Logic Insurance, Global Insurance Market Trends - Across the world, insurance markets are adapting to the aftermath of the economic crisis.
Consumers and businesses tighten their purse stringsSluggish consumer and business spending similarly strains the US property/casualty and life insurance segments, causing revenues and earnings to fall in 2010. The decline in net premiums occurred at the same time that investment yields were torpid. Insurers are further pressured by a competitive insurance market, with pricing barely budging in 2010 and no expectations for significant movement in 2011.
Insurer surplus in the US is at an all-time high, and this, too, is driving enhanced competition for business. As in Europe, US insurers that invest in more efficient distribution methodologies and more cost-effective operations can drive stronger performance at home and abroad.
Industry highlights More people and businesses are equipped to buy insurance and the regulatory systems in many locales have become more sophisticated.
While insurance penetration in more mature markets is hindered by relatively high saturation, fast-growing developing and emerging markets offer important growth prospects over the long-term.
Insurers seeking opportunities will need to consider strategies that address the fast pace of local and global regulatory and accounting developments.
Access to reliable capital sources to support investments in specific regions and developing distribution strategies that take into account consumer buying patterns and demographic trends are other avenues for growth.
Growth prospects in Asia-PacificAsia-Pacific presents significant opportunities for insurers seeking growth, as many markets in the region have enlarged due to an increasing number of consumers looking to purchase insurance. Additionally, the regulatory systems across much of the region have become more sophisticated.
Europe in 2011 offers a financially stronger insurance market than in 2010, given strengthening of the credit and equity markets and improvements in the insurance industry's capitalization, solvency and profitability.
While GDP is expected to decrease slightly in 2011, inflation should remain steady at 1.5% to 1.6% — levels that pose no immediate threat to growth.
Litigation, fraud and catastrophe-type exposures also are increasing in the region. As insurers prepare for the implementation of Solvency II and Basel III, they must develop ways to maintain, if not increase capital.
To seize growth in 2011, insurers will need to quickly address and adapt to the changing regulatory and accounting environments, enhance the flexibility of their distribution systems, develop new markets and products and improve management of capital.
On the life side, premiums improved modestly in 2010. As Europe's population ages and grapples with demographic challenges to their social welfare systems, especially those parts related to retirement benefits, it creates opportunities for insurers to provide products and services in the retirement space. The downside is the low interest rate environment, which reduces profitability of guaranteed products.
Continued high unemployment also makes it difficult financially for many individuals to purchase new products. A key question facing life insurers is whether the emerging capital requirements will hinder their ability to meet consumer needs. (Logic insurance article source Inguard.com)
Many multinational insurance companies that hunkered down to conserve capital and trim expenses are now ready to invest in global markets that are poised for significant growth.
Global Insurance Market Trends
Insurers enter new domainsExpectations are pointing to insurers entering new domains, as well as expand their presence in current markets. While there are signs of stabilization, consumers and businesses continue to tighten their purse strings. For much of the European and US insurance markets, these conditions continue, with only slight improvement.
In Europe, for example, 2011 will likely be another year of low GDP growth, low interest rates and moderate equity market performance. On the life insurance side in Europe, low interest rates reduce the probability of people saving or putting capital into investment products like life insurance and annuities. Insurers that seek greater flexibility in their distribution relationships may be able to counter the stagnant sales environment.
In Europe, for example, 2011 will likely be another year of low GDP growth, low interest rates and moderate equity market performance. On the life insurance side in Europe, low interest rates reduce the probability of people saving or putting capital into investment products like life insurance and annuities. Insurers that seek greater flexibility in their distribution relationships may be able to counter the stagnant sales environment.
Consumers and businesses tighten their purse stringsSluggish consumer and business spending similarly strains the US property/casualty and life insurance segments, causing revenues and earnings to fall in 2010. The decline in net premiums occurred at the same time that investment yields were torpid. Insurers are further pressured by a competitive insurance market, with pricing barely budging in 2010 and no expectations for significant movement in 2011.
