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This is BMI’s third report on the US’ insurance sector. The main aim of this report is to analyse the US’ non-life and life insurance segments in a global context.
One of the challenges revolves around the way in which accident and health insurance is treated. In most countries whose insurance sectors are surveyed by BMI, health insurance is considered part of the nonlife segment. In the US, however, only is small proportion of the entire health insurance sector is provided by property/casualty insurers, which are broadly analogous to non-life or general insurers in other countries. A larger proportion of health insurance is provided by life/health insurers, which, but for their involvement in accident and health insurance, would be broadly analogous to life insurers in other countries. However, the majority of health insurance coverage is provided by specialist health insurance plans, which are considered generally (and by us) to lie outside the mainstream insurance sector.
In order to determine a data series for the US non-life segment that is consistent with those calculated for other countries, we have used as a starting point the property and casualty direct premiums disclosed by the Insurance Information Institute (III) in its 2010 Insurance Fact Book. We have added the net health insurance premiums identified by the American Council of Life Insurers (ACLI) in its annual statistical publications. Accordingly, we consider that non-life premiums rose from US$598.83bn in 2005 to US$637.20bn in 2006, US$651.08bn in 2007 and US$654.65bn in 2008. These figures include health premiums written by life insurers that rose from US$118.69bn in 2005 to US$141.20bn in 2006, US$151.46bn in 2007 and US$165.03bn in 2008. In relation to 2009, we have assumed that gross premiums contracted by 2%. The III’s review of the Property & Casualty insurers’ 2009 results noted that net premiums shrunk by 3.7%.
Net premiums in Q110 were 1.3% lower than they had been in the previous corresponding period. 2009 marks the first occasion since the Great Depression of the 1930s that net premiums have fallen for three consecutive years. For the time being, we are looking for another 2% contraction in premiums in 2010. Meanwhile, life premiums (actually mostly contributions to individual and group annuities, together with premiums for individual and group life insurance, together with minor lines), rose from US$447.30bn in 2005 to US$478.48bn in 2006, US$515.26bn in 2007 and US$520.92bn in 2008. It appears to us that the health plans wrote around US$437bn in 2008. This is not included in our figures.
However, 2009 was a particularly challenging year for the life segment. A study of the top 25 life/health insurance companies by AM Best, which was published in March 2010, found that net premiums of these organisations contracted by 17.9% to US$465bn in 2009. In its annual review of the global insurance industry, Swiss Re indicated that life premiums in the US fell by 15%. This slump was ‘unprecedented’, as ‘weakening consumer demand and capacity constraints adversely impacted new business in all major business lines.’
Unsurprisingly, given the volatility of global financial markets in Q408, savings and equity-linked products suffered the most.
For the time being, we are looking for life premiums to contract by another 2% over 2010 as a whole. Nevertheless, we recognise that sales of particular products may contract by much more than this. According to figures published by Beacon Research and the Insured Retirement Institute, and cited by Best’s Insurance News, sales of individual fixed annuities in Q110 fell by 52% - relative to the previous corresponding period – to US$16.7bn or so.
The US insurance sector accounts for about one-quarter of total premiums written by non-life and life companies worldwide. Around one-third of all reinsurance sold worldwide is bought by US firms. Aside from its absolute size, we suggest that it stands out from other national insurance markets for the following reasons:
It is comparatively fragmented, even though a process of consolidation has been underway for some years. Companies such as State Farm (in the non-life segment) and MetLife (in the life segment) have powerful brands, access to economies of scale and several other advantages. Nevertheless, their respective 12% of total property/casualty premiums and 13% of life/health premiums are unusually large in that they are in double digits. Even in analyses of particular lines, double-digit market shares are the exception rather than the norm. Among the health plans, whose premiums we have not included in the premium figures discussed above, the largest player appears to be United Health Group, with a market share of 13%.
Mutuals account for substantial minority of the market. Conventional wisdom would suggest that, in the country with the world’s largest and most sophisticated capital markets, almost all insurance companies would be listed public companies in order to facilitate access to capital. The success and size of companies like New York Life and State Farm is that some of the leading players do not need such access and instead focus on delivering the benefits of mutual status to their policyholders/ members.
