Sigma report studies frontier markets - FREE

Sigma report studies frontier markets - FREE

Africa mapSwiss Re’s latest Sigma report looks at the insurance prospects for 21 emerging markets in different corners of the globe.

The report’s conclusions include that: there is no “one-size-fits-all” approach; such “frontier markets” need long-term commitment; and there is a major “first mover advantage” for those insurers leading the pack.

The reinsurer’s study focused on smaller economies within Sub Saharan Africa, Latin America, Southeast Asia, and the Commonwealth of Independent States (CIS, i.e. former Soviet countries beyond the EU).

Criteria for these frontier markets were GDP rates 0f 5-10% and insurance penetration below 1.5%.

“In the initial years, growth will likely favour non-life and commercial business over life and personal lines. Later, as incomes rise, premiums for life products, with their emphasis on savings, could grow more rapidly,” said Swiss Re’s sigma study.

“However, there is no "one-size-fits-all" approach to increasing insurance penetration or doing business in the frontier markets. To be successful, insurers will need to understand the different macroeconomic conditions, socio-economic factors, regulatory regimes and cultural characteristics of the various markets,” said the reinsurance firm.

The report focused on the appropriate strategies, including use of joint ventures with local carriers, and how technology can be used to disrupt and leapfrog traditional insurance growth trajectories.


In Sub-Saharan Africa (SSA), the Sigma study focused on Angola, Cote d’Ivoire, Ethiopia, Ghana, Kenya, Mozambique and Nigeria, noting motor insurance was gaining importance within these traditionally resource-driven, nascent commercial insurance markets.

“Regulatory frameworks and supervision have been improving, but are often still weak. On the other hand, SSA is leading the emerging markets in terms of mobile-phone distributed (micro) insurance,” said Swiss Re.

“With the large low income population, micro-insurance and mobile-based insurance products will be key to increasing the reach and penetration of insurance. Other growth areas are in the agriculture field and insurance for large infrastructure projects,” added the reinsurer.


For those former Soviet states that lie beyond the boundaries of the present-day European Union, the report focused on three countries: Azerbaijan, Georgia and Kazakhstan.

The report noted that like many SSA markets, these countries have been hit by the drop in commodity and energy prices, while insurance has traditionally seen as a luxury rather than a necessity.

The sigma study said these CIS countries still had a positive long-term outlook.

“One is the introduction of new categories of compulsory insurance, such as mandatory health and compulsory MTPL insurance in Azerbaijan and Georgia, respectively. Another is the opening of CIS economies. For example, WTO membership should (eventually) help Kazakhstan further open its real economy and financial sector,” said Swiss Re.

“Another important factor is regulation. For instance, Kazakhstan has a robust regulatory framework and in Azerbaijan, a new unified system for damage assessment in motor cover should build consumer trust in the insurance sector. On the flipside, an unexpected decision in Georgia to reverse liberalization in healthcare led to a slump in medical premiums in 2014, showing how regulation can also hinder insurance sector growth,” the reinsurer said.

LatAm markets

In Latin America, the sigma report focused on Bolivia, Colombia, Ecuador and Peru as the continent’s “largest block of frontier markets”.

The insurance and sectors in Peru and Colombia are further developed than those in Bolivia Ecuador, noted Swiss Re, attributed to structural and institutional reforms carried out in the 1990s and early 2000s.

“The regulatory and operating environments in these markets have improved considerably, and have encouraged foreign insurer participation, increasing their market share in Colombia from 34% in 2003 to 41% in 2014,” said Swiss Re.

“In contrast, foreign participation in the Bolivian market has practically disappeared, and the business environment in Ecuador has grown more challenging with the worsening economic climate and steady encroachment of the state into the local re/insurance markets,” the reinsurer said.

SE Asia

Cambodia, Laos, Myanmar (Burma) and Vietnam (dubbed CLMV by the Sigma study) were the Southeast Asian countries included..

Swiss Re noted the CLMV economies had benefited from improved domestic stability and integration into the globalised economy.

Their insurance sectors are at an early stage of development and driven by non-life business, with Vietnam the most developed of the four, with highest insurance penetration.

 “The CLMV markets are revising insurance and related regulations to enable faster sector growth. For example, a new Insurance Law in Cambodia took effect from February 2015. In Myanmar, where the insurance market has been in state hands since 1963, twelve private companies were granted conditional approval to provide insurance services in 2013,” Swiss Re said.

“Two other developments that will potentially act as growth drivers for insurance in CLMV, alongside stronger GDP growth, are the ASEAN Economic Community and China’s One Belt, One Road policy. Both are explored in this sigma,” the reinsurer added.

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