Compilation of reports and outlooks for 2017 - 2018 covering the global market, Malaysia's Takaful and Vietnam's growing insurance sector.
1H2017 - GLOBAL INSURANCE STOCKS RISE DUE TO IMPROVED INVESTMENT AND UNDERWRITING RESULTS
1. US life insurance stocks outperformed on a year over year (YoY) basis, led by tax reform expectations and financial deregulation by the new US Government while P&C insurers underperformed the benchmark indices on underwriting concerns.
2. UK insurance stocks outperformed in 2Q17, as most insurers saw analyst upgrades and positive EPS revisions for FY17, with most large players outperforming analyst estimates, primarily on the back of improved investment results
3. European insurers witnessed positive earnings per share (EPS) revisions on the back of favorable underwriting performance.
4. Listed Chinese (mainland) life insurers rallied in 2Q17 after the Chinese (mainland) Government indicated relaxing norms to allow commercial pension funds to invest in equity markets.
NATCAT LOSSES HALTS PERIOD OF LOSSES AND LIMIT FURTHER PRICING WEAKNESS
1. During 1H17, global CAT insured losses were estimated to be ~US$22b, nearly 35% below the 10-year average of US$34b.
2. ~80% of insured losses were sustained in North America, led by significant severe weather outbreaks across the US. Other major insured loss events included Cyclone Debbie that prompted significant flooding in eastern Australia (US$1.2b) and Windstorm Zeus in France (US$340m).
3. Insured losses in EMEA and Asia-Pacific remained subdued, each accounting for around one-tenth of the insured losses. This was despite large flood related losses in mainland China (US$6.4b) and Peru (US$3.2b). However, insured losses are expected to be minimal given the extremely low insurance penetration in these countries.
2017 A POOR PERFORMANCE FOR GLOBAL REINSURANCE MARKET
1. Willis Re estimated catastrophe losses of $136bn (£100bn) last year coincided with constrained profitability for the wider market.
2. At the same time, prior-year reserve releases slowed, with traditional reinsurers supplemented by insurance-linked securities capacity, which has grown to $75bn.
3. Pricing corrections have not seen a significant spike due to strong reinsurance market capitalisation, along with losses being split over a number of different events and largely retained in the primary market. As catastrophe losses stopped a further downward movement in risk-adjusted rates in most markets and classes.
4. 2018 renewal season will be a disappointment in terms of the rating levels achieved for many reinsurers.
5. Research from ClimateWise revealed just 30% of catastrophic losses caused by extreme weather events have been insured over the last decade, creating an insurance protection gap of $1.7trn.
6. only one-fifth of homeowners in Greater Houston had flood cover when Hurricane Harvey struck the US last August, and that insurance penetration is even lower in developing countries.
TAKAFUL OUTPACE CONVENTIONAL INSURANCE DURING 1H17 IN MALAYSIA
1. Malaysia's takaful growth has continued to outpace the conventional insurance sector, driven by stable domestic consumption and government efforts to reach out to the mass-market.
2. Family and general takaful grew by 7.5% and 5.9% respectively in the first half of 2017 (1H17), compared with life insurance's 5.2% growth, and a 1.8% contraction in general insurance.
3. family takaful accounted for 30.5% of the overall life market based on new business premiums in 1H17, up from 28.8% at end-2016. General takaful accounts were 12.8% of the overall general insurance market in the same period, up from 12.2%. Family takaful represents over 60% of total new business in Malaysia.
TAKAFUL OUTLOOK IN MALAYSIA
1. the takaful segment is to benefit from the government's push for affordable insurance and 75% insurance penetration by 2020.
2.The liberalisation of motor tariffs may provide a boost to motor takaful premiums in the short term, as policyholders are likely to reassess their options across both conventional and takaful platforms.
3. By July 2018, composite takaful operators are required to split their operations to comply with regulatory requirements as mandated in the Islamic Financial Services Act.
4. Smaller-scale players to be more likely to consider mergers and acquisitions (M&A) options to divest their portfolios if they are unable to justify the additional regulatory capital burden and start-up costs at the onset.
INSURANCE MARKET GROWS ABOVE 21% IN VIETNAM
1. The insurance market has maintained a high growth rate of 21.2 per cent in 2017, gaining revenue of VND105.61 trillion (US$ 4.65 billion). Of this total, the revenue from non-life insurance premiums was VND40.56 trillion, up 10.61 per cent, and life insurance premiums was VND65.05 trillion, rising 28.9 per cent.
2. insurance companies re-invested VND247.8 trillion into the economy, which is a rise of 26.74 per cent from last year and purchased Government bonds worth VND20.86 trillion in 2017.
3. Insurers also paid VND29.42 trillion for customers, up 14.92 per cent compared with last year.
4. Next year, the target of the insurance sector is to gain total revenue of VND129.24 trillion, up 22.38 per cent from 2017. The sector also plans to re-invest VND305.49 trillion into the economy. nsurance firms are targeting an increase in their total assets to VND370.81 trillion next year.
5. The domestic fast-growing insurance market, poised to thrive thanks to rising living standards, has prompted a number of foreign companies, including the UK’s Aviva Plc and Canada’s Sun Life Financial Inc, to step up their presence in Viet Nam through mergers and acquisition or joint ventures in 2017. It also has great potential as the country has one of the world’s lowest life insurance penetration levels, at less than 1 per cent of the GDP. The average insurance premiums in Viet Nam stand at $30, much lower than the global average of $595 and Southeast Asia’s $74.
MINDSET IN VIETNAM
1. Awareness among Vietnamese people about life insurance may have increased, but most still do not believe that it is worth the expense. In fact, almost all Vietnamese people are wary of it and think it unnecessary to buy insurance.
2. Life insurance products usually involve a long-term contract, so many customers are also concerned about their financial capacity to fulfil it in the future. Doubts about the commitment of foreign life insurers to permanently operate in Viet Nam also contribute to its low-penetration rate.
3. Bancassurance market in Viet Nam has remained sluggish, contributing only 2 per cent to the total turnover of the insurance market.
GLOBAL ECONOMIC GROWTH SET FOR 7 YEAR HIGH
1. The global economy will grow by almost 4% in purchasing power parity terms this year – the fastest rate of expansion recorded since 2011 with an extra $5trn (£3.7trn) of output in 2018, with the US, emerging Asia and the Eurozone fuelling growth. According to research by PricewaterhouseCoopers (PwC).
2. These countries and regions are expected to be responsible for almost 70% of the increase, compared with their post-2000 average of around 60%, with China growing by 6-7%.
3. Expansion in the Eurozone is predicted to be above 2% this year, with the Netherlands leading the larger countries at 2.5%, however, it is thought that Brexit could drag UK growth down to 1.4%.
4. However risks could come from e progress of the Brexit negotiations and wider discussions about the future of the EU.
5. As International Monetary Fund cut its UK economic growth forecast from 1.7% to 1.6% for 2017, predicting a further fall to 1.5% this year.
Source: vietnamnet.vn, theedgemarkets, theactuary,