Insurer surplus in the US is at an all-time high, and this, too, is driving enhanced competition for business. As in Europe, US insurers that invest in more efficient distribution methodologies and more cost-effective operations can drive stronger performance at home and abroad.
Investment in foreign marketsIndeed, with capital and surplus overflowing for many if not most multinational insurers, there are tantalizing opportunities for prudent investment in other foreign markets, depending on the region. In Asia-Pacific, for instance, significant opportunities beckon.
Domestic markets in many countries are growing fast — now that a middle class has burgeoned. More people are buying homes, cars and other seeming luxuries beyond their grasp a few years ago. And more businesses have sprung up to provide these goods and services.
While more mature markets in the region are saturated from an insurance penetration standpoint, emerging markets and those continuing to develop offer varying opportunities for growth, especially for early movers willing to invest now for long-term potential. Strategically, such insurers might consider investments that seize upon the evolving distribution strategies in the region, especially for life insurance sales.
Customers are seeking to buy insurance products outside the established agency and independent financial advisor channels, which will require insurers already in certain markets to retool their existing distribution models. For insurers entering the markets, they might consider adopting more flexible sales approaches that leverage the Internet, mobile platforms and other evolving technologies.
Indefinitely postponing a response to the current market opportunities seems ill-advised, given the chief attraction of the Asia-Pacific market and its remarkable growth rate.
Domestic markets in many countries are growing fast — now that a middle class has burgeoned. More people are buying homes, cars and other seeming luxuries beyond their grasp a few years ago. And more businesses have sprung up to provide these goods and services.
While more mature markets in the region are saturated from an insurance penetration standpoint, emerging markets and those continuing to develop offer varying opportunities for growth, especially for early movers willing to invest now for long-term potential. Strategically, such insurers might consider investments that seize upon the evolving distribution strategies in the region, especially for life insurance sales.
Customers are seeking to buy insurance products outside the established agency and independent financial advisor channels, which will require insurers already in certain markets to retool their existing distribution models. For insurers entering the markets, they might consider adopting more flexible sales approaches that leverage the Internet, mobile platforms and other evolving technologies.
Indefinitely postponing a response to the current market opportunities seems ill-advised, given the chief attraction of the Asia-Pacific market and its remarkable growth rate.
Industry highlights More people and businesses are equipped to buy insurance and the regulatory systems in many locales have become more sophisticated.
While insurance penetration in more mature markets is hindered by relatively high saturation, fast-growing developing and emerging markets offer important growth prospects over the long-term.
Insurers seeking opportunities will need to consider strategies that address the fast pace of local and global regulatory and accounting developments.
Access to reliable capital sources to support investments in specific regions and developing distribution strategies that take into account consumer buying patterns and demographic trends are other avenues for growth.
Growth prospects in Asia-PacificAsia-Pacific presents significant opportunities for insurers seeking growth, as many markets in the region have enlarged due to an increasing number of consumers looking to purchase insurance. Additionally, the regulatory systems across much of the region have become more sophisticated.
Growth drivers vary on market-by-market basisSome challenges, of course, remain. Since Asia-Pacific is a highly diverse super-region with respect to different countries' economic development and insurance penetration, the rate and drivers of growth vary on a market-by-market basis. Mature markets, for example, are more saturated.
Developing and emerging markets, on the other hand, offer greater growth opportunities for companies prepared to invest for the long haul.
We anticipate further regional evolution, but not revolution, in Asia-Pacific markets in 2011. Each insurer's strategic prioritization and response to the opportunities presented may reap significant rewards. Early movers may especially benefit by their immediate actions, while the insurers who wait to discern the short-term mistakes of others may similarly attain valuable traction.
Poised for opportunity
Indefinitely postponing a response to the current market opportunities seems ill-advised, given the chief attraction of the Asia-Pacific market and its remarkable growth rate. This alone helps explain why many multinational insurers are either preparing plans for further investment in the region, or are in the thick of implementing them.
As life insurers examine how to reduce the capital strains caused by guaranteed products, the prolonged low interest rate environment will depress the yields for new cash flow and maturing bonds.
