The index is built through estimates of the size of the insurance protection gap (IPG) in these markets and their ability to consume it. The IPG represents the difference between the insurance coverage that is necessary and beneficial to the market, and the amount of that coverage actually purchased.
The global IPG has reached $5.77 trillion (around £4.3 trillion), or 658 basis points of global GDP, according to MAPFRE. The life segment accounts for 70.8% ($4.09 trillion) of the IPG, with the non-life segment accounting for the remaining 29.2%, or $1.7 trillion.
“More than 70% of the current gap is explained by the underinsurance of emerging countries,” said Manuel Aguilera, MAPFRE Economics general manager. “In this sense, the aging populations, their income growth, and size are factors that determine the widening insurance gap for the life business in these countries. The IPG in the non-life business has also grown over the last three decades, although significantly less.”
The MAPFRE GIP also accounts for other variables, including penetration, economy size, and population size, in order to rank markets based on their contribution to closing the global insurance gap. In order to be ranked highly, markets need to be large (as measured by GDP) and also need to have adequate capacity to close their own IPG.
However, MAPFRE also recognised the value of markets that have capacity to close their own IPG, but have relatively little economic weight.
“For example, there are three countries – Egypt, Pakistan and Nigeria – that, in the next few years could be contenders in the life segment for the top 10 positions currently occupied by other emerging markets,” MAPFRE said in a statement. “Within the non-life line, Pakistan, Egypt, Bangladesh, Nigeria and the Philippines (in that order) have been identified as countries with huge potential to reduce their domestic insurance gap.”