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Waves of change: the shifting insurance landscape in rapid-growth markets

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This report from EY:
• Analyzes 21 rapid-growth markets (RGMs) for overall outlook for and attractiveness to insurers
• Develops an opportunity-risk matrix
• Criteria for evaluation:
o Projected insurance premium growth
o Regulatory change
o Macroeconomic volatility
o Potential for liquidity risks
o Corruption risk

Full report available at: http://www.ey.com/GL/en/Industries/Financial-Services/Insurance/EY-Waves-of-change

Veröffentlicht in: Business, Wirtschaft & Finanzen
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Waves of change: the shifting insurance landscape in rapid-growth markets

  1. 1. Waves of change The shifting insurance landscape in rapid-growth markets
  2. 2. Waves of change: the shifting insurance landscape in rapid-growth markets ► ► ► Analysis of 21 rapid-growth markets for overall outlook for and attractiveness to insurers. Develops an opportunity-risk matrix Criteria for evaluation: ► ► ► ► ► ► Projected insurance premium growth Regulatory change Macroeconomic volatility Potential for liquidity risks Corruption risk Full report available at: ey.com/insurance/wavesofchange Page 2 Waves of change | The shifting insurance landscape in rapid-growth markets
  3. 3. About the study: market analysis This report includes an analysis of 21 RGMs in terms of risks and opportunities for global insurers Page 3 Waves of change | The shifting insurance landscape in rapid-growth markets
  4. 4. Purpose of EY’s RGM study Provide objective information, analysis and actionable insights to insurance executives evaluating global growth investments in light of: ► Slower growth in the BRICs (Brazil, Russia, India and China), which have been traditional targets of many investments ► Significant increases in overall contribution of rapid-growth markets to insurance premium growth ► Need to evaluate markets that previously have attracted little attention and for a methodological approach for balancing opportunities and risks. Page 4 Waves of change | The shifting insurance landscape in rapid-growth markets
  5. 5. Current matrix of opportunity and risk for insurance investments Page 5 Waves of change | The shifting insurance landscape in rapid-growth markets
  6. 6. Economic and premium forecasts for RGMs in 2020 Insurance executives actively weighing investments in RGMs will also want to consider future growth prospects Page 6 Waves of change | The shifting insurance landscape in rapid-growth markets
  7. 7. Overview of key findings ► ► ► RGMs remain essential to growth strategies of global insurers Profound global change is rebalancing risks and opportunities ► Slowing macroeconomic growth among the BRICs ► Regulatory openings in Mexico, Turkey, Indonesia and elsewhere ► Broad-based technology adoption ► Shifting demographics Insurance executives must rethink top investment priorities and expansion plans Page 7 Waves of change | The shifting insurance landscape in rapid-growth markets
  8. 8. Key findings: most attractive markets Turkey: government policy offers supportive environment, with substantial risks. ► Possibility of economic downturn and return of domestic political turmoil ► Relatively mature markets for some lines of coverage Indonesia: projections for extremely strong economic growth ► Challenging to obtain licenses ► Acquisition as main entry route China: despite recent slowdown, extraordinary income growth spurs auto and home ownership ► Aging population drive development of life and health markets ► Market entry remains difficult for foreign firms ► Regulatory changes in the offing? Page 8 Waves of change | The shifting insurance landscape in rapid-growth markets
  9. 9. Key findings: most attractive markets for insurance investment Malaysia: attractive mix of demographics and expected economic growth ► A base for the development of takaful, sharia-compliant insurance Hong Kong: low opportunity, but least risk ► Can serve as a trade route into the rest of Asia. The United Arab Emirates (UAE): fastest-growing insurance market among the Gulf States ► CAGR of 17% since 2007 ► Regulatory changes may create opportunity for expansion of takaful products Page 9 Waves of change | The shifting insurance landscape in rapid-growth markets
  10. 10. RGM ranking by highest opportunity and lowest risk • • Page 10 Waves of change | The shifting insurance landscape in rapid-growth markets Opportunity: the degree to which regulatory, demographic and economic factors are expected to accelerate growth in the next 2-3 years Risk: the extent to which macroeconomic issues, liquidity and corruption risks may cause problems for insurance firms.
  11. 11. Overview of opportunities ► RGMs will account for a greater share of global insurance premiums ► Financial-sector stability in some RGMs exceeds that of some developed markets – South Africa, Turkey, Thailand and Poland are most affected markets ► New distribution channels drive growth – Malaysia, China and Mexico are most affected markets ► RGMs pioneer micro-payments and other innovations – India, Brazil, Mexico, Malaysia and Indonesia are most affected markets ► Converging consumer trends foster new insurance needs – Czech Republic, Hong Kong, Poland, China, Mexico are most affected markets Page 11 Waves of change | The shifting insurance landscape in rapid-growth markets
  12. 12. Overview of risks and volatility ► Macroeconomic slowdowns could limit premium growth – Mexico, Poland and the Czech Republic are most exposed, while Brazil is also slowing down ► Liquidity risk could affect RGMs dependent on external capital inflows – Turkey, Morocco and Kenya are most exposed ► Corruption risks are falling on average, but persist in some RGMs – Russia, Kenya and Nigeria remain potentially challenging markets Page 12 Waves of change | The shifting insurance landscape in rapid-growth markets
  13. 13. Regulatory forces ► “Make or break” factors in expansion success ► Insurance is opening to foreign firms in RGMs, but liberalization can have a downside – India and Mexico are most affected ► Risk-based regulations in some RGMs may move ahead of developed markets – South Africa and Chile are most affected ► Tightening of consumer protection regulations in RGMs may also disrupt growth in insurance premiums Page 13 Waves of change | The shifting insurance landscape in rapid-growth markets
  14. 14. Key factors for market selection and prioritization – four waves of change ► ► ► ► Speed of regulatory change: some RGMs are moving quickly and may surpass advanced economies in the stringency of risk-based regulation and consumer protections. New modes for consumer adoption of insurance: the rise of social media, mobile phones and overseas educational experiences are breaking down traditional barriers to insurance penetration. Traditional cultures are now experiencing rapid premium growth. Government fiscal policy: tax incentives can have significant impacts on savings and pension services, but a weakening of confidence in public pension and welfare plans can encourage pursuit of private insurance alternatives. Government attitude: many RGM governments see insurance as a “strategic” boost for savings, investment and entrepreneurship. Some may seek foreign expertise to develop the sector, while others will promote domestic firms. Page 14 Waves of change | The shifting insurance landscape in rapid-growth markets
  15. 15. Taking action: the right response for insurers Understand and balance the considerable trade-offs between opportunities and risks: ► Attune global strategists to potential regulatory changes, and develop plans before new rules take effect ► Closely track consumer behaviors and rapid technological change in specific markets ► Follow – and anticipate – changing government attitudes ► Consider how macroeconomic trends can affect specific markets ► Identify circumstances where shared service options can be applied ► Acknowledge that local culture matters across markets Page 15 Waves of change | The shifting insurance landscape in rapid-growth markets
  16. 16. Contacts Shaun Crawford Global Insurance Leader +44 (0) 207 951 2172 scrawford2@uk.ey.com Jonathan Zhao Asia-Pacific Insurance Leader +85 2 2846 9023 jonathan.zhao@hk.ey.com Andreas Freiling EMEIA Insurance Leader +49 6196 996 12587 andreas.freiling@de.ey.com James Littlewood Latin America Insurance +1 305 415 1849 james.littlewood@ey.com

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