AllianzTrade17May202304101418Lookingback:stronggrowthAftertheinflationshockLookingahead:dramaticchangebelowthesurfaceInsurance'sroleasanchorinturbulenttimesAllianz

ResearchAnchor

inturbulent

timesAllianz

Global

Insurance

Report2023Allianz

ResearchE

xecutiveSummar

y?

Total

global

insurance

premium

income

amounted

to

almost

EUR5.6trn

in

2022.Liferemainsthelargestsegment(EUR2.6trn),aheadofp&c(EUR1.8trn)andhealth(EUR1.1trn).Lastyear,

thepremiumpoolgrewbyEUR259bnor+4.9%–againstthebackdropofaglobalinflationrateof8.6%.Arne

Holzhausen?Head

ofInsurance,WealthandTrendsarne.holzhausen@?

However,

the

three

segments

fared

very

differently:

Whileproperty

andcasualty(p&c)clockedrobustgrowthof+8.7%,

healthexpandedbyamoremodest+4.9%,andlifeinsurancemarketgrowthwasadismal+2.4%:squeezedrealhouseholdincomestookatollonprivatesavings.??

The

rise

in

p&c

premiums

was

driven

by

all

regions

around

the

globe.

However,withEUR77.5bn(+9.9%),

morethanhalfoftheglobalincreasein2022camefromNorthAmericaalone;withpremiumincomeofEUR860bn,theregionremainsbyfarthelargestmarketworldwide.Asia,

too,sawhealthygrowthof+8.4%lastyear(+EUR31bn).

WithtotalpremiumincomeofnearlyEUR403bn,theregionovertookEuropeforthefirsttime(+4.0%orEUR15bntoEUR397bn).?MichaelaGrimmSenior

Economistmichaela.grimm@?

Life

insurance

markets

suffered

last

year,

particularly

in

Western

Europe:Premiumincomedeclinedbyalmost-3%in2022(-EUR21bntoEUR740bn).GrowthwasdisappointinginAsia,

too,recordingamodestincreaseof+3.6%(+EUR33bntoEUR952bn).As

inp&c,

NorthAmericawasthemaingrowthdriverin2022,addingEUR61bninnewpremiums(+7.8%

toEUR840bn).America’sdominanceisevenmorepronouncedinhealth,wheretheUSmarketaccountsforaroundtwo-thirdsofallpremiumincomeworldwide.KathrinStoffelExpert

WealthMarketskathrin.stoffel@??

North

America

–

i.e.,

the

US,

which

accounts

for

94%

of

the

region’s

premiumpool

–

dominated

the

global

insurance

market

not

only

in

2022,

but

overthe

last

decade:

Morethanhalfoftheincreaseinglobalpremiumincomeinp&candhealthwasgeneratedthere.Inlife,theshareisstillslightlybelowone-third,whileAsia

commandsthebiggestsliceofthecake.As

aresult,theregion’sglobalmarketsharerosefromanalreadyimpressive39.6%

in2012toawhopping43.9%in2022.ThisisinsharpcontrasttoWesternEurope,whichlostmorethan6ppstoreach23.8%.

Theotherclear“l(fā)oser”isJapan(-3.7pps

to5.5%),whileChinawasabletoalmostdoubleits

globalshareto11.4%;therestofAsiastoodat10.1%.PatriciaPelayo-RomeroExpert

Insurancepatricia.pelayo-romero@withtheparticipation

ofLucas

Chaka?

In

economic

terms,

navigating

an

inflationary

environment

will

be

the

biggestchallenge

in

the

coming

years.

Fivestructuraldriverswilldetermineinflation(the"FiveDs"):

demographics,deglobalization,decarbonization,digitalizationResearchAssistantlucas.chaka@217

May

2023anddebt.Overall,thefiveDs

mightsignificantlylift

annualinflationbyupto1pp.??

Despite

higher

inflation

–

or

perhaps

precisely

because

of

it

–

premiums

areset

to

increase

by

+5.2%

p.a.

over

the

next

decade,

adding

EUR4,190bn

to

theglobal

premium

pool.

