Swiss Re highlights growth potential in APAC's HNW insurance sector

Swiss Re highlights growth potential in APAC’s HNW insurance sector | Insurance Business Asia

Reinsurance

Swiss Re highlights growth potential in APAC’s HNW insurance sector

Rising wealth in Asia creates new opportunities

Reinsurance

By
Kenneth Araullo

The high-net-worth (HNW) market in the Asia-Pacific (APAC) region is emerging as a key growth area for the insurance industry, according to insights from the Swiss Re Institute (SRI).

Interviews conducted by SRI with experts from major insurers and brokers in Hong Kong, Singapore, and globally revealed a consistent belief in the region’s growth potential. This optimism is driven by economic recovery and entrepreneurial activity, leading many insurers to target double-digit growth in the HNW segment over the next two to five years.

APAC holds approximately 30% of global HNW financial wealth, placing it second after the Americas. This is attributed to the region’s strong economic performance over recent decades. The HNW category is defined as individuals or households with assets between $1 million and $50 million, while assets above $50 million fall under ultra-high-net-worth (UHNW).

The number of HNW individuals globally saw an increase in 2023, largely due to a recovery in equity markets and steady economic growth. Currently, around 28% of the world’s HNW population resides in APAC, with cities like Tokyo, Singapore, Sydney, Hong Kong, and Beijing ranking among the top 10 worldwide for millionaire residents. China has around 6 million HNW individuals, trailing the 22 million in the United States.

Swiss Re’s projections suggest that the gap between HNW wealth in the U.S. and APAC is likely to narrow as economic growth in APAC, particularly in emerging markets and China, continues to outpace global averages.

This trend presents significant opportunities for insurers, especially in property insurance, as growing household wealth leads to more valuable assets needing coverage. The life insurance market in APAC also stands to benefit, with many emerging Asian countries starting from a low base in terms of millionaire population, offering room for expansion.

While some of the wealth in the HNW market comes from inherited family assets, a growing portion consists of first-generation entrepreneurs. This shift is likely to influence financial planning needs, such as legacy planning, for a new demographic entering the millionaire bracket.

Swiss Re noted that generational changes are expected to affect investment strategies, with HNW individuals rebalancing between wealth preservation and growth in the post-pandemic environment. Given global geopolitical uncertainties, cross-border diversification is likely to become a more prominent focus for HNW households seeking stable investment options, and life insurance may play a key role in meeting these needs.

The SRI interviews also highlighted several industry trends that insurers may leverage for strategic planning. A significant post-pandemic development has been the increase in remote processing and distribution capabilities.

The insurance industry is considered more adaptable today than before the pandemic, with customers showing more willingness to purchase policies in different locations. Within APAC, mainland China is viewed as having the highest potential for growth, despite a slowdown in its economic expansion.

However, Swiss Re experts acknowledged that the path to growth is not without challenges. The current high-interest rate environment has raised the cost of premium financing, a traditional mainstay of the HNW insurance sector.

Additionally, insurers and brokers have reported an increase in policy lapses and surrenders, attributed to liquidity pressures and changing customer preferences. Other concerns include evolving regulatory frameworks and a shortage of skilled talent in the industry.

To capitalize on growth opportunities and address these challenges, many insurers and brokers are expanding their geographical presence, investing in innovative product development, and exploring new distribution channels, such as bancassurance.

According to insights from Swiss Re, overcoming these obstacles will require ongoing innovation, adaptability, and a collaborative approach across the industry.

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