Foreign groups account for about one-eighth of each of the non-life and the life segments. Zurich is the largest foreign player in the overall non-life segment, while ING, AEGON and John Hancock have top- 10 positions in the overall life segment. The foreign groups present all have the economies of scale, both within the US and in their businesses elsewhere, to compete.
The US is too big for foreign multinationals to ignore. Absolute size of the opportunity that is available to foreign multinationals means that all large companies with international aspirations should have clear reasons for not being active in the US – if that is their decision. The US economy and insurance sector may not be growing as rapidly as that of say China, but the restrictions and the relative sizes of entrenched local players are far less of a problem. Furthermore, the regulatory environment if vastly more transparent.
Similarly, the vast majority of US insurance companies see no need to pursue expansion abroad. We estimate that AIG accounted for one-sixth of non-life premiums and one-third of life premiums written by US companies outside the US in 2006. In spite of AIG’s well publicised financial problems – which do not stem from its traditional property/casualty or life/health businesses – we suspect that the same is broadly true today. In spite of its disposal of key businesses in Brazil and Taiwan over the last year or so and many smaller assets, AIG is still the US insurer with the largest global footprint. However, its global orientation makes AIG the exception rather than the rule.
Reinsurance is the main section of the market where foreign and (ultimately) foreign-owned companies have the edge. The Lloyd’s market in London, leading Bermuda-based reinsurers, such as XL and multinationals such as Swiss Re, Munich Re and Hanover Re, account for about 80% of the reinsurance premiums written annually in the US.
Unsurprisingly, auto-related lines are enormous businesses for the non-life insurers. In 2008, for instance, private passenger auto premiums amounted to more than US$160.0bn, while commercial auto premiums were in excess of US$26.0bn. However, the sophistication of the US non-life market, together with the high level of litigiousness, means that auto-related lines are a smaller percentage of total non-life premiums than they are in other countries. Conversely, liability insurance is more important in the US than it is in most other markets. Medical malpractice liability insurance alone, for instance, is a US$11.0bn business.
The popularity of individual annuities is an aspect of the US life sector which sets it apart from its counterparts in other countries. Annuities can be fixed or variable, immediate or deferred and are distributed through a variety of channels. In 2008, contributions to ordinary individual annuities were more than US$220.0bn. Contributions to group annuities were nearly US$127.0bn. Ordinary life and group life insurance premiums were US$137.0bn and nearly US$31.0bn respectively.
Diversity in distribution channels is a distinctive feature. In most countries whose insurance sectors are surveyed by BMI, insurers tend collectively to focus on one or two distribution channels. In the US, however, both non-life and life insurers are substantial users of tied agents, independent brokers, in-house sales networks, direct sales channels (including the internet) and (for life insurers), stockbrokers, financial planners and banks. This is another sign of the competitive pressures.
Aside from focusing on particular distribution channels, insurance companies also differentiate themselves by pricing, product features and brand.
Competitive pressures contribute to the typically slow growth rates of both non-life and life segments. Life penetration is also constrained by the abundance of organised savings products that fall outside the purview of the insurance sector. Nevertheless, the absolute increases in premiums that BMI forecasts for the next five years are substantial.
There is no federal regulator of the entire insurance sector. Insurers are subject to regulation by the relevant authority in the state in which they are chartered and must be licensed by regulators in other states in which they operate. Some companies are arguing for a federal regulator to be set up. However, although the existing regime gives rise to interstate inconsistencies and additional costs, it has generally served the insurers and their customers well. Aside from AIG, whose problems did not originate in its insurance businesses, failures of insurance companies have tended to be few and small. The US is an important domicile for captive insurance companies. This is despite the proximity and attractions of well-established offshore domiciles such as Bermuda and the Cayman Islands
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Contact:
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Tel: +1-888-989-8004
http://reportsandreports.blogspot.com/
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Browse All Business Monitor International Market Research Reports
This is BMI’s third report on the US’ insurance sector. The main aim of this report is to analyse the US’ non-life and life insurance segments in a global context.
