annual report 2008-09 - IRDA

ANNUAL REPORT 2008-09
i) World insurance scenario
As per Swiss Re, global insurance premiums in
calendar year 2008 were USD 4270 billiion which is
slightly higher than USD 4128 billiion in 2007. Life
business accounted for USD 2491 billiion; and nonlife
insurance accounted for the remaining USD 1779
billiion. Adjusted for inflation, non-life premiums
declined by 0.8 per cent and life premiums falling even
faster at 3.5 per cent over the previous year. While
underwriting results of non-life insurance business
remained comfortable, investment income and return
on equity fell sharply in both life and non-life insurance.
While life premium in the industrialised countries
declined by 5.3 per cent, in the emerging markets they
increased by 15 per cent in 2008. The financial crisis
and the economic downturn severely impacted sales
of single premium products and unit-linked products.
The profitability of life insurers deteriorated in 2008
due to low investment yields, high cost of guarantees
and low revenues from asset management fees.
Solvency was impacted and access to capital became
difficult. Slower demand for cover and softening of
premium rates caused decline in non-life premium
volume in 2008. Non-life premiums declined by 1.9
per cent in the industrialised countries, but recorded
a positive growth of 7.1 per cent in the emerging
markets.
The outlook for insurance industry in 2009 looks
uncertain due to many challenges. Reduced demand,
low interest rates and the need for additional capital
by many companies are some of the major challenges
facing the insurance industry in 2009. The economic
downturn will curb demand for non-life insurance,
particularly in the commercial lines of business.
Demand for personal lines of insurance (eg. Motor) is
likely to be less affected, since insurance spending is
less discretionary, particularly in the industrialised
markets. Insurers may have to focus on underwriting
discipline and reduction in costs so as to remain
profitable.
Average insurance density (per capita premium) in
dollar terms for industrialized countries stood at USD
3655, of which USD 2175 was for life insurance and
USD 1481 was in the non-life insurance. In the
emerging countries, the insurance density was USD
89 (USD 47 in life and USD 42 in non-life segments),
compared to its previous year level of USD 74. The
Insurance density of India was USD 47.4, which
continued to be dominated by life insurance business
(USD 41.2).
Insurance penetration (insurance premium as per cent
of GDP) measures the level of insurance activity
relative to the size of the economy. As GDP per capita
rises, it is expected that individuals will purchase more
insurance. The latest Swiss Re report reveals that the
insurance penetration in India was 4.6 per cent in 2008
consisting of 4.0 per cent in life business and 0.6 per
cent from non-life business, unchanged from 2007.
India’s position vis-à-vis other Asian countries in
respect of insurance penetration and density is
depicted in the following tables and graphs.
TABLE 5(a)
Insurance Penetration - 2008
(In per cent)
Total Business Life Non-life
Japan 9.8 7.6 2.2
Singapore 7.8 6.3 1.6
India 4.6 4.0 0.6
Malaysia 4.3 2.8 1.5
Thailand 3.3 1.8 1.5
PR China 3.3 2.2 1.0
Sri Lanka 1.4 0.6 0.9
Philippines 1.4 0.9 0.5
Indonesia 1.3 0.9 0.4
Pakistan 0.8 0.3 0.4
Source: Swiss Re Sigma No. 3/2009
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