With the fate of Brexit hanging in the balance, one question financial advisers will be asking is: what will the risk appetite of clients be in the months ahead?
With Brexit looming over the British economy, the US-China trade war rumbling on and questions over security and Iran still lingering, it is no wonder it is difficult to plan too far ahead.
However, one piece of cheery news for financial advisers is that the market for life insurance continues to grow on a global basis.
According to the latest sigma report from Swiss Re, life premiums will increase by 2.9%, well above the 0.6% annual average of the previous 10 years, with a bounceback in China the main driver.
In fact, it reveals that China will contribute most to life and non-life premium growth in the next two years and its share of global premiums will reach 20% by 2029, up from about 11% currently. China remains on course to surpass the US as the largest insurance market by the mid-2030s.
Elsewhere in emerging markets, favourable polices such as tax benefits (for example in Argentina) and promotion of financial inclusion schemes in some Asian markets should support demand. So too will positive economic momentum and favourable demographics.
In the advanced markets, life premiums are forecast to grow by 1.2% in 2019/2020. The US and Canada will lead, based on robust growth in the annuities business and solid wage and employment growth also.
However, there is one warning note: the traditional savings business will remain unattractive for consumers in advanced markets, due to low interest rates.
GLA predictions in numbers
- London’s gross value-added growth rate is forecast to be 1.5% in 2019. The growth rate is expected to increase to 1.6% in 2020 and reach 2.2% in 2021.
- London is forecast to see increases in the number of workforce jobs in 2019, 2020 and 2021.
- London’s household income and spending are both forecast to increase in the next three years, albeit at a relatively slow rate.
UK not OK?
Closer to home, the picture has been confused by Brexit and is likely to remain so for much of 2019.
PWC has recently concluded: “We project UK economic growth to remain modest at 1.4% in 2019 and 1.3% in 2020, compared with its long-term trend rate of around 2%.
“These projections assume that a Brexit deal is eventually agreed, leading to an orderly exit from the EU. Risks are weighted to the downside due to the possibility of a more disorderly Brexit.”
The Greater London Authority, in its spring forecast published in June, agreed, saying: “The economic environment continues to be more uncertain than usual at both the UK and London levels.
“However, despite this, the outlook for the London economy remains one of expected growth for the coming few years. While business sentiment has fallen and London consumer confidence about the short-term future economic outlook has fluctuated markedly since the 2016 referendum, the economy has continued to grow and sterling remains low. Fiscal policy is also moving in a more expansionary direction, with the government announcing the end of austerity.”
Image credit | Alamy
Insurance in numbers
- Global insurance premiums topped $5trn for the first time ever in 2018.
- Life and non-life premiums will grow about 3% in real terms during 2019/2020, based on strength in emerging markets across both sectors, and solid growth in non-life in advanced markets.
- In advanced markets, traditional life insurance savings business remains testing, given low interest rates.
- In non-life, ongoing evolution of advanced driver assistance systems will likely pressure motor premiums in the long term.
- By 2029, Asia-Pacific will account for 42% of global premiums – China’s share is forecast to be 20% and the country is on course to become the largest insurance market by the mid-2030s.
Source: Swiss Re Sigma