As it accounts for over 63 per cent of global sector revenues, the performance of the US market will always have a huge bearing on the sector as a whole and healthy growth, coupled with rapid expansion of the increasingly influential Chinese market, has spurred expansion in recent years.
Nicholas Wyatt, project leader for MarketLine, explained: “Demand for setting up new insurance contracts has been quite strong in the US in recent years and, with the country’s penetration of brokers as a distribution channel the highest in the world, much of it is directed towards brokers.”
The Chinese market has seen rapid expansion, recording a CAGR of 16.2 per cent for the 2012-2016 period. As Wyatt expounds, this is the sign of a burgeoning market: “Brokerage is nowhere near as prevalent in Asia as it is in North America, but the emerging demand for insurance products based on rising income and economic acceleration of countries within the region has stimulated the sector’s growth there. Nowhere has this been more apparent than in China.”
However, Wyatt sounds caution when it comes to the sector’s future: “We still expect the sector to record impressive growth on a global scale, but we are projecting a deceleration in the growth rate through to 2021. The US will continue to dominate the global sector, but lower commissions caused by declining premium rates, along with a stagnant reinsurance segment, are triggering a decelerating growth trend for brokers.”
According to Wyatt, the US is not alone: “China’s growth will remain impressive, but will not hit the dynamic heights of recent years. A tightening of regulation in the insurance industry in 2016 to mitigate increasing risks, associated mainly with property insurance products, has already had an impact, and demand for non-life insurance products is also expected to slow, obviously having a knock-on effect for brokers.”
For these reasons, MarketLine anticipates growth for the 2016-2021 period to slow to a CAGR of 5.1 per cent, driving the sector to a value of $54.8 billion.