Socioeconomic fundamentals drive insurance growth in region — Moody’s

Strong socioeconomic fundamentals will continue to support the growth of the insurance sector in the Southeast Asian region, including the Philippines, according to Moody’s Investor Service.

In a statement, Moody’s assistant vice president and analyst Frank Yuen noted the positive growth prospect of the insurance sectors in different Southeast Asian nations, particularly the Philippines, Indonesia, Malaysia, Singapore, Thailand and Vietnam, on the back of strong socioeconomic fundamentals.

“The strong fundamentals include urbanization, a grow- ing middle class, low insurance penetration, and the lack of a sufficiently funded welfare system,” Yuen said.

However, he said the pace and quality of insurance growth in the region will vary per country, depending on the market maturity, financial depth, demographic and policies.

“The insurance industry in these countries are finding different ways to overcome common growth bottlenecks,” Yuen said.

The bottlenecks include difficulties in expanding and enhancing distribution capabilities, low protection content in mainstream products, shallow bond markets that limit investment options, and an increasing need to improve the capacity of industries to withstand shocks and support growth through tightening risk-based capital regimes.

Yuen said governments in the region have also adopted policies to address the widening protection gaps in the region.

In addition, Moody’s said economic incentives for insurance coverage are now emerging throughout the region, particularly in medical and retirement coverage.

According to Moody’s, governments in the region are able to provide some health coverage to the public, but the ability to sustain such coverage varies, leading to opportunities for commercial insurers.

“Similarly, economic developments in the region will continue to support the growth of non-life premiums,” Yuen said.

In particular, Moody’s said the high exposure of the Philippines to natural disasters has fueled the demand for catastrophic loss coverage.

Moody’s also noted that insurance distribution throughout the region is dominated by agencies and brokers, which are uneven in quality, coverage and geographical reach.

The Philippines’ insurance industry has seen sustained growth in terms of premium income in the first half.

According to data from the Insurance Commission, the premium income of stakeholders in the insurance industry jumped more than 24 percent to P145.76 billion from P117.29 billion the same period last year.

Broken down, the premium income of the life insurance sector in the first six months grew by 28 percent to P116.14 billion from P90.79 billion a year ago.

The non-life insurance sector also posted P24.44 billion in net premiums, 10 percent higher than the P22.2 billion recorded in the same period in 2017.