. 

Thus, the impact of the corona pandemic is going to be three times stronger than that of the global financial crisis, when global premium income decreased by 1.0%. Compared to the pre-COVID-19 growth trend, the pandemic will shave around 360 billion euros from the global premium pool (Life: 250 billion euros, P&C: 110 billion euros).

 “2020 is lost to the virus, no doubt about it,” said Allianz Chief Economist Ludovic Subran. “More interesting is the question about what comes after COVID-19. Basically, we see three trends, already in place before, that will gather steam in the coming years: Digitalisation of the business model, the pivot to Asia and the growing significance of ESG-factors. 

“While Asian players lead in technology, European peers are ahead with ESG. But dominance of the global insurance industry will be decided in Asia – Asian households emerge as the consumer of last resort, driving global insurance demand.”

In fact, Asia (ex Japan) clocked growth of 6.8% in 2019, more than twice the rate of the year before. Both segments, life and P&C, contributed to the increase in premiums: Life grew by 6.5% and P&C by 7.5%. Total premiums reached 947 billion euros in the region, almost half of them written in China. 

However, 2020 will be challenging for Asia: Premium income is expected to decline by 0.7%, with life insurance shrinking by 1.8% and P&C still slightly growing by 1.9%. Long-term prospects look brighter – the region will return to its “normal” growth and see an average growth rate p.a. of 8.1% until 2030; life and P&C are expected to grow at the same speed. This is almost twice the speed of the global market (4.4%).

“Asia was the region first hit by COVID-19; it will also be the region that recovers first,” said Allianz SE economist and report co-author Michaela Grimm. “Higher risk awareness and pent-up demand for social protection will drive growth in the coming years, with China in the lead: For the next couple of years, we expect double-digit increases in premiums in the Middle Kingdom. 

“Up to 2030, China’s premium pool will grow by a whopping 777 billion euros – the market size of UK, France, Germany and Italy combined. China and Asia will emerge even stronger than before from today’s crisis.”