Between 2013 and 2018, Lloyd’s premiums surpassed global economic growth and global non-life commercial insurance growth.
But there is room for further expansion, as illustrated by the fact that global commercial insurance penetration sits at less than 1% and that Lloyd’s estimates the global insurance gap at US$163 bn.
A focus on mature and strategically important emerging markets
Lloyd’s continues to prioritise large, mature markets and strategically significant emerging markets. Analysis from Lloyd’s Market Intelligence highlights advanced markets in North America, Europe and Asia account for over 85% of global non-life commercial insurance premiums. Meanwhile, although China’s commercial insurance market is significantly smaller it is projected to expand rapidly, highlighting its strategic importance.
India, Brazil or Mexico are also expected to grow significantly, while other emerging markets will continue their ascending trajectory driven by booming demographics, rising middle classes and government-led infrastructure projects.
Intangible assets are the new frontier of innovation
At the same time as geographic shifts, there have been changes in the composition of the global economy. In 1975, the most important assets were tangible bricks and mortar assets; however Ocean Tomo, an Intellectual Property merchant bank, identified that by 2015 this had reversed with intangibles making up 84% of a company’s book value. Meanwhile, with a global value in excess of US$50 tn, Brand Finance found that for the first time in history intangible assets made up more than half of the global economy in 2018.
This increasing importance of brand and reputation over traditional bricks and mortar assets is shifting insurance demand. Aon’s 2019 Global Risk Management Survey revealed that reputation was the most important risk facing global businesses. Meanwhile, quantitative and qualitative intelligence shows that demand for cyber and data breach solutions continues to grow at a faster pace.
This change is also impacting traditional classes of insurance. Marsh’s 2019 Terrorism report found that business interruption is now increasingly important over traditional property classes. For example, the London Bridge terrorist attack of 2017 led to a police cordon around Borough Market with an estimated cost to businesses of 1.4 million, yet there was no damage to property.
Rising geopolitical tensions
Increased political and geopolitical instability is also driving demand for political risks insurance both in developed and emerging markets. Indeed, US-China trade tensions and Brexit continue to have significant impacts on a company’s ability to execute contracts and plan ahead with a degree of acceptable certainty.
In Lloyd’s alone, political risk and trade credit insurance has grown at a considerable pace since 2013, one of the fastest growing classes together with Cyber. Not surprisingly, demand for political risk is coming from clients located not just in more traditionally volatile markets but also in mature markets in North America and Europe.
Globally, it is predicted that growth in commercial non-life insurance will continue to be driven by key developed and strategically important emerging markets. However, demand for insurance solutions is shifting from covering physical property damage towards harder to insure risks, including cyber and reputation. Meanwhile, the resurgence of geopolitical tensions is driving demand for more innovative political risks solutions. Against this background, product and geographic innovation will prove decisive in securing an advantage over the competition.
Are you a Lloyd’s Market Participant and do you want to access global macroeconomic, non-life insurance and Lloyd’s trends? Do you want to speak to an expert? Contact the Market Intelligence team at WMID@lloyds.com or visit www.lloyds.com/marketintelligence