The ninth edition of the study, entitled Growth, profitability, and opportunity, reveals that the property and casualty (P&C) industry achieved a global underwriting profit last year, helped by relatively light catastrophe losses in comparison with 2011 and 2012. Combined ratios varied significantly by country, and the study reveals many profitable areas of growth in the global insurance market. For the global P&C business, the average insurer combined ratio for 2013 across the top 50 global markets was 99.1 per cent, with 21 markets achieving a combined ratio below 95 per cent, and 10 markets achieving a combined ratio below 90 per cent.
The study highlights that global insurance and reinsurance premium reached a record US$4.9 trillion in 2013 – a 0.9-per-cent increase over 2012 – driven primarily by growth in the P&C and health insurance segments. Global insurance and reinsurance capital reached a record $4 trillion.
For many insurers, big data is the presumed answer to the question of how to grow profitability in an environment with record capital levels. The study discusses big data and its potential transformative effects on the insurance industry, and also discusses other emerging trends including: the effects of technology on motor insurance, new capital demands in the US health insurance market, rising frequency of cyber attacks, and advanced modelling capabilities for China crop insurance.
Stephen Mildenhall, global CEO of analytics for Aon, commented on the report’s findings: “There are many bright spots within today's rapidly evolving insurance marketplace. The overall global combined ratio under 100 per cent, and the variation in results by country, clearly show there are many desirable areas for profitable growth in the market today. In addition, the continued flow of cheaper alternative capital into the industry provides a competitive cost-advantage to early adopters. The potential pay-off to innovation is higher today than it has been for many years.”
The 2014 Insurance Risk Study includes a country opportunity index, which ranks the desirability of the top 50 markets based on a mix of profitability, growth potential, and political environment. Saudi Arabia leads the index with a combined ratio of 91.5 per cent and strong projected growth of 8.1 percent, followed by the Ecuadorean and Singaporean markets. Hong Kong, China, and Australia were all new entrants to the top quartile of the index this year.
As a conclusion to the report, Aon Benfield Analytics forecast that global P&C insurance premiums will increase by 18 per cent over the next five years to reach $1.6 trillion by 2018, driven by strong growth in China.