Life insurance premiums in advanced Asian markets continued to weaken, falling 2.1% in 2017 (2016: ?3.8%), according to the latest Swiss Re Institute sigma study, World Insurance in 2017.
In Japan, life premiums are estimated to have shrunk by around 6.1% in 2017 (2016: ?11%), reflecting continued weakness in annuity products after the cut of the standard assumed interest rate to 0.25%. In addition, consumers are delaying term life insurance purchases in anticipation of lower rates after the adoption of the new mortality table.
In South Korea, premiums are estimated to have fallen by 6.5%, as the growth of protection products eased after two years of strong increases, and sales of endowment policies remained weak.
Growth eased to around 6.7% in Hong Kong due to tightening controls on capital outflows from mainland China, but demand from Chinese visitors still account for around 33% of new individual life premiums.
In Taiwan, a strong increase in individual annuity premiums, albeit from a low base, contributed to higher growth, while Singapore´s stellar growth of 22% in 2017 was broad-based.
Low interest rates and volatile equity markets will continue to dampen growth of saving business. In Japan, major insurers have cut life premium rates from April 2018. However, the negative impact on premium growth will be partly offset by the release of pent-up demand that has built up in anticipation of the new mortality table. Overall, Asian insurers are looking to annuities and other venues for growth, with an increasing focus on protection products. Profitability will continue to be depressed.
Non-life insurance
In 2017, non-life premiums in advanced Asia grew by 1.4% (2016: 2.9%). Growth slowed in all markets except Taiwan. In Japan, the drag from the withdrawal of long term fire contracts is fading, but overall premiums failed to register growth as the compulsory motor rates were cut by around 6?7% in April 2017. In Hong Kong, a stronger contribution from accident and health (A&H) as well as motor drove growth. In South Korea, the steady growth in long-term business, particularly in A&H, partly compensated for the sluggish growth in motor due to rate cuts. In the case of Singapore, intense competition from new entrants and soft rates hindered overall non-life premium growth. In comparison, rising property rates and stronger car sales were the factors behind the stable premium increases in Taiwan.
Outlook
The outlook of advanced Asia varies by country. For instance, Japanese non-life insurers are planning to lower rates for voluntary motor by an average of 2-3% in 2018 due to lower claims, which will negatively impact premium growth. In Korea, it is expected that risk awareness and demand could increase after the earthquakes hit Pohang in November 2017 and Gyeongju in September 2016. A lack of catastrophe losses led to the improved profitability of non-life insurers in 2017.
Hong Kong, where underwriting profits dropped significantly due to increasing provisions for A&H business, is the exception. At the same time, lower motor claims have increased pressure on insurers to reduce premium rates in most markets.
Insurers also have to contend with low interest rates. In response, insurers in Japan increased the share of overseas stocks and bonds in their portfolios in search of higher yields. In April 2017, the FSA cut the standard assumed interest rate to 0.25% from 1%. Saving-type policies are becoming less attractive due to lower assumed standard interest rates, which also means higher policy reserve requirements. Some insurers are considering to stop selling single-premium saving products.
Starting in April 2018, life insurers have been required to use the new mortality table. Because of mortality rate reductions and increased average lifespans, life premium rates should decline, while medical and health insurance prices should go up. A