Developing and emerging markets, on the other hand, offer greater growth opportunities for companies prepared to invest for the long haul.
We anticipate further regional evolution, but not revolution, in Asia-Pacific markets in 2011. Each insurer's strategic prioritization and response to the opportunities presented may reap significant rewards. Early movers may especially benefit by their immediate actions, while the insurers who wait to discern the short-term mistakes of others may similarly attain valuable traction.
Poised for opportunity
Indefinitely postponing a response to the current market opportunities seems ill-advised, given the chief attraction of the Asia-Pacific market and its remarkable growth rate. This alone helps explain why many multinational insurers are either preparing plans for further investment in the region, or are in the thick of implementing them.
As life insurers examine how to reduce the capital strains caused by guaranteed products, the prolonged low interest rate environment will depress the yields for new cash flow and maturing bonds.
Europe in 2011 offers a financially stronger insurance market than in 2010, given strengthening of the credit and equity markets and improvements in the insurance industry's capitalization, solvency and profitability.
While GDP is expected to decrease slightly in 2011, inflation should remain steady at 1.5% to 1.6% — levels that pose no immediate threat to growth.
Litigation, fraud and catastrophe-type exposures also are increasing in the region. As insurers prepare for the implementation of Solvency II and Basel III, they must develop ways to maintain, if not increase capital.
To seize growth in 2011, insurers will need to quickly address and adapt to the changing regulatory and accounting environments, enhance the flexibility of their distribution systems, develop new markets and products and improve management of capital.
European insurers challenged to prosper amid uncertaintyThe European insurance industry entered 2011 financially stronger than it was at the beginning of 2010. As the credit and equity markets recover combined with reductions in claims frequency in 2009 and 2010, the industry's capitalization, solvency and profitability are improving. Efforts to maintain and increase capital will continue in 2011, as insurers prepare for the impending implementation of
Solvency II and Basel III. Macroeconomic conditions indicate that 2011 will likely be another year in Europe of low GDP growth, low interest rates and moderate equity market performance. Even if the economic recovery continues, insurers may find that the assets underpinning their balance sheets have decreased in value.
Questions concerning the impact of the European sovereign debt crisis also remain, albeit the effect may vary for individual countries. Certainly, the macroeconomic conditions will challenge the skills and resources of insurers to generate superior investment returns and maintain balance sheet strength.
Macroeconomic conditions suggest sluggish economy
The sluggish economy and low interest rate environment challenges all segments of the European insurance industry to achieve superior growth. Non-life premiums across the region were poor in 2010, while profitability in both the non-life and reinsurance sectors will continue to be challenged by the soft market, the need for continuing expense reductions, and the end of loss reserve releases supporting profitability.
Business demand for traditional non-life products will remain especially listless in 2011 due to the slow business growth. At the same time, risks relating to continued advancements in technology, catastrophic weather events as well as fraud and litigation exposure are increasing. A key question is how catastrophic losses in 2010 might affect pricing this year.
Aging population creates opportunities
Questions concerning the impact of the European sovereign debt crisis also remain, albeit the effect may vary for individual countries. Certainly, the macroeconomic conditions will challenge the skills and resources of insurers to generate superior investment returns and maintain balance sheet strength.
Macroeconomic conditions suggest sluggish economy
The sluggish economy and low interest rate environment challenges all segments of the European insurance industry to achieve superior growth. Non-life premiums across the region were poor in 2010, while profitability in both the non-life and reinsurance sectors will continue to be challenged by the soft market, the need for continuing expense reductions, and the end of loss reserve releases supporting profitability.
Business demand for traditional non-life products will remain especially listless in 2011 due to the slow business growth. At the same time, risks relating to continued advancements in technology, catastrophic weather events as well as fraud and litigation exposure are increasing. A key question is how catastrophic losses in 2010 might affect pricing this year.
Aging population creates opportunities
Continued high unemployment also makes it difficult financially for many individuals to purchase new products. A key question facing life insurers is whether the emerging capital requirements will hinder their ability to meet consumer needs. (Logic insurance article source Inguard.com)
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