Abstract
While India may be less vulnerable to an export-led slowdown in growth than
China and other East Asian
economies, we are still expecting the coming
years to be difficult for the burgeoning economy. India has
enjoyed record
growth in recent years, due largely to a strong inflow of funds from overseas
investors
eager to get an early foothold in what will inevitably become
one of the world' s largest economies. India' s
GDP growth averaged 8.8%
between FY2003/04 (April-March) and FY2007/08, which we believe is 1.5-
2.0 percentage points above sustainable trend growth at 7.0-7.5%.
With
capital inflows now contracting sharply, we believe India will return to
below-trend growth in both
FY2008/09 and FY2009/10, with the main part of
the downside concentrated in the latter year. We are
forecasting growth of
6.8% and 5.0% in FY08/09 and FY09/10, respectively, a marked slowdown
compared with the 9.0-9.6% GDP growth rates recorded in the three preceding
fiscal years. Moreover,
with our new assumption of a more prolonged global
downturn extending well into 2010, we have also
decided to revise down our
GDP forecast for FY2010/2011, from 7.9% to 6.4%.
While this slowdown will
be felt across large swathes of Indian society, it is still far from the
negative
growth levels we are forecasting in other emerging economies such
as Singapore and South Korea. This is
because we believe that India is
more resilient to a global slowdown than other economies due to its low
exports-to-GDP ratio (14-15%) and an expected resilience in domestic
consumption due to lower food
and fuel prices raising the disposable
income of low-income households.
Since the last quarter, we have made two
major changes to the data in this report. First, we have – to the
greatest extent possible – incorporated hard figures that have been made
available by the regulator(s) and
trade association(s) in each country. In
some cases, therefore, we have begun to include numbers that
pertain to
the development of the insurance sector through the early stages of the global
financial crisis.
Second, we have extended our forecasts out to 2013. In
all cases, we have reviewed the key growth
drivers – non-life
penetration and life density – that we had incorporated in our
forecasts.
The global financial crisis is likely to affect the various
segments of the global insurance industry in
different ways. In many
countries – especially in Europe – the coming recession points to
softness in the
non-life segment. In many cases, the numbers of policies
may fall: there should be downwards pressure on
premiums. By contrast, the
main problem for the life segment – in almost all countries – is
the extreme
volatility of financial markets. Over the longer-term though,
the fortunes of life insurance will recover,
thanks to the secular growth
of organised savings in most countries. China, where the larger insurance
companies continue to achieve double digit growth in premium income, is a good
example of this. Some
particular niches should also do well in the current
environment, such as legal liability insurance.
In the Asia Pacific, we
profile 23 companies. These are AEGON, AIG, Allianz, Aviva, AXA, Cardif,
Fortis, Generali, Groupama, HDI-Gerling, HSBC Insurance, ING Group, Liberty
Mutual,
Manulife, MetLife, Prudential Financial, Prudential plc, QBE, RSA,
Sun Life Financial, The
Hartford, Principal Financial Group and Zurich
Financial Services.
We estimate that, over the course of 2008, total
premiums in India rose by 22% to INR 2,251,694mn.
Non-life premiums rose
by 13% to INR 308,228mn, while Life premiums rose by 23% to INR
1,943,466mn.
Between now and the end of the forecast period, we expect
that annual non-life premiums will grow by
INR 526,005mn, while annual
Life premiums should increase by INR 830,739mn. Growth in non-life
premiums should be driven by the general growth in nominal GDP plus a rise in
non-life penetration from
the current level of 0.67% to 1.00%. Growth in
Life premiums should be driven by the change in the
overall population and
a rise in life density from US$39.11 to US$50.00 per capita.
BMI’s
Insurance Business Environment Rating is 53.3.
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