ProtectionJul 2 2015

Life sector premiums return to growth: Swiss Re

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Life sector premiums return to growth: Swiss Re

There was a return to growth in the global life insurance sector during 2014 with premiums up 4.3 per cent, according to a Swiss Re report.

This was part of a wider revival in the insurance market seen over the course of 2014 which saw global non-life premiums increase by 2.9 per cent.

The 44-page Sigma report, called World Insurance in 2014: Back to Life, said life premium growth was expected to remain fairly solid in the advanced economies in 2015 and increase in the emerging markets, particularly in Central and Eastern Europe and China.

Kurt Karl, chief economist at Swiss Re, said: “Despite the acceleration in 2014, overall advanced-market life insurance premiums are about the same level as before the steep drop in volumes in 2008.

“The gain in premiums in 2014 outpaced economic growth, increasing insurance penetration in the advanced markets, but premiums post-crisis have been growing at a much slower rate than before the financial crisis.”

In the life sector, there were variations in premium growth across different regions.

Very strong growth in Oceania and solid results in Western Europe and Japan more than offset another year of contraction in North America.

Overall profitability in the life insurance sector improved slightly in 2014, driven by stronger stock markets, higher premium growth and cost containment efforts.

Despite positive premium growth, overall industry profitability is expected to fall short of pre-crisis levels in 2015 because investment yields will remain under pressure from the low interest rate environment.

The report said: “Overall sector profitability is unlikely to improve markedly in the near future as the burden from low yields as well as ongoing regulatory changes continue, keeping return on equity below the pre-crisis ‘normal’.

“Even after interest rates start to rise, it will take several years for higher rates to filter through to investment returns and overall profitability.”

Global real premium growth rates, 2014
LifeNon-lifeTotal
Advanced markets3.8%1.8%2.9%
Emerging markets6.9%8%7.4%
World4.3%2.9%3.7%

Adviser view

Jason Butler, a partner with London-based Bloomsbury Private Wealth, said: “I am not surprised there has been an increase in cover because that’s part and parcel of what you see during buoyant economic times.”