In2033,premiumincomewillreachEUR4.3trninlife,EUR3.1trninp&candEUR2.3trninhealth.??

With

EUR1,726bn,

most

of

the

increase

will

be

in

the

life

segment.

However,annual

growth

(+4.7%)

over

the

next

decade

is

likely

to

lag

well

behind

generaleconomic

growth

(+5.2%).

Insurancepenetrationwillthusfallby0.3ppsto2.8%.Asia

willremainthegrowthengineforthegloballifebusiness,withannualgrowth(ex.Japan)expectedtoriseto+7.5%.

Theregionshouldaccountforhalfofabsolutepremiumgrowth(EUR866bn),morethanNorthAmerica(EUR377bn)andEurope(EUR276bn)combined.??

In

the

p&c

segment,

additional

premiums

will

amount

to

EUR1,282bn

by

2033.Thisrepresentsanannualgrowthrateof+5.0%,roughlyinlinewiththepreviousdecade(+5.1%)

andgeneraleconomicgrowth(+5.2%);insurancepenetrationwillthereforedecreaseonlyslightlyby1pp(to

2.0%).

As

inthelifesegment,Asia

(ex.Japan)isthecleargrowthchampionamongthemajorregions,withanannualrateof+8.1%.Inabsoluteterms,however,theimportanceoftheregionislowerthaninthelifesegment:"only"around35%

oftheexpectedpremiumgrowth(EUR448bn)isattributabletoAsia,

againstEUR357bninNorthAmericaandEUR168bninEurope.??

In

view

of

the

major

technological

upheavals

and

new

and

rising

risks,

thisforecast

–

which

suggests

continuity

–

may

come

as

a

surprise.

However,thisappliesonlytothesurfaceofpremiumgrowth.Theunderlyingchangesaredramatic.??

Technology

will

change

how

insurers

operate.

Ecosystems,forinstance,willplayadecisiveroleincustomeraccess,offeringnotonlyindividualproductsbutcomprehensive"solutions"forcustomerneeds,be

itformobility,living,travel,wealthorhealth.Artificialintelligenceopensunimaginedpossibilitiesindataanalyticsandcouldrevolutionizetheentirevaluechainfromunderwritingtoclaimshandling.??

Preserving

its

social

relevance

–

and

with

it

its

billion-dollar

premium

pool

–the

industry

is

facing

a

fundamental

change

in

its

business

model:

Thevaluepropositionofinsurerswillevolve,frompurefinancialcompensationtoriskmanagementandholisticserviceofferingstopreventandmitigaterisks.

Thisfollowsaninescapablelogic:To

closethehugeprotectiongaps–inNatCat,cyber,healthorpension–mobilizingmorepremiumsmightnotbe

enough;avoidingrisksinthefirstplacewillbecomemoreandmoreimportant.??

However,

this

transformation

will

play

out

over

a

long

time.

In

the

meantime,insurance

can

prove

their

worth

in

turbulent

times

of

high

inflation

and

lowgrowth.

Theinsuranceindustrycannotundoinflation,butitcansmoothouttheimpact,actingasakindofbuffer.Its

resilienceintermsofliquidityandcreditmakesitabellwetherfortheinvestmentsneededtofinancethegreentransition.Insuranceisanessentialshockabsorberasitflattensthecurveoftheeconomiccycle.3Allianz

Research?

TLooking

back:strong

grow

thTheglobalinsuranceindustryprovedtoberesilientinto6.9%in2021

and6.6%in2022.However,thedecline2022:InsurersworldwidecollectedmorethanEUR5.6trnin

ofinsurancepenetrationisnotjusttheconsequenceoflife,p&candhealthinsurancepremiums,morethaneverbefore.Theincreaseoverthepreviousyearamountstoanestimated+4.9%,inlinewiththeaveragegrowthrateofthepastdecade(CAGR1

2012-2022:+5.0%).sky-highinflation.Itmustbeseenasalonger-termtrend–albeitwithhugedifferencesbetweenthesegments.Whilehealthinsuranceincreasedinrelevanceoverthelastdecade(albeitfromalowlevel)andp&cmanagedtonarrowlydefendits

turf

(not

surprisinglyasmanyp&cinsuranceproductsaremandatory),lifeinsurancedroppeddramatically:firstultra-lowinterestratesandnowsqueezedrealincomeshavetakenatollonprivatesavings(seeFigure1).However,therobustdevelopmentmustbe

seenagainstthebackdropofrapidlyrisinginflation:Inthelastyearalone,theglobalinflationrateislikelytohavedoubledfrom4.3%

to8.6%.

