The trend of increasing non-peak zone insured losses has coincided with rapid economic growth in emerging economies. During the last decade, developing nations have driven global economic growth, symbolized by China becoming the second-largest economy in the world. Increasingly stable economic and socio-political conditions in many countries in Asia, Latin America, the Middle East, Eastern Europe and Africa have supported growing investment in these regions because of the attractive opportunities for companies seeking long-term growth.
The rapid growth in emerging regions, and slow or stagnant growth in established markets, has prompted insurers and other companies to increasingly look toward new regions for top-line growth. Latin America and South and East Asia in particular have been pinpointed as important markets for the sector, with significant growth opportunities predicted for the future.
The contribution made by emerging markets to overall global economic growth increased by more than 10 percent from 2001 to 2010. This meant developing economies accounted for approximately two thirds of overall global economic growth by 2010. Despite forecasts of more moderate economic expansion in emerging markets, growth here is expected to continue to outpace that of the advanced economies over the next five years (see Figure 1).
The transformation of emerging nations in Asia to service-based economies, along with buoyant demand in Latin American markets, will drive this growth. Indeed, emerging markets are expected to make up around 40 percent of the world economy by 2017, according to the International Monetary Fund. The rapid expansion of wealth in these regions, particularly among the middle classes, has created opportunities for many companies, including insurers and reinsurers. Indeed, a recent study (1) found the middle classes now make up 40 percent to 50 percent of the population in many developing countries. Moreover, the establishment of manufacturing facilities, strong infrastructure investments, land development, construction, growing personal wealth and increased international trade has driven demand for various types of insurance products in these regions.