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

Waves of change

The shifting insurance landscape inrapid-growth markets

Waves of change | The shifting insurance landscape in rapid-growth markets

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

Cole Ollinger

URL TBD


About the study: market analysis

This report includes an analysis of 21 RGMs in terms of risks and opportunities for global insurers


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.


Current matrix of opportunity and risk for insurance investments


Economic and premium forecasts for RGMs in 2020

Insurance executives actively weighing investments in RGMs will also want to consider future growth prospects


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


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?


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


RGM ranking by highest opportunity and lowest risk

• 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.


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


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


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


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.


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

Contacts

Shaun Crawford

Global Insurance Leader

+44 (0) 207 951 2172

[email protected]

Jonathan Zhao

Asia-Pacific Insurance Leader

+85 2 2846 9023

[email protected]

Andreas Freiling

EMEIA Insurance Leader

+49 6196 996 12587

[email protected]

James Littlewood

Latin America Insurance

+1 305 415 1849

[email protected]

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

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