Global insurance market trends

Global insurance industry overview

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While there are signs of stabilization, consumers and businesses continue to tighten their purse strings.

Across the world, insurance markets are adapting to the aftermath of the economic crisis. Many multinational insurance companies that hunkered down to conserve capital and trim expenses are now ready to invest in global markets that are poised for significant growth.

Insurers enter new domains

Expectations are pointing to insurers entering new domains, as well as expand their presence in current markets. While there are signs of stabilization, consumers and businesses continue to tighten their purse strings. For much of the European and US insurance markets, these conditions continue, with only slight improvement.

In Europe, for example, 2011 will likely be another year of low GDP growth, low interest rates and moderate equity market performance. On the life insurance side in Europe, low interest rates reduce the probability of people saving or putting capital into investment products like life insurance and annuities. Insurers that seek greater flexibility in their distribution relationships may be able to counter the stagnant sales environment.

Consumers and businesses tighten their purse strings

Sluggish consumer and business spending similarly strains the US property/casualty and life insurance segments, causing revenues and earnings to fall in 2010. The decline in net premiums occurred at the same time that investment yields were torpid. Insurers are further pressured by a competitive insurance market, with pricing barely budging in 2010 and no expectations for significant movement in 2011.

Insurer surplus in the US is at an all-time high, and this, too, is driving enhanced competition for business. As in Europe, US insurers that invest in more efficient distribution methodologies and more cost-effective operations can drive stronger performance at home and abroad.

Investment in foreign markets

Indeed, with capital and surplus overflowing for many if not most multinational insurers, there are tantalizing opportunities for prudent investment in other foreign markets, depending on the region. In Asia-Pacific, for instance, significant opportunities beckon.

Domestic markets in many countries are growing fast — now that a middle class has burgeoned. More people are buying homes, cars and other seeming luxuries beyond their grasp a few years ago. And more businesses have sprung up to provide these goods and services.

While more mature markets in the region are saturated from an insurance penetration standpoint, emerging markets and those continuing to develop offer varying opportunities for growth, especially for early movers willing to invest now for long-term potential. Strategically, such insurers might consider investments that seize upon the evolving distribution strategies in the region, especially for life insurance sales.

Customers are seeking to buy insurance products outside the established agency and independent financial advisor channels, which will require insurers already in certain markets to retool their existing distribution models. For insurers entering the markets, they might consider adopting more flexible sales approaches that leverage the Internet, mobile platforms and other evolving technologies.

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