Inrealterms,therefore,thepictureisbecomingmuchgloomier.Moreover,thegrowthmomentumhassloweddownconsiderablycomparedtothepreviousyear(+7.1%

in2021)

duetotheweakdevelopmentinthelifesector.Theupshot:Forasecondyearinarow,premiumgrowthtrailedbehindoveralleconomicgrowthandinsurancepenetration(premiumsasapercentageofGDP)continuedtofall,from7.1%

in20201

CompoundAnnualGrowthRate.417

May

2023Figure

1:

LosingrelevanceGlobalgrosswritten

premiums*andnominalGDP

growth*(y/y,in%)

andglobalgrosswritten

premiums*as

%ofGDP

bysegments8.012.07.00.810.08.06.04.02.00.0-2.06.05.04.03.02.01.00.01.32.12.23.93.1lifep&chealth2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022GWP

(life,

p&c

and

health)20122022*The

conversion

intoEUR

is

based

on

2022

exchange

rates.Sources:

National

financial

supervisory

authorities,

insurance

associations

and

statistical

offices,

Axco,

Refinitiv

Datastream,

AllianzResearch.Figure2depictsthegrowthdynamicin2022byregionand

wheregrowthsignificantlysloweddownfrom+9.3%andlineofbusiness.Theglobalmarketgrowthin2022wasprimarilyfedbythesharpriseinp&cpremiumincome:Withanincreaseof+8.7%,

premiumsforp&cinsuranceproductswrittenworldwideoutpacedhealthandlifeinsurancemarketgrowth(+4.9%

and+2.4%,respectively)byawidemargin.Andincontrasttoboththesesectors–+6.5%,

respectively,in2021

–thepaceofp&cpremiumgrowthevenacceleratedcomparedtothepreviousyear(+6.4%in2021).Figure

2:

LifeisadragGrosswritten

premiumgrowth*,2022byregionin%WorldNorthAmericatotalhealthlifeWesternEuropeAsiaex

JPN&CHNRestoftheWorldp&cCHNJPN-15.0-10.0-5.00.05.010.015.020.0*The

conversion

intoEUR

is

based

on

2022

exchange

rates.

Japan:

Health

is

part

of

life(thirdsector

products).Sources:

National

financial

supervisory

authorities,

insurance

associations

and

statistical

offices,

Axco,

Refinitiv

Datastream,

AllianzResearch.5Allianz

ResearchThesurgeinp&cbusinesslastyearwasdrivenbyallregionsaroundtheglobe.AtthetopofthelistisNorthAmericaor,

moreprecisely,theUSalone:WithalmostEUR77.5bn,morethanhalfoftheworldwideincreaseinp&cpremiumscamefromthere(seeFigure3).

In2022,theUSp&cmarketstoodatanestimatedEUR802bn,correspondingtoayear-over-yeargrowthofnearly+10%(CAGR2012-2022:+5.4%)andaglobalmarketshareofnearly45%.TheUSmightnolongerbe

theundisputedglobalhegemonbutinthep&cbusinessitstillrulestheworld.withtheregionalaverage,thedevelopmentinsmallermarketssuchasAustria(+6.7%),Greece(+6.5%)andPortugal(+6.4%),forexample,wasclearlyabove.WesternEuropeaccountedforaround22%ofglobalpremiumvolumeattheendof2022(EUR397bn).Asia's

p&cinsurancemarketgrowthincreasedsignificantlyfromonly+1.6%

in2021

to+8.4%lastyear,

surpassingthelong-termaverage(CAGR2012-2022:+6.7%).Themaindriverofthereturnto“normal”AsiangrowthrateswastherecoveryoftheChinesemarket,whichaddedEUR12.2bninpremiums,almostasmuchasWesternEurope.AnotherEUR16.5bninadditionalpremiumswaswrittenintherestofAsia

(withoutJapan),underliningtheimportanceoftheregionfortheglobalinsuranceindustry(seeFigure3).Accordingtoourprojections,insurersinWesternEuropewrote+4.0%

morep&cbusinessintheregionthaninthepreviousyear,

thehighestannualincreasesince2017.

