Emerging Asia to lead insurance sector growth

China, Indonesia, Malaysia, and India are the most promising economies.

When 2020 swings around, Asia will account for 90% of insurance premium growth in emerging markets, a forecast that is driven by China’s immense potential and by the region’s demographic momentum. China’s mammoth contribution to this EY forecast should not come as a surprise to insurers as the world’s second biggest economy promises the most lucrative opportunities, but analysts reckoned it would be wise not to overlook the strong growth fountains found in Indonesia, Malaysia, and India.

“The most attractive markets, which combine high potential growth with relatively lower risk, are mainly in Asia,” said Rohan Sachdev, global insurance emerging markets leader at EY, citing the firm’s latest risk-opportunity ranking. “Whilst China is by far the biggest potential growth market, Malaysia, Indonesia and India also offer potentially attractive opportunities. Singapore, Hong Kong and South Korea offer low risk, but much smaller growth potential.”

Even after factoring in an expected economic growth slowdown, China is still projected to account for almost 60% of expected emerging-market premium growth by 2020. This translates to roughly US$280b of the US$480b in projected additional premiums for the period.

After China, Indonesia is next in line with the most promising opportunity in Asia, poised to experience annual premium growth of 16% from 2015 to 2020, but this will come with higher risk. Sachdev said the country offers global firms a huge market to develop sharia-compliant, takaful insurance programmes. Insurers yearning for growth will find Asia the perfect place to sate their thirst, if only for the sheer number of potential clients coming out of the region. In the case of Indonesia, an additional 40 million people are projected to join the country’s middle class by 2020, which has attracted the likes of AIG and Sun Life to expand their local presence.

“Favourable demographic trends and the ability of new technology to allow companies to leapfrog antiquated infrastructure help explain why Asia remains an important focus for companies looking to boost their investment in emerging markets,” reckoned Sachdev.

EY data suggested there is a correlation between robust middle class growth and insurance product appetite. The number of households earning more than US$20,000 per year in China, Indonesia, India, and Malaysia - the top four in the firm’s opportunity rankings in Asia - is expected to see a significant rise from 2016 to 2020.