Chinese insurers to hold up as COVID-19 hits other emerging markets harder, Swiss Re says

Last modified August 12, 2020. Published August 12, 2020.

Chinese insurers are expected to show resilience despite COVID-19 while companies in other emerging markets will not fare as well, said in a report released on Tuesday, which cites anticipated average premium-growth trajectories.

“Emerging market insurers will be the hardest-hit globally by COVID-19, with a 3.6 percentage point impact on premium growth in each of 2020 and 2021,” Swiss Re said. “China's insurance market is the exception, with average premium growth of 7% over 2020- 2021, supported by a swift economic recovery, government policies, rising risk awareness and active customer engagement by insurers.”

The premium hit is slated to be steeper, at 4.5%, for emerging market insurers when China is excluded, Swiss Re noted. However, the firm said that emerging Asia — it pointed to China taking a leading role — will help emerging-market insurers get back to their pre-pandemic levels for premiums in 2021.

Swiss Re said that the premium-growth hit in China will be 3%, while emerging Asia with China excluded will suffer a 3.9% hit. The harder-hit emerging regions, Swiss Re said, will include emerging Europe, with a 5.2% hit, Latin America, with a 4.8% hit and the Middle East and Africa, with a 4.2% hit.

Swiss Re noted that emerging-market life insurance was impacted more than non-life this year, forecasting premium-growth stagnation in 2020 followed by a 7% climb in 2021. The company attributed the premium forecast to trouble in non-Chinese emerging markets.

“While emerging Asia including China is expected to be resilient, in the other regions we expect deep recessions and labor market deterioration to affect demand for life insurance, resulting in large declines in premiums even in major economies such as Brazil, Mexico, Turkey and South Africa,” the firm said.

In contrast, Swiss Re said that it expects non-life insurance premium growth of 3% in China for this year and about 7% in 2021, citing Chinese governmental support for compulsory liability insurance and rural infrastructure investing as reasons. However, the firm predicts that premiums will get hit in other emerging markets.

“Non-life premiums in emerging Europe and central Asia will decline strongly this year due to their proximity to and trade dependence on western Europe, where growth is expected to be weak, as well as recessions in Russia and Turkey. Latin America, the Middle East and Africa will also contract, as economic weakness prior to the outbreak of COVID-19 is coupled with falls in commodity prices and external revenues,” said Swiss Re.

Swiss Re also highlighted Chinese insurers’ aggressive engagement and promotion activities, citing results for a survey that it conducted in April, which show that 75% of the country’s consumers have been contacted by their insurance company, with that percentage falling to 50% in Hong Kong. Chinese consumers were also more receptive to buying more insurance, Swiss Re noted.

“More than half (59%) of Chinese consumers also expressed interest in buying more insurance, higher than in the other markets surveyed,” the firm said.

Despite the premium challenges, Swiss Re said that emerging-market insurers do not have significant claims risk from COVID-19, citing low market penetration and use of infectious-diseases coverage exclusions. The company said that it is also optimistic about these insurers’ long-term prospects.

“Despite the near-term challenges, we remain confident that emerging markets will be the growth engine of global insurance in the long term as their fundamental growth drivers, including urbanization, growth of the middle class and rising consumer risk awareness, are still intact,” Swiss Re said.