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Pakistan Insurance Report 2011
Business Monitor International, Nov 2010, Pages: 54
The Pakistan Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Pakistan's insurance industry.
Pakistan is unusual in that the total premiums continued to grow at double-digit rates over the last two years despite the global financial crisis and the absence of a clear improvement in the overall political and security situation in the country.
In the non-life segment, premiums had been growing by 15-20% per year over 2005-2007. Growth slowed to 6% in 2008 and just 2% in 2009. On the basis of the figures that are available to us at the time of writing, we estimated non-life premiums tracked sideways in 2010. By the standards of developing countries, this is an outcome that is more than respectable. Even if one assumes, as BMI does, that nonlife penetration will rise only slightly over the coming years, it is easy to see how Pakistan could be one of the world’s fastest growing insurance markets over the next five years.
The situation of the life segment is even more encouraging. The life segment is underdeveloped in terms of our main metric, density (ie: premiums per capita), but has sustained steady double digit growth over the last five years and is expected to continue doing so. Importantly, the life segment accounts for well over half of the entire insurance sector. In this respect, Pakistan differs markedly from countries such as Kazakhstan or Ukraine, where persistent financial and social instability have discouraged people from long-term saving through insurance. The implication is that there is a small minority of the population who are risk tolerant and understand the benefits of life insurance. As is the case in a number of countries whose insurance sectors are surveyed by BMI, the life segment is dominated by a state-owned former monopoly, State Life Insurance Company (SLIC). The gradual loss of market share by SLIC to ALICO and the other life insurers, most of which are offshoots of local non-life companies, suggests to us that competition is causing the creation of attractive products. This process could well account for the very impressive growth trend.
The Pakistani non-life segment also suffered as a result of the extreme flooding in the country in 2010, which affected margins. Munich Re reported that H110 was the warmest period since meteorological records began in 1880. The devastating floods in Pakistan and other severe weather events are being attributed to the effects of climate change by some commentators. Munich Re also said that based on its data and records, the number of extreme weather events has tripled since 1980 and that the trend is expected to continue.
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