Inabsoluteterms,theincreaseamountedtoEUR15.3bn–onlyafractionofthegrowthseenintheUS.Insyncwiththeglobaldevelopment,thepaceofpremiumgrowthdidnotonlyaccelerate–albeitslightly–comparedtothepreviousyear(+3.9%

in2021)

butwasalsowellabovetheaverageannualgrowthduringthepastdecade(CAGR2012-2022:+2.5%).Whilepremiumgrowthinthecontinent’slargestmarket,Germany(+4.0%),wasinlineIn2022,Asianp&cpremiumincomeamountedtotheequivalentofnearlyEUR403bn,correspondingtoaglobalmarketshareofjustunder22%.

Thus,forthefirsttime,theentireregionwrotemorepremiumsinp&cthanWesternEurope.However,theAsianinsurancemarketisanythingbutahomogeneousmass.Thegrowthratesareinverselyproportionatetothematurityoftheindividualmarkets:Figure

3:

UShegemonyAbsolutepremiumgrowth*,2022byregioninEURbnJPNCHNRestoftheWorldWesternEurope16.5NorthAmericaAsiaex

JPN&CHN77.561.02.415.320.935.312.822.37.02.82.512.2-12.45.3-20.6-1.7lifep&chealth*The

conversion

intoEUR

is

based

on

2022

exchange

rates.

Japan:

Health

is

part

of

life(thirdsector

products).Sources:

National

financial

supervisory

authorities,

insurance

associations

and

statistical

offices,

Axco,

Refinitiv

Datastream,

AllianzResearch.617

May

2023themorematureamarketintermsoftheinsurancehalfofthatbeingunderwritteninthetwo

largestmarkets,theUKandFrance,alone.Withintheregion,however,thedevelopmentwasanythingbuthomogeneous.Marketswithhighsharesofsingle-premiumorunit-linkedproductsexperiencedhefty

declinesinpremiums.WhilethelifeinsurancemarketintheUK,

forinstance,isestimatedtopenetrationrateanddensity2

,thelowerthegrowthrates1tendtobe.InthewealthiermarketssuchasHongKong(1.4%),Japan(+3.7%)

andSingapore(+3.9%),

growthin2022wasinthelowsingledigits.Themostdynamicgroupofcountries,ontheotherhand,achieveddouble-digitpremiumgrowthacrosstheboard:Forexample,according

havegrownbyalmost+5%,premiumincomeinFrancetoourprojections,theincreasesrangedfromjustunder+12%

inMalaysiaandmorethan+16%

inIndonesiaandSriLankato+24%

inthePhilippines.Intermsofvolume,theAsianinsurancemarketisstilldominatedbythetwoheavyweights

ChinaandJapan,which,takentogether,accountforalmosttwo-thirdsofregionalp&cpremiumincome.ChinaalreadyovertookJapanin2010.

Lastyear,

whenits

p&cpremiumincomegrewby+7%,

China’smarketwasalmostthreetimesasbigasJapan’s.Takingcontractedbycloseto-3%.Germanyalsoreportedadeclineof-7%

afteraminusof0.4%inthepreviousyear.Inthesouthernpart

ofthecontinent,Italy(-11%)

andPortugal(-22%)recordedsharpdeclines,whileSpainandGreeceshowedincreasesof+4.2%

and+2.4%,respectively.Overall,premiumgrowthin2022waswellbelowthe–alreadyrelativelyweak–regionallong-termaverage(CAGR2012-2022:+1.8%).thesetwo

countriesoutoftheequation,marketgrowthfor

BesidesWesternEurope,lifeinsurancemarkettheregionwas+12.8%lastyear,

wellabovethelong-termaverageof+6.9%overthepastdecade.developmentsdisappointedinlargeparts

ofAsia.

