The global cross-border life market in 2023 saw an estimated 16% reduction in total new premiums, down to the equivalent of £48bn from £57bn in 2022.
These are the headline results of the sixth annual AILO Global Cross-border Life Market report. There are a number of key factors that influenced the 2023 result:
The Impact of Higher Interest Rates
Higher interest rates in the face of stubborn inflation provided a timely boost to the sale of life insurance savings and protection products globally in 2023. However, as the recent AILO Regular Premium Product Survey has highlighted, such products now only account for roughly 5% of AILO Member new business activity, so many cross-border life companies were not best placed to take advantage of these economic circumstances in 2023.
For cross-border life companies with a focus on investment-linked business, higher interest rates had the effect of increasing the risk-free rate for many investors, influencing them away from equity-linked investment solutions at a time when cash deposits were often producing annual returns of 5% or more. Whilst this was not the sole priority for many high value cross-border life customers, anecdotal evidence suggests that the risk-free rate had a significant impact on smaller investors and raised the threshold at which cross-border products were being recommended.
The Dominance of Europe as a Region
The Europe ex-UK region regularly accounts for around two-thirds of all the global cross-border new life business. As a result, any significant changes impacting this region will have a disproportionate effect on the overall global result.
In 2023, the global market was down 16% on 2022, and new premiums in the Europe ex-UK region declined by 20%, with the region being responsible for an estimated 75% of the global shortfall.
In 2023, over 80% of Europe ex-UK cross-border life business was unit-linked and the top three markets in accounted for just over three-quarters of total premiums. The impact of higher interest rates has therefore had a disproportionate impact on cross-border life companies in Europe that was concentrated in a relatively small number of individual markets.
Winners & Losers
The underperformance of the Europe ex-UK region in 2023 obscures the fact that, apart from Asia-Pacific, all the other regions increased their global share although only North and Latin America increased the volumes of business they wrote compared to 2022:
• North America experienced a 7% increase in new business volumes, reflecting the more favourable investment climate in that region and it remains the second largest global region.
• The UK maintained its global ranking of third in 2023 but experienced a 20% drop in new business for reasons similar to that of the Europe ex-UK region.
• The Middle East was again the fourth ranked region in 2023, representing 7% of the global total, but new premiums were down 10% on the previous year.
• Asia-Pacific was the fifth largest region in 2023 although its global share reduced slightly to 3.7%, with new premiums down 19% down year-on-year.
• The other noteworthy year-on-year increase in 2023 was the Latin America region with business volumes up 17.5% on 2022 and a global share of 1.3%, albeit from a low base. In 2023, emerging markets generally fared better than the more established and mature markets.
• Africa’s share of global share increased to 0.4% in 2023, but it remains the smallest global region.
There’s nothing to suggest that the global cross-border life market is in terminal decline, but it has proved to be noticeably less resilient in the face of recent market shocks, including the post pandemic period, than it has previously been noted for.
By way of perspective, in 2023, if the global cross-border life market were a country it would be roughly the same size as the domestic life market in Taiwan, the world’s 11th ranked global market by new business in 2023 .
Commenting on the results, AILO chairman Jeffrey More said: “Something of a ‘Perfect Storm’ impacted negatively on many aspects of the global cross-border life sector in 2023. Buoyant investment markets that would otherwise favour the sale of equity-linked product solutions were met with an interest rate environment not seen since before the global financial crisis and a preference for lower risk forms of investment. However, with inflation receding, growth recovering and lower interest rates returning, the sector is already beginning to see a recovery in 2024.”
The Global Cross-border Life Market in 2023 report is available exclusively to AILO Members on request to the secretariat@ailo.org
