Hi everybody đź‘‹
Today, and for the thirteenth Reinsurance Tutorials video of the season, we will talk about " Specificities of Insurance in emerging markets"
This subject will be addressed by CCR Re experts Bertrand Petras and Emmanuel Jacquemin.
Let’s start! ⏬
[Bertrand Petras] : Hi, I am Bertrand Petras, Vice President Life & Health, Middle East / North Africa.
[Emmanuel Jacquemin] : Hello, I am Emmanuel Jacquemin, Head of Underwriting for Non-Life in Southern Europe and Latin America. Thank you for joining us in this presentation on the specificities of reinsurance in emerging markets.
[Bertrand] : Even though every emerging market has its own characteristics, there are common features differentiating them from mature markets from an insurance perspective.
[Emmanuel] : The first differentiation factor is the penetration rate of insurance. While the insurance premiums represented 8.4% of the United Kingdom’s GDP in 2019, it only reached 0.3% in Nigeria. This low penetration hampers the emerging economies’ ability to recover from catastrophic events and has a negative impact on the insurance sector contribution to the creation of jobs and revenues. In addition to this, it also questions the relevance of our industry and limits its ability to mutualize the markets at a global level. Increasing the insurance penetration’s rate in the emerging economies is one of the main challenges of our industry and requires the involvement of local governments, insurance and reinsurance sectors, and international funding agencies. The example of the TCIP, created after the 1999 EQ and now the largest buyer of Cat capacity in Turkey, shows that such initiatives allow to create insurance substance in emerging economies by giving access to insurance products and is a win-win deal for the country and for the insurance industry. The Shariah compliant products for the Life Insurance in the MENA region is another example of how penetration can be increased through products overcoming cultural or religious obstacles.
[Bertrand] : Another important factor is the growth pace of the insurance premium. While the average growth for the OCDE countries was 2.9% in 2020, China reached a 6.9% growth. This growth is driven by the economic and demographic growth, by the development of a wider middle class and by the development of an insurance mindset. Consequently, many international groups invested in emerging markets in recent decades in order to achieve the premium growth they cannot get in mature markets. The large market share hold by international groups is another characteristic of the emerging markets, even though it varies significantly between them. As an example, 56% of the 2022 Non Life premiums in Brazil are written by companies belonging to foreign groups.
[Emmanuel] : The split of insurance premium between lines of business also differentiates emerging markets from mature markets. On the Non-life side, Motor represents a higher percentage of the total premium in emerging markets and sometimes reaches 70% of the total Non Life insurance premium. Motor indemnities tend to be much lower in Emerging markets. Property is also relatively oversized. On the contrary, Casualty is much less developed than in mature markets, mainly for economic and cultural reasons.
[Bertrand] : On the Life side, health insurance represent a much larger portion of the premium in emerging markets because this cover is often provided by government schemes.
Insurance products are usually less complex in emerging markets than in mature markets. On the Non Life side, very few Covid losses were covered because property policies always require a material damage to trigger BI – whereas BI without MD was covered in some mature markets. Digital channels are playing a key role in the development and awareness of insurance products. Technology adoption is increasing rapidly in emerging markets and requires insurers and reinsurers to adapt to digital technology to attract new customers and younger generations.
[Emmanuel] : Lastly, a higher level of social, regulatory or monetary instability is more often observed in emerging markets than in mature markets. Social instability can lead to losses, as observed in Chile in 2019 and 2020 and in South Africa in 2021. Monetary instability can make it difficult for our industry to operate and access foreign currency, as currently observed in Argentina. Regulatory instability has a negative impact on investment and on penetration rates, as insurance is a long-term industry that requires a stable regulatory framework.
[Bertrand] : CCR Re currently writes almost 40% of its premium in emerging markets. This illustrates our conviction that these markets must contribute to the balance of our global book and our confidence in their future.
[Emmanuel] : Thanks a lot for watching this video, we hope it gave you some highlights on the Specificities of Reinsurance in Emerging Markets.
[Bertrand] : Thanks and goodbye !
Bye for now đź‘‹