Swiss Re sigma Report Examines 2007 Worldwide Results

Swiss Re has released its latest sigma study, which examines and analyzes the worldwide insurance industry results from 2007. According to the report world insurance premium income grew 3.3 percent in real terms in 2007, to $4.061 trillion. The growth was “primarily driven by the life business in industrialized and emerging markets and to a lesser extent by the non-life business in the emerging markets,” Swiss Re noted.

“Life insurance premiums increased 5.4 percent, which is above the previous ten year average,” the bulletin. “Non-life premium growth was robust in the emerging markets (+10 percent), but decreased in the industrialized countries (-0.3 percent). However, both the life and non-life industries are financially sound despite the challenging economic environment.

Daniel Staib, one of the study’s authors, stated: “Despite a macroeconomic environment characterized by marginally slower economic growth and rising inflation, life insurance continued to expand in 2007 with world life insurance premiums increasing by 5.4 percent to $2.393 trillion.” Sales of retirement and other wealth accumulation products spurred growth in the industrialized economies. Life insurance in the emerging markets was fuelled by strong economic performance and catch-up potential.”

The life sector grew in areas of single premium business and pension and annuities products in countries “where an aging population and reductions in state social security benefits were causing a shift from a traditional life insurance model to a pension-driven one,” said Swiss Re. In addition “the growing economies of the emerging markets with a relatively young population and an expanding middle class are driving sales across all products.” However the credit crisis and turbulent financial markets did not significantly affect life insurance sales.

Swiss Re noted: “Global non-life premium growth slowed to 0.7 percent in real terms, totaling USD 1.668 trillion in 2007. Non-life premium growth continued to follow divergent trends in the industrialized and the emerging markets. While premium volume retreated in the industrialized markets, growth slowed marginally in the emerging markets. Though downward pressure on premium rates continued in some countries, overall technical results were favorable and profitability remained sound.”

The report indicates that future growth in the life sector should “moderate as capital and stock market turmoil dampen demand. Staib added: “As the economic environment and capital markets stabilize, life insurance is projected to resume its strong performance in the medium term, both in terms of growth and profitability.”

He also indicated that in the non-life sector “insurance premiums are expected to fall in the industrialized economies. However, non-life premiums will continue to grow in the emerging economies, albeit at a slightly slower rate than in the recent past.”

Swiss Re also noted that the “effects of the sub-prime crisis are expected to be limited, resulting in lower investment results. A further concern is rising global inflation, which will increase claims costs in liability insurance and other long-tail business lines as well as hamper profitability.”

Swiss Re’s sigma study “World insurance in 2007” examines the insurance markets of 147 countries, making explicit reference to 88. For the complete presentation, including the graphs and charts illustrating the findings go to www.swissre.com.

The English, German, French, Italian and Spanish versions of the sigma study No. 3/2008, “World Insurance in 2007: emerging markets leading the way” are available electronically on the sigma section of Swiss Re’s web site. The versions in Chinese and Japanese will appear in the near future.

Source: Swiss Re