At+3.6%,regionalpremiumgrowthwaswaybelowthelong-termaverage(CAGR2012-2022:+4.5%),

butatleastsomewhatbetterthantheglobalaverage(+1.9%).

AsinWesternEurope,nouniformpatternwasdiscernibleatthecountrylevel:On

theonehand,bothsaturatedmarketssuchasHongKong(-5.5%)andTaiwan

(-26%)

andcountrieswithastrongneedtocatchup,suchasIndonesiaAllotherinsurancemarkets(restoftheworld,globalmarketshareof8.3%)

recordedgrowthofaround+16%inthep&csegment(CAGR2012-2022:+7.5%),

drivenbystrong(largelyinflation-related)increasesinEasternEurope(around+35%)andLatinAmerica(more

than+23%).Thesetwo

regionsaccountforjustunder24%

anda

(-7.8%),

thePhilippines(-0.5%)andThailand(-2.3%),sawgood36%,respectively,ofthisgroupofcountries’marketvolume.negativegrowth.On

theotherhand,bothChinaandJapan,accountingforaround60%

ofregionalpremiumincome,showedpositivegrowth.However,ataround+10%,

lifepremiumsinJapangrewmorethantwiceasfastasthoseintheMiddleKingdom.Themaindriverwereso-called“thirdsector”

products,whicharehealthpoliciessoldbylifeinsurersthatbenefitedfromelevateddemandforhealthprotectionintheaftermathofCovid-19.

Attheendoflastyear,

theregion’slifeinsurancemarketstoodatanestimatedEUR937bn,correspondingtoaglobalmarketshareof36%.Excludingthetwo

largestmarkets,theregionpostedaslightdeclineof-0.4%

lastyear(CAGR2012-2022:+5.6%).Inthehealthsegment3

,thedominanceoftheUSis2evenmorepronounced.Notonlywasthebulkofnewpremiumsin2022writtenintheUSbutoverall,too,theUSmarketaccountedforaroundtwo-thirdsofallpremiumincomeworldwide.Inmanyothermarkets,privatehealthinsuranceisstillanichesegment,albeitaverydynamicone:Globalpremiumgrowthreacheddouble-digitsoverthelastdecade(CAGR+10.1%).

Inthelastthreeyears,Covid-19

fueleddemandforadditionalhealthprotection,notleastintheUS,wherepremiumincomeincreasedbymorethan+40%

(or

EUR211bn)

inthattimespan.Lifeinsurancemarketssufferedlastyear,

particularlyinWesternEurope.On

theoldcontinent,businesswithlifeinsuranceproductsshrankbyalmost-3%year-on-yearin2022(EUR20.6bn).Therefore,its

shareinglobalpremiumincomedecreasedby1.3pps

to28%.Basedonourprojections,theregion’slifepremiumincomecametoalmostEUR740bnattheendoflastyear,

witharound2

GrosswrittenpremiumsaspercentageofGDPandpercapita,respec-tively.3

Ingeneral,datavisibilityofhealthinsurancepremiumsisstillratherlow.Often,healthpremiumsare

includedinothersegmentsashealthcoverageisseenaspartofotherproductsandnotseparatelyreported;inJapan,forinstance,healthistreatedas“thirdsectorproducts”withinlife.7Allianz

ResearchFigure

4:

Mindthegap(between

theUSandtherest)Justlikeinthep&cbusiness,thelion'sshareofgloballifepremiumincomewasstillwrittenintheUSlastyear:Thecountry’sglobalmarketshareaccountedforjustunder30%–1.7ppsmorethanin2021.Innetterms,itgeneratedalloftheincreaseinlastyear’sglobalpremium.Attheendof2022,theUSlifeinsurancemarketstoodatanestimatedEUR777bn,correspondingtoayear-over-yeargrowthofaround+8%(CAGR2012-2022:+2.9%).Totalgrosswritten

premiums*,2012and2022byregionin%NorthAmericaWesternEuropeAsiaexJPN

&

CHNCHN5.35.220225.59.211.46.09.839.8

43.910.1Allotherinsurancemarkets(restoftheworld,globalmarketshareof3.4%)sufferedadeclineofaround-12%inthelifesegment(CAGR2012-2022:+1.6%)causedbythesharpslumpofpremiumincomeinSouthAfrica(-54%)whichusedtobe

responsibleforalmostone-thirdofpremiumincomeinthosecountries.On

theotherhand,LatinAmericarecordedastrongincrease(nearly+12%),accountingfor43%ofthisgroupofcountries’marketvolume.JPN30.123.8RestoftheWorld*The

conversion

intoEUR

is

based

on

2022

exchange

rates.Sources:

