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NEW YORK, Sept. 9, 2020—The world’s 10 largest insurance markets are cumulatively expected to see their Gross Domestic Product (GDP) decrease by nearly seven percent in 2020 compared to 2019 because of COVID-19, according to a new Insurance Information Institute (Triple-I) report.
“Premium growth is related to economic activity, and as of Q3 2020 GDP growth for the world’s 10 largest insurance markets is expected to decrease by –6.99 percent in 2020, compared to our previous estimate of -4.9 percent. COVID-19 and lower economic activity continue to hinder premium growth in property, workers compensation and auto, while a recent survey indicates that COVID-19 led to a reduction in life premium,” writes Dr. Michel Léonard, Vice President & Senior Economist, Triple-I, in his just-released Global Macro and Insurance Outlook: Q3 2020.
GDP represents the value of the total goods and services an economy produces in a single year whereas premium is the price paid for an insurance policy. Beyond premiums, insurers also generate revenue through investment income.
“The impact of structurally lower long-term interest rates on asset allocation is likely to be more significant for U.S. insurers than for their foreign counterparts for two reasons. First, U.S. carriers tend to hold more fixed income and less equity than their counterparts in other advanced or emerging economies. Second, U.S. carriers face significantly lower domestic interest rates than their counterparts in emerging economies,” Dr. Léonard states.
The world’s 10 largest insurance markets, in order, as defined by total premium written in 2018-2019, are: the United States, China, Japan, the United Kingdom, France, Germany, South Korea, Italy, Canada, and Taiwan. The Triple-I’s projection of a nearly seven percent GDP decrease in the world’s 10 largest insurance markets in 2020 as compared to 2019 was weighted based on the total premium written in each one.
Before offering an assessment of the Global Insurance Outlook, Dr. Léonard’s report also gives a Global Macro overview of the variables which impact all economies: Growth & Inflation, Monetary & Fiscal Policy, Equity Markets, and Commodities.