MAPFRE: Asia expected to drive growth in 2023

With Europe facing a contraction and some longer-term energy challenges, the majority of this year’s global economic growth is predicted to come from Asia, according to MAPFRE.

The assessment comes from MAPFRE Economics, MAPFRE’s research arm, which sees opportunities for insurers in its ‘2023 Economic and Industry Outlook’ report, despite predicting lower global life and non-life insurance industry premium growth in 2023 amid a global economic downturn.

China is expected to return to a growth rate of 4.8% for the year now that it has ended its zero-COVID policy. Indonesia and Japan will also grow this year by 4.5% and 1.1%, respectively.

Gonzalo de Cadenas-Santiago, director of Macroeconomics and Financial Analysis at MAPFRE Economics, reports that the eurozone is predicted to go into recession, with the exception of Spain, due to tax incentives, as high energy costs threaten the long-term viability of European industrial output. At the same time, the European Central Bank’s monetary policy is likely to exacerbate the contraction. While the US may avoid recession this year, its GDP growth is forecast to be a muted 0.1%. 

Overall, MAPFRE Economics predicts a slowing of global economic growth to 2%, seven tenths of a percentage point lower than the last forecast in October of last year. 

As usual, the Outlook report includes an analysis of how the global economic environment will affect the performance of the insurance industry. It reports that the industry as a whole – and life insurers in particular – may benefit in 2023 from a combination of tightening monetary policy and investment opportunities.

MAPFRE experts also believe, however, that the market will face greater difficulties in 2023 for business development, particularly in emerging countries, after a year in which the non-life sector saw significant growth. 

On the positive side of things, the tightening of monetary policy with higher interest rates will continue to boost the savings-linked life insurance business, at least partially offsetting the negative effect of the economic downturn. 

The outlook for the future profitability of investment portfolios is also improving, as the year progresses, which is used by the insurance industry to supplement its technical profitability, it suggests. This is bearing in mind insurance companies’ advantageous position in terms of high liquidity and low leverage owing to the characteristics of their business model.

According to Ricardo González, director of Analysis, Sectorial Research, and Regulation at MAPFRE Economics, the negative effect on the balance sheets of insurance companies due to the rise in bond rates and the performance of equities has been absorbed by the high solvency levels of the insurance industry. Furthermore, the environment for life insurance savings business and traditional annuities with interest rate guarantees continues to improve.