One of the challenges revolves around the way in which accident and health insurance is treated. In most countries whose insurance sectors are surveyed by BMI, health insurance is considered part of the nonlife segment. In the US, however, only is small proportion of the entire health insurance sector is provided by property/casualty insurers, which are broadly analogous to non-life or general insurers in other countries. A larger proportion of health insurance is provided by life/health insurers, which, but for their involvement in accident and health insurance, would be broadly analogous to life insurers in other countries. However, the majority of health insurance coverage is provided by specialist health insurance plans, which are considered generally (and by us) to lie outside the mainstream insurance sector.
In order to determine a data series for the US non-life segment that is consistent with those calculated for other countries, we have used as a starting point the property and casualty direct premiums disclosed by the Insurance Information Institute (III) in its 2010 Insurance Fact Book. We have added the net health insurance premiums identified by the American Council of Life Insurers (ACLI) in its annual statistical publications. Accordingly, we consider that non-life premiums rose from US$598.83bn in 2005 to US$637.20bn in 2006, US$651.08bn in 2007 and US$654.65bn in 2008. These figures include health premiums written by life insurers that rose from US$118.69bn in 2005 to US$141.20bn in 2006, US$151.46bn in 2007 and US$165.03bn in 2008. In relation to 2009, we have assumed that gross premiums contracted by 2%. The III’s review of the Property & Casualty insurers’ 2009 results noted that net premiums shrunk by 3.7%.
Net premiums in Q110 were 1.3% lower than they had been in the previous corresponding period. 2009 marks the first occasion since the Great Depression of the 1930s that net premiums have fallen for three consecutive years. For the time being, we are looking for another 2% contraction in premiums in 2010. Meanwhile, life premiums (actually mostly contributions to individual and group annuities, together with premiums for individual and group life insurance, together with minor lines), rose from US$447.30bn in 2005 to US$478.48bn in 2006, US$515.26bn in 2007 and US$520.92bn in 2008. It appears to us that the health plans wrote around US$437bn in 2008. This is not included in our figures.
However, 2009 was a particularly challenging year for the life segment. A study of the top 25 life/health insurance companies by AM Best, which was published in March 2010, found that net premiums of these organisations contracted by 17.9% to US$465bn in 2009. In its annual review of the global insurance industry, Swiss Re indicated that life premiums in the US fell by 15%. This slump was ‘unprecedented’, as ‘weakening consumer demand and capacity constraints adversely impacted new business in all major business lines.’
Unsurprisingly, given the volatility of global financial markets in Q408, savings and equity-linked products suffered the most.
For the time being, we are looking for life premiums to contract by another 2% over 2010 as a whole. Nevertheless, we recognise that sales of particular products may contract by much more than this. According to figures published by Beacon Research and the Insured Retirement Institute, and cited by Best’s Insurance News, sales of individual fixed annuities in Q110 fell by 52% - relative to the previous corresponding period – to US$16.7bn or so.
The US insurance sector accounts for about one-quarter of total premiums written by non-life and life companies worldwide. Around one-third of all reinsurance sold worldwide is bought by US firms. Aside from its absolute size, we suggest that it stands out from other national insurance markets for the following reasons:
It is comparatively fragmented, even though a process of consolidation has been underway for some years. Companies such as State Farm (in the non-life segment) and MetLife (in the life segment) have powerful brands, access to economies of scale and several other advantages. Nevertheless, their respective 12% of total property/casualty premiums and 13% of life/health premiums are unusually large in that they are in double digits. Even in analyses of particular lines, double-digit market shares are the exception rather than the norm. Among the health plans, whose premiums we have not included in the premium figures discussed above, the largest player appears to be United Health Group, with a market share of 13%.
Mutuals account for substantial minority of the market. Conventional wisdom would suggest that, in the country with the world’s largest and most sophisticated capital markets, almost all insurance companies would be listed public companies in order to facilitate access to capital. The success and size of companies like New York Life and State Farm is that some of the leading players do not need such access and instead focus on delivering the benefits of mutual status to their policyholders/ members.
Foreign groups account for about one-eighth of each of the non-life and the life segments. Zurich is the largest foreign player in the overall non-life segment, while ING, AEGON and John Hancock have top- 10 positions in the overall life segment. The foreign groups present all have the economies of scale, both within the US and in their businesses elsewhere, to compete.
