GLObAL INSURANCE MARKET TRENDS

[Pages:12]GLObAL INSURANCE MARKET TRENDS

2018

G20/OECD INFE CORE COMPETENCIES FRAMEWORK ON FINANCIAL LITERACY FOR ADULTS

OECD Insurance and Private Pensions Committee The importance of insurance as a foundation for economic activity was acknowledged at the inception of the OECD with the creation of the Insurance Committee in 1961. The scope of activities of the Insurance Committee has gradually widened, and now covers the topic of private pensions, reflecting the importance of private pension systems in OECD countries (the Committee was accordingly renamed the Insurance and Private Pensions Committee in 2005). Today, the Committee's work focuses on: strengthening market and regulatory surveillance and transparency of the insurance sector and private pension systems; promoting the role of insurance in providing protection against risks within the economy and society, including long-term retirement savings, and enhancing financial resilience to shocks, including disasters; supporting insurance market efficiency, stability, and trust; promoting the role of funded private pensions, taking into account the overall pension system and its contribution to the level of retirement income, to ensure adequate retirement income within a cost-effective, stable, and sustainable framework, and complementing the public pension system; supporting the contribution of insurers and private pensions ? along with other institutional investors and banks ? to long-term investment and growth; and ensuring appropriate protection of policyholders and pension plan participants, adequate financial education and awareness given financial and other risks, and access to insurance and private pension systems. The Committee engages in a range of co-operative activities with non-member economies. More information on the Committee's work is available at: daf/fin/insurance. Global Insurance Statistical database: daf/fin/insurance/oecdinsurancestatistics.htm

? OECD 2019 This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. This document, as well as any statistical data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

Foreword

The eighth edition of Global Insurance Market Trends provides an overview of market trends to understand better the insurance industry's overall performance and health. This monitoring report is compiled using data from the OECD Global Insurance Statistics (GIS) database. The OECD has collected and analysed data on insurance in OECD countries such as the number of insurance companies and employees, insurance premiums and investments by insurance companies dating back to the early 1980s. Over time, the framework of this exercise has expanded and now includes key balance sheet and income statement items for the direct insurance and reinsurance sectors. The geographical reach of the insurance statistics database is also expanding and will continue to do so. In addition to covering the 36 OECD countries, this edition covers a number of non-OECD countries in Latin America, achieved through cooperation with the Association of Latin American Insurance Supervisors (ASSAL); several non-OECD countries in Asia; and countries from other regions, such as Tunisia. This monitoring report and the GIS database provide an increasingly valuable cross-country source of data and information on insurance sector developments for use by governmental and supervisory authorities, central banks, the insurance sector and broader financial industry, consumers and the research community.

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TABLE OF CONTENTS

FOREWORD ................................................................................................................................................... 3

HIGHLIGHTS .................................................................................................................................................6

GLOBAL INSURANCE MARKET TRENDS...............................................................................................7

Underwriting performance...........................................................................................................................7 Annual real gross premium growth in the life and non-life insurance sectors .........................................7 Claims development: Life sector............................................................................................................10 Claims development: Non-life sector.....................................................................................................12 Combined ratio: Non-life sector.............................................................................................................13

Investment allocation and performance .....................................................................................................15 Portfolio allocation: Life insurers...........................................................................................................16 Portfolio allocation: Non-life insurers....................................................................................................17 Portfolio allocation: Composite insurers................................................................................................18 Investment returns ..................................................................................................................................20

Profitability: Return on equity ...................................................................................................................22 Change in equity position.......................................................................................................................23

STATISTICAL ANNEX...............................................................................................................................25

ADDITIONAL NOTES ................................................................................................................................29

Notes to be taken into consideration when interpreting the data ...............................................................29

Figures

Figure 1. Annual real growth rates of direct gross premiums in the life and non-life sectors

in selected countries, 2017

8

Figure 2. Annual real growth rates of gross claims payments in the life sector in

selected countries, 2017

11

Figure 3. Annual real growth rates of gross claims payments in the non-life sector in

selected countries, 2017

12

Figure 4. Major natural disasters around the globe, 2017

13

Figure 5. Combined ratio for the non-life sector in selected countries, 2016-2017

14

Figure 6. Asset allocation of domestic life insurance companies in main instruments or vehicles, 2017 16

Figure 7. Asset allocation of domestic non-life insurance companies in main instruments

or vehicles, 2017

18

Figure 8. Asset allocation of domestic composite insurance companies in main instruments

or vehicles, 2017

19

Figure 9. Average real net investment rates of return by type of domestic insurer in

selected countries, 2017

21

Figure 10. Return on equity by type of insurer in selected countries, 2017

23

Figure 11. Change in equity position by type of insurer in selected countries, 2017

24

Figure 12. Direct premiums of all undertakings operating in selected countries, 2017

25

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Tables Table 1. Average real net investment rates of return by type of domestic insurer

in selected countries, 2016-2017 .......................................................................................................... 26 Table 2. Return on equity by type of insurer in selected countries, 2016-2017 ........................................... 27 Table 3. Change in equity position by type of insurer in selected countries, 2016-2017............................. 28

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HIGHLIGHTS

Gross premiums continued to rise in most countries in the life and/or in the non-life insurance sectors in 2017. Many of the largest increases occurred in countries with relatively low insurance penetration where the insurance industry is developing. Aggregate trends for the life and non-life insurance businesses may however hide differences in dynamics demonstrated in each type of insurance policy and the risk insured. Additionally, substitution effects may exist between insurance products, and insurance and banking products, as some countries reported a shift from guaranteed life insurance products towards unit-linked products, which transfer investment risk from insurers to policyholders. Other countries reported increased interest in insurance products as a means to achieve higher returns than bank savings products.