National

financial

supervisory

authorities,

insurance

associationsand

statistical

offices,

Axco,

Refinitiv

Datastream,

AllianzResearch.Overall,insurerswroteEUR259bnmoreinpremiumsin2022thaninthepreviousyear(life:+EUR61bn;p&c:+EUR145bn,health:+EUR53bn).As

discussed,NorthAmericaexplainsmostoftheincrease.ButtheUShasplayedanoutsizedroleinglobalinsurancemarketsoverthelastdecade,too.Inthisperiod,theUSinsurancemarketraisedits

globalmarketsharefromanalreadyimpressive39.6%

toawhopping43.9%.ThisisinsharpcontrasttoWesternEurope,whichlostmorethan6ppstoreach23.8%.

Theotherclear“l(fā)oser”isJapan,whileChinawasabletoalmostdoubleits

globalshareto11.4%.However,theUSdominanceisunlikelytoendsoon(seeFigure4).Lookingatthethreesegments,thedominanceoftheUSisclearinp&candparticularlyinhealth:Inbothsegments,theUSmarketaccountedforroughlyhalfandthree-quarters,respectively,oftheincreaseinglobalpremiumincomeoverthelastdecade.Inlife,however,theshareislessthanone-third.Inthissegment,Asiacommandsbyfarthebiggestsliceofthecake.WesternEurope,ontheotherhand,islosingsignificanceinallthreesegments;itnotonlytrailsbehindtheUSbutalsoAsia

(seeFigure5).Figure

5:

TheoldcontinenttrailsbehindShareofabsolutepremiumgrowth*byregion,2012-2022in%4.71.910.7North

AmericaWestern

EuropeAsia17.031.7p&c:health:life:27.549.76.949.1+EUR766bn+EUR738bn+EUR747bn71.5Rest

of

theWorld17.312.1*The

conversion

intoEUR

is

based

on

2022

exchange

rates.Sources:

National

financial

supervisory

authorities,

insurance

associations

and

statistical

offices,

Axco,

Refinitiv

Datastream,

AllianzResearch.8Decompositionof

growth17

May

2023Overthepast

two

decades,premiumincomefornon-life

insuranceproducts

fromprivatecustomerbusinessintheEurozoneisestimatedtohavegrownbynearly+70%

tojustunderEUR172bn.Inabsoluteterms,thefourlargestmarketsintheregionaccountedforfour-fifthsofthisincrease:France(+EUR23.4bn),Germany(+EUR18.2bn),Spain(+EUR10.1bn)andItaly(+EUR4.6bn).TheFrenchp&c

insurancemarketalso

topsthelistintermsofrelativegrowth,whichmorethandoubledduringthisperiod.PremiumgrowthinSpainwasalso

above-averageatalmost+95%,whileGermany(just

under+55%)andItaly(nearly+26%)werewellbelowtheregionalaverage.However,thesevalues"only"reflectthenominaldevelopment.Againstthebackgroundofgallopinginflation,whatproportionofmarketgrowthhasbeen

downtoinflationoverthepast

21

years?Forouranalysis,weuse

theinflationrateforexpensesforinsurancepolicies

recordedbyEurostataspart

oftheharmonizedconsumerpriceindex.14On

averageoverthelongterm,insuranceinflationintheEurozonelaggedslightlybehindthegeneralinflationrate(1.6%vs

2.0%)(seeFigure6).Thedifferencesinsomeyearswereconsiderable,rangingfrom+2.3ppsin2010

toawhopping-7.6pps

lastyear–aclearsignthattheindustry

islagginginpassingtheinflationshocktoits

customers.