The US is too big for foreign multinationals to ignore. Absolute size of the opportunity that is available to foreign multinationals means that all large companies with international aspirations should have clear reasons for not being active in the US – if that is their decision. The US economy and insurance sector may not be growing as rapidly as that of say China, but the restrictions and the relative sizes of entrenched local players are far less of a problem. Furthermore, the regulatory environment if vastly more transparent.
Similarly, the vast majority of US insurance companies see no need to pursue expansion abroad. We estimate that AIG accounted for one-sixth of non-life premiums and one-third of life premiums written by US companies outside the US in 2006. In spite of AIG’s well publicised financial problems – which do not stem from its traditional property/casualty or life/health businesses – we suspect that the same is broadly true today. In spite of its disposal of key businesses in Brazil and Taiwan over the last year or so and many smaller assets, AIG is still the US insurer with the largest global footprint. However, its global orientation makes AIG the exception rather than the rule.
Reinsurance is the main section of the market where foreign and (ultimately) foreign-owned companies have the edge. The Lloyd’s market in London, leading Bermuda-based reinsurers, such as XL and multinationals such as Swiss Re, Munich Re and Hanover Re, account for about 80% of the reinsurance premiums written annually in the US.
Unsurprisingly, auto-related lines are enormous businesses for the non-life insurers. In 2008, for instance, private passenger auto premiums amounted to more than US$160.0bn, while commercial auto premiums were in excess of US$26.0bn. However, the sophistication of the US non-life market, together with the high level of litigiousness, means that auto-related lines are a smaller percentage of total non-life premiums than they are in other countries. Conversely, liability insurance is more important in the US than it is in most other markets. Medical malpractice liability insurance alone, for instance, is a US$11.0bn business.
The popularity of individual annuities is an aspect of the US life sector which sets it apart from its counterparts in other countries. Annuities can be fixed or variable, immediate or deferred and are distributed through a variety of channels. In 2008, contributions to ordinary individual annuities were more than US$220.0bn. Contributions to group annuities were nearly US$127.0bn. Ordinary life and group life insurance premiums were US$137.0bn and nearly US$31.0bn respectively.
Diversity in distribution channels is a distinctive feature. In most countries whose insurance sectors are surveyed by BMI, insurers tend collectively to focus on one or two distribution channels. In the US, however, both non-life and life insurers are substantial users of tied agents, independent brokers, in-house sales networks, direct sales channels (including the internet) and (for life insurers), stockbrokers, financial planners and banks. This is another sign of the competitive pressures.
Aside from focusing on particular distribution channels, insurance companies also differentiate themselves by pricing, product features and brand.
Competitive pressures contribute to the typically slow growth rates of both non-life and life segments. Life penetration is also constrained by the abundance of organised savings products that fall outside the purview of the insurance sector. Nevertheless, the absolute increases in premiums that BMI forecasts for the next five years are substantial.
There is no federal regulator of the entire insurance sector. Insurers are subject to regulation by the relevant authority in the state in which they are chartered and must be licensed by regulators in other states in which they operate. Some companies are arguing for a federal regulator to be set up. However, although the existing regime gives rise to interstate inconsistencies and additional costs, it has generally served the insurers and their customers well. Aside from AIG, whose problems did not originate in its insurance businesses, failures of insurance companies have tended to be few and small. The US is an important domicile for captive insurance companies. This is despite the proximity and attractions of well-established offshore domiciles such as Bermuda and the Cayman Islands
About Us
ReportsandReports comprises an online library of 10,000 reports, in-depth market research studies of over 5000 micro markets, and 25 industry specific websites. Our client list boasts almost all well-known publishers of such reports across the globe. We as a third-party reseller of market research reports employ a number of marketing tools, such as press releases, email-marketing and effective search-engine optimization techniques to drive revenues for our clients. We also provide 24/7 online and offline support service to our customers.
Contact:
Ms. Sunita
7557 Rambler road,
Suite 727, Dallas, TX 75231
Tel: +1-888-989-8004
http://reportsandreports.blogspot.com/
http://reportsandreports.proarticles.co.uk/
http://reportsnreports.wordpress.com/
