Covid-19 to dampen global insurance market in 2020, but Asia to pick up steam more quickly: Allianz

Singapore

THE impact of Covid-19 on the global insurance market is expected to be three times worse than the impact of the global financial crisis of 2008, according to Allianz in its latest global insurance report.

Premium income is expected to shrink by 3.8 per cent globally in 2020, and by 0.7 per cent in Asia ex-Japan, as the sudden stop in economic activity around the world will batter insurance demand.

In the aftermath of the GFC, global premium income dropped by 1 per cent.

Compared to the pre-Covid-19 trend, an estimated 360 billion euro (S$563 billion) is expected to be lost in 2020.

The report called 2019 a "golden'' year, when global premiums rose 4.4 per cent, the strongest growth in four years. Global premium income totalled 3.9 trillion euro in 2019.

Asia, a bright spot pre-Covid, is expected to recover relatively quickly, even if 2020 is set to be challenging. Michaela Grimm, Allianz SE economist and co-author of the Allianz Global Insurance Report 2020, said: "Asia was the region first hit by Covid-19; it will also be the region that recovers - up demand for social protection will drive growth in coming years with China taking the lead.''

By 2030, China's premium pool is expected to grow by 777 billion euro - the market size of UK, France, Germany and Italy combined.

Singapore's insurance market is expected to shrink by 3.4 per cent this year, after a growth of 3.1 per cent in 2017 and 2.9 per cent in 2019. Allianz expects the weakness, however, to be temporary, and the Singapore market should recover to 5 to 6 per cent growth in the long run. Over the next 10 years, Allianz projects an average compound growth rate of 4.1 per cent for Singapore.

Singapore's life insurance segment is expected to remain more dynamic with a growth rate of 4.3 per cent, compared to the property & casualty segment's growth of 2.9 per cent.

Even with one of the world's highest insurance penetration, the average Singapore resident spent 4,888 euro for insurance coverage in 2019. It was ranked fourth highest in per capita premiums for life and P&C. Singapore's total insurance premium was equivalent to 8.6 per cent of GDP, compared to the global average of 5.4 per cent.

Most markets are expected to recover in 2021, and global premium growth should settle at 4.4 per cent, compared to 8.1 per cent in Asia ex-Japan. The region is expected to contribute over 50 per cent or 1.27 trillion euro to global premium growth until 2030. This is twice as much as North America and four times as much as Western Europe.

Allianz chief economist Ludovic Subran believes three industry trends will gather steam - digitisation, the pivot to Asia and the growing significance of ESG (environment, social and governance) factors. "2020 is lost to the virus, no doubt about it. More interesting is the question about what comes after Covid-19 . . . While Asian players lead in technology, European peers are ahead with ESG. But the dominance of the global insurance industry will be decided in Asia. Asian households emerge as the consumer of last resort, driving global insurance demand.''

Pent-up demand in Asia reflects weak social security systems and protection gaps in natural catastrophes. Asia ex-Japan's share of the global premium pool is expected to rise from 24.2 per cent in 2019 to 35.3 per cent in 2030.