Much has been written about the economic prospects of MINT – also referred to as the new “BRIC” on the block. We take a closer look at the insurance potential, and why Indonesia could be the pick of the crop.
MINT is undoubtedly the most well-known acronym of a group of economies since BRIC – Brazil, Russia, India, and China. It is not surprising given that the term, though created by Fidelity Investments, was made popular by the person who coined BRIC: Mr Jim O’Neil, retired Chairman of Goldman Sachs Asset Management.
A taste of MINT
Made up of Mexico, Indonesia, Nigeria, and Turkey, the MINT economies have “very favourable demographics for at least the next 20 years, and their economic prospects are interesting,” he had said, adding that they deserve no less attention than the BRIC countries, which are already closely watched. (See Table 1: Macroeconomics Indicators.)
MINT share a few common themes. Demographic dividends from large and youthful populations, the four nations combine for a total population of 608.7 million, the bulk of whom are under 25 years old.
Mexico, Indonesia, and Nigeria, blessed with rich commodity wealth, are also huge producers and exporters of oil. MINT are also strategically placed – Mexico’s proximity to the US; Indonesia in the heart of ASEAN and its proximity to China in shipping its vast coal exports; Nigeria in the rising African continent and with oil bound for Europe; and Turkey the transcontinental Eurasian country with eastern and western attributes.
MINT’s economic potential, together with BRIC, is expected to shape the world economy’s development.
MINT’s insurance potential
Specifically on insurance, the potential is huge in the respective MINT markets. While the world recorded an insurance penetration rate of 6.28% in 2013, MINT’s penetration ranged from 0.6% to 2.2%.
Global insurance density was US$651.70, while MINT’s recorded premiums per capita ranged from only $11 to $223. A large underinsurance gap exists to be filled. (See Table 2 – MINT: Total Premium Volume; and Tables 3 and 4 for the respective life and non-life breakdown.)
And if you compare the figures to advanced markets’ 8.27% penetration rate and $3,602.80 in premiums per capita, it is understandably exciting.
Not all MINTed equal
So which MINT market should insurers focus on? In Clyde & CO’s Insurance Perspectives, Mr Andrew Holderness, Global Head of its Corporate Insurance team, said that not all of MINT may be high on the agenda for insurers looking for growth opportunities.
In the short-to-medium term, they should be considered as two separate groups. “The first, comprising Nigeria and Turkey, should certainly not be ignored by any insurer with global ambitions, but may be considered more of a slow-burn investment,” he said. “In contrast, Mexico and Indonesia are starting to see considerable interest from global underwriting businesses.”
Mexico’s $27.35 billion premium income in 2013 is second only to Brazil’s US$88.93 billion in Latin America. The Mexican government will also spend $400 billion on projects in the next few years in sectors including energy tourism, transport, water, and urban development.
According to Mr Holderness, this will bring opportunities for foreign insurance and reinsurance as there is currently insufficient capacity in the domestic market to insure the large risks that these projects will entail.
The stand-out MINT market
Between Mexico and Indonesia, statistics suggest that Indonesia could be the more attractive insurance market. At 240 million, Indonesia has close to double Mexico’s population numbers, but only 70% of the Latin American country’s $1.26 trillion GDP.
Looking specifically at the insurance statistics, while both have similar insurance penetration rates, Indonesia’s premium per capita has plenty of room for growth. At $77, it is only 34.5% of Mexico’s per capita premium of $223. Indonesia’s premium income had also grown 12.43% (inflation-adjusted) in 2013, close to double that of Mexico’s 6.45%.
Describing Indonesia as a “stand-out market”, Mr Holderness said its year-on-year premium growth is five times the rate of Europe’s (2.16%) and the US’ (-2.49%). Globally, the growth rate was 1.44%.
Hence the country has seen a spate of deals with overseas insurers entering the market, and more are expected to come, he said. The government has taken steps to tighten up regulations significantly and strengthen the industry, such as new rules in capital requirements. Many small insurers are unlikely to be able to fulfil this, hence further M&A activities are expected, he said.
Mr John Cusano, Accenture’s Senior Managing Director of Global Insurance, had said that with GDP rising at 5.9%, “Indonesia has to be an attractive target for insurers.” The fairly low urbanisation rates (5.7% projected for 2015) will increase to 72.1% in 2050, with a fast-growing middle class. Insurance penetration is low, which should mean a huge opportunity, said Mr Cusano.
Indonesia, thus, clearly seems to be the pick of the MINT crop.