“Compared to the pre-Covid-19 growth trend, the pandemic will shave around €360 billion from the global premium pool (life: €250 billion, P&C: €110 billion),” the report states in the opening section, explaining that the impact of the Covid-19 pandemic is going to be three times stronger than that of the global financial crisis, when global premium income decreased by one per cent.
However, Allianz goes on to reason that while, yes, 2020 has been more or less lost to the Covid-19 pandemic, trends such as digitalisation, Asia-centric market growth and the growing significance of ESG [environmental, social and governance] are due to dominate the insurance sphere in coming years.
“Covid-19 is seen as a game-changer, but in insurance it may rather reinforce existing trends, namely digitalisation and the pivot to Asia, which will emerge faster and stronger from Covid-19,” the report reads. “With growth of +8.1 per cent per annum until 2030, Asia (ex Japan) is expected to grow almost twice as fast as the global market. It will add a massive €1,277 billion to the global premium pool, twice as much as North America and four times as much as Western Europe. Asia's rising middle class will increasingly play the role of the consumer of last resort with huge pent-up demand, reflecting weak social security systems and protection gaps in natural catastrophes, health, retirement and mortality. As a consequence, the region’s share (without Japan) of the global premium pool will rise from 24.2 per cent (2019) to 35.3 per cent (2030).”
Commenting on the role that ESG will increasingly play, the report states: “If the corona crisis taught the world anything, it is the need for more resilience. Increasingly, ESG will be seen not only as an indispensable tool to screen long-term risks to improve investment returns, but also as an insurance business enabler. As more and more companies implement ESG strategies, the demand for accompanying products and services is set to rise rapidly. A new era of ‘impact underwriting’ emerges.”
The report also warns that while Europe recorded an increase in premiums up until recently (driven by both life and P&C segments), with total premiums reaching €1,063 billion in the region (almost three quarters of them written in the ‘Big 4’ – the UK, France, Germany and Italy), “2020 will be challenging for Western Europe – to put it mildly.”
It predicts that premium income in the region is expected to decline by 4.7 per cent, with life insurance shrinking by 4.8 per cent and P&C by 4.5 per cent – Europe is one of the regions hardest hit by Covid-19 according to the report, although long-term growth prospects are looking a bit better.
“After the challenging decade following the great financial crisis, a battle-tested European insurance industry proved remarkably resilient during Covid-19. The outlook, however, is less encouraging,” the report reads. “As in other fields, Europe is falling further behind the US and particularly Asia. Just before the great financial crisis, its global market share was still at par with the US – and far ahead of Asia’s. At the end of this decade, it will be 6pp behind the US and a whopping 15pp behind Asia. Covid-19 should be seen as a wake-up call for Europe to finally get its act together and initiate higher and more inclusive growth.”
You can download the report in full here.