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Life reinsurance premium tipped to rise

Global life reinsurance premiums are expected to rise by about 3% a year until 2019, according to a new report from S&P Global.

“Despite prevailing low interest rates [and] fierce competition in the sector’s bread-and-butter business of US mortality, we consider the opportunities outweigh challenges in the sector,” the ratings agency says.

“We see growth potential in the longevity and morbidity business lines and in the expanding primary life insurance markets.”

The top six life reinsurers (Munich Re, Swiss Re, Reinsurance Group of America, Scor, Hannover Re and Gen Re) recorded $US56.4 billion ($70 billion) of gross written premium last year, down from $US57.3 billion ($71.8 billion) in 2015.

Based on these figures, S&P notes premium decline for Munich Re (down 11%), Hannover Re (down 10%) and Gen Re (down 3%).

Swiss Re growth was up 7%, Reinsurance Group of America 7% and Scor 3%.

“The premiums for the top six life reinsurance companies declined, despite our positive view on growth opportunities in emerging markets and in the longevity and morbidity business.

“We believe the decline is mainly due to the reduction of some large one-off treaties in North America and Australia, and currency effects.”

S&P believes there is growth to be found in emerging markets, especially Asia-Pacific.

“These developing life insurance markets could expand significantly in the next few years as these economies develop and insurance penetration rates rise.

“Emerging-market life insurance premiums increased significantly above the global average of about 5% [last year].

China’s life insurance premium grew about 30% last year, but the penetration rate is 2.4%, low compared with Western European markets on about 4.7%.

“In emerging markets, we generally see younger demographics, increasing wealth and improving healthcare, which should point to improved mortality over time.

“The primary writers and reinsurers should benefit from good diversification.”

S&P says sales of a higher level of protection-type products are increasing, given younger demographics and lower wealth levels.

“Some reinsurers are working closely with primary writers to develop new products and sales, and in exchange retain a percentage of the business underwritten,” the report says.

“There are ample opportunities for the sector to support product development, underwriting and claims handling, and to finance acquisition costs.”

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