Withouttaking2022intoaccount,thetwo

ratesraninsync

witheach

other(1.7%onaverage).Contrarytogeneralperception,however,theindustry

does

notseemtobe

drivinginflation.On

theonehand,theintensityofcompetitionhaslimitedinsurers'abilitytoraiseprices;ontheotherhand,productivityincreases–notleastthankstothemanyopportunitiesofferedbydigitalization–haveprobablyreducedthecostpressureontheindustry.Atthecountry

level,nouniformpatternemerges.UnlikeinItalyandGermany,whereinsuranceinflationwas(slightly)belowtheoverallconsumerpriceindex,

namely-0.1ppandeven1pp,respectively,itwashigherinSpain

(+0.6pp)andFrance(+0.2pp).Over52theperiodconsidered,theannualinsuranceinflationratesadduptoaround38%inItaly,agood

40%

inFranceandmorethan59%inSpain.Germany,witharound19%,pushestheregionalaveragedowntonearly34%.Due

tothebelow-averagedevelopmentintheinsurancemarket,averageinsuranceinflationinItalywasevenalmost13ppshigherthanpremiumgrowthitself.Inotherwords,theItalianretailp&c

markethasshrunkoverthelasttwo

decadesinrealterms.TheSpanishinsurancemarket,ontheotherhand,recordedabove-averagegrowthrates,buthereitwasthenoticeablyhigherinflationthatledtonearlytwo-thirds

ofthemarketgrowthbeingattributabletopriceincreasesalone.InFrance,whichhadbyfarthehighestmarketgrowthinacountry

comparison,37%ofthepremiumincreasewasfedbypriceincreases.AlthoughtheinsurancemarketinGermanygrewatabelow-averagerateintheregionalcomparison,theinflationrate,whichwasalso

belowaverage,meantthat"only"35%ofthemarketgrowthwasdrivenbyinflation.ThatmeansthattherealgrowthoftheGermanmarket(+35.6%)wasevenhigher–albeitonlymarginally–thanthatofSpain(+35.2%)andtheEurozoneaverage(+35.0%)sincetheendof2001(seeFigure7).FortheEurozone,thismeansthatnearlyhalfofthe(nominal)premiumgrowthoverthepast

two

decadeswasdrivenbyinsuranceinflationalone:justunderEUR36bnoftheadditionalpremiumswrittenfrom2002

to2022wereduetovolumegrowthandalmostEUR35bntopricegrowth.4

Asweconsiderthenon-lifeinsurancemarketwithouthealthinsuranceproductsinthisanalysis,wehaveadjustedthereportedinflationrateaccord-ingly.5

For

Spain,thereisnodataavailableoninsuranceinflationconnectedwiththedwellingintheyear2022;accordingtoEurostat,countriesare

notobligedtocompileHICPindicesforitemswhichhaveaverylowweight(lessthan1per1000),inwhichcasethesecorrespondingsub-itemsare

trans-mittedwithaweightofzero.Figure6:NotinthedrivingseatHICPinsurance(ex

health)vs

HICPallitems,

annualrateofchange,2002-2022Figure7:

NotallisrealNominalP&Cmarket(privatecustomer

business)growth

vs

insuranceinflation,2002-202249.08.07.06.05.04.03.02.01.00.0delta(lhs)HICPinsurance(exhealth)(rhs)HICPallitems(rhs)120NominalincreaseinGWPInsuranceinflation(exhealthinsurance),

summedup20100806040200-2-4-6-8-10FranceGermanyItalySpainEuroarea2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022Sources:

Eurostat,

AllianzResearchSources:

Eurostat,

AllianzResearch9Allianz

ResearchAf

ter

theinflation

shockDigesting

higher

rates:

The

economic

environmentEveniftherathergloomyforecastsseemtospeakadifferentlanguage,thethemeoftheeconomicoutlookforthenext

fewyearsisnormalization.Aftertheextremeswingsofrecentyears,causedbytheCovid-19

pandemicandthewarinUkraine,theglobaleconomyshouldreturntocalmerwaters.Calmistobe

understoodquiteliterally:growthwillbe

ratherlow.Thisis