Asia's insurance industry will take a hit from the economic slowdown in China and Europe, but stimulus measures such as infrastructure spending by Asian governments offer a ray of hope, analysts at Swiss Re Group say.
"Slowing GDP growth will be a drag on both life and non-life insurance demand in Asia," said Clarence Wong, Asia client markets director of Swiss Re. "If Asia slows down because of Europe, it will necessarily affect the insurance business in Asia."
The weakening demand in Europe would mainly hurt the maritime, aviation and transport (MAT) insurance business, Wong said.
If Asia's gross domestic product declined 1 per cent, insurance premiums in the region would fall 6.7 per cent, he said. "There is a high sensitivity to GDP growth in Asia's insurance industry."
Asia's GDP would fall 1 per cent if both Europe and China suffered a severe downturn, Swiss Re chief economist Kurt Karl said. "That is a very hard landing for Asia."
Karl assigns a 30 per cent probability to a severe European downturn, while Wong says there is a 25 per cent chance of a hard landing in China, which he defines as GDP growth of 4 to 5 per cent. "There are four areas where China is particularly vulnerable. These are possible triggers that can lead to a hard landing of the economy," he said.