Claims payments also increased in 2017 in the life and in the non-life sectors in most countries. In the life sector, the largest increases were coming from payments of advantageous life insurance policies reaching the end of their terms in 2017. In the non-life sector, the largest increases in claims payments were due to natural disasters that hit several countries around the globe in 2017 and generated large losses for the insurance industry. Non-life insurers in these countries usually experienced a deterioration of their combined ratio in 2017.

All insurers - irrespective of whether they engage in life, non-life insurance activities, or both ? generally achieved positive real investment rates of return in 2017, which may be driven by gains on equity markets. Life, non-life and composite insurers (i.e. insurers that operate in both the life and non-life insurance sectors) continued to invest most of their assets in bills and bonds in 2017 and were therefore still exposed to the challenges associated with the persistent low interest rate environment.

Despite these challenges, the insurance industry remained profitable in 2017. All types of insurers exhibited positive returns on equity (ROEs). In comparison to 2016 however, insurers in a number of countries reported a decline in ROEs. This may be the result of losses incurred by the industry following natural disasters, but could also be due to an increase in administrative costs in some cases.

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GLOBAL INSURANCE MARKET TRENDS

Following the same structure as past editions, this report looks into several key aspects of the health and performance of the insurance industry among reporting countries:

the underwriting performance of the life and non-life insurance businesses, which depends on the evolution of gross premiums and claims payments;

the investment allocation and investment performance of insurers;

the profitability of insurance companies, measured by returns on shareholder equity.

Underwriting performance

Gross premiums continued to increase in most markets ...

Gross premiums continued to increase in the life and/or non-life sectors in most countries in 2017. In many countries, specific insurance classes, such as motor vehicle insurance, were a major driver of the increase in gross premiums.

... and claims as well.

Claims payments increased in many countries as well, especially in countries that faced major natural catastrophes in 2017, which was the largest year on record for insured losses from natural catastrophes. These events affected several countries across the globe.

While non-life insurers generally continued to record underwriting profits, underwriting performance deteriorated in a number of countries following catastrophe losses.

Annual real gross premium growth in the life and non-life insurance sectors

Gross premiums still on the rise on average in 2017

Gross premiums grew on average in 2017, continuing the growth identified in previous editions of this report. Gross premiums grew by 4.2% and 4.0% in the life and non-life insurance sectors respectively in real terms (i.e. after adjustment for inflation) among the 46 reporting countries (Figure 1).1

Most countries in the reporting sample observed an increase of gross premiums in the life and/or the non-life insurance sectors. Gross premiums increased in 22 countries (i.e. almost half of the sample) in both sectors, in eight countries in the life sector only, and in 12 countries in the non-life sector only. Four countries recorded lower amounts of gross premiums in both life and non-life sectors in 2017 compared to 2016: Belgium, Finland, Japan and Norway.

1

Average growth rates of gross premiums are calculated over all reporting countries. The number of reporting

countries varies over the years though, limiting the comparability of results. Find previous editions of Global

Insurance Market Trends at: .

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Figure 1. Annual real growth rates of direct gross premiums in the life and non-life sectors in selected countries, 2017

25

Non-life sector

In per cent

AUS

20

HND

LVA

LTU POL

15

IND

LUX

MEX EST

CRI

10 DEU

ISL

HUN NIC

CZE

5

PRT NZL

TUN DNK AverageISR

SWE

ESP

USA SVN

CHE FRA AUT

GTM HKG

IDN

NLD ITABECLHL0 BRA

JPN FIN MYS COLGRC

-5 PER

SGP TUR

Life sector

RUS

NOR

BOL

-10

-15

-20

-10

0

10

20

30

40

50

Notes: Countries are labelled with their ISO code. ISO codes are available on the United Nation Statistics Division internet page, `Countries and areas, codes and abbreviations' at the following address: . The red triangle shows the simple average of the growth rate of gross premiums in the life and non-life sectors in 2017 among the reporting countries. Data refer to all undertakings (i.e. domestic undertakings and branches and agencies of foreign undertakings operating in the reporting country) except in some cases such for Honduras and Nicaragua where data refer to domestic undertakings only. Direct gross premiums for Germany include EEA undertakings for the first time in 2017, affecting trends between 2016 and 2017. Data for New Zealand refer to the growth rates of net premiums written of all undertakings.

Source: OECD Global Insurance Statistics.

The scale of change in gross premiums varied across countries and by insurance business, and may be attributed to different factors.

The scale of the change in life gross premiums varies

across countries

In the life sector, the growth rate of gross premiums ranged from 40.7% (Russia) to -15.1% (Australia) in 2017. Russia observed the largest increase of life gross premiums in real terms in 2017, followed by Bolivia (21.2%), Singapore (20.7%) and Turkey (20.5%). Six other countries recorded growth over 10% in 2017. In 20 countries, the growth of life gross premiums was more moderate and between 0% and 1% in four of them: Brazil, Germany, Poland and the United States. Life gross premiums declined in 16 countries.

Life insurance is fast expanding in some

markets with the lowest penetration

Some of the countries with the lowest levels of life insurance penetration observed the largest increases in life gross premiums (e.g. Bolivia, Russia and Turkey). In some countries, such as Russia and Turkey, this growth was the continuation of rapid growth observed in 2016 (over 40%). The amount of (direct) life gross premiums represented 0.5% or less of GDP in Bolivia,

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