AM Best has assigned a stable market segment outlook to the Philippine non-life insurance market, underpinned by long-term growth prospects and positive regulatory developments.
In its Best’s Market Segment Report, “Market Segment Outlook: Philippines Non-Life Insurance” AM Best states that the Philippine non-life insurance segment had exhibited one of the highest growth rates in the Southeast Asian insurance industry in the period leading up to 2020. However, as a result of the COVID-19 pandemic, non-life premiums fell sharply during 2020. Premium revenues were impacted by a general slowdown in economic activity, as well as from challenges with distribution arising from insurance agents’ inability to physically meet with clients and to sell products in a conventional manner. Nevertheless, AM Best’s longer-term view of the economic fundamentals and non-life insurance growth in the Philippines is positive. Supporting factors for the stable outlook include:
- Solid growth prospects over the long term, supported by an increasing trend in GDP per capita, which is expected to drive higher demand and increased penetration for retail and commercial insurance products;
- Rising minimum net worth requirements for insurers that are expected to lead to market consolidation and strengthening of the industry’s combined capital position; and
- Increased use of digitalisation in retail sales and policy administration, which are expected to support expense efficiencies over time.
At present, the country’s non-life insurance penetration rate is very low as compared with the global average, which indicates the market’s significant untapped potential. Furthermore, the government’s “Build Build Build” programme is expected to be one of the key drivers of Philippines’ economic recovery; in turn, this is expected to catalyse the long-term growth of the property, cargo and engineering insurance segments.
A partially offsetting factor is the market’s very high exposure to natural catastrophe risks. The Philippines is considered one of the most catastrophe-prone countries in the world. Despite these hazard risks, the market continues to exhibit fierce competition in the fire insurance segment, with persisting soft pricing conditions.
To access the full copy of this market segment report visit http://www3.ambest.com/bestweek/purchase.asp?record_code=306878.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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