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The Misguided Pursuit of Developing Markets

Are they really worth the risk?
  • Bill Pieroni
  • January 2022

With the increasing globalization and interdependence of insurance markets, as well as pursuit of growth and profit, it is natural for insurers to consider international expansion. Conventional wisdom suggests that developing markets hold the greatest opportunity.

This line of reasoning is understandable—however, the facts do not, in general, support it. The insurance industry's collective interest in developing markets is not justified by their actual potential growth and value capture.

Types of Global Markets

ACORD recently analyzed more than 11,000 carriers across 100 countries to determine how premium growth and value are distributed globally, and how country-specific factors influence strategies, tactics and outcomes.

Related: AM Best Analysts Examine Growing Risk Complexity in Europe Market Briefing

We found that the most useful metrics for classifying each market were current insurance penetration, and the change in that penetration over the last 10 years. “Insurance penetration,” in this case, was defined as direct premiums written as a percentage of national GDP. Mature markets were those with higher-than-average insurance penetration, but increasing at a lower-than-average rate. The rest were classified as “developing.”

It is worth noting that some developing insurance markets are not ones that would normally be thought of as “developing countries.” For example, Norway and Singapore, despite having robust, developed overall economies, are developing markets for insurance purposes.

Outcomes and Performance

Developing markets represent 12% of global direct premiums, but accounted for only 9% of premium growth over the last 10 years. While insurance is becoming an increasingly important part of developing economies, their relative share of the global market is shrinking. The premium growth rate is not keeping up with the averages.

The above figures exclude the two largest developing markets, China and South Korea. These two countries are among the 10 largest global insurance markets, and are growing rapidly. They are undeniably becoming more relevant. However, they present significant challenges. South Korea is the most unprofitable insurance market among the top 10—in fact, carriers operating there destroyed value over the last 10 years equal to 11% of the total value generated by the rest of the world. China, while selectively profitable for domestic insurers, represents a unique environment for others. Regulatory and cultural factors, among others, appear to create barriers for non-domestic carriers.


Simply put, the facts do not justify the en masse pursuit of developing markets. However, opportunities for success do exist across all types of markets.

Related: Trending Research Includes Reports on Global Reinsurance, Captives

Insurers considering entry into a developing market must consider two key questions. First, is there a compelling business case for expanding into the market, aligned with your stakeholders' goals and objectives? Perhaps your commercial clients include multinational firms operating in these countries, your investors see opportunity there or activities there support your widely understood core mission.

Second, what are the capability imperatives in this market, and can you execute them? Carriers need to understand the uniqueness of each developing market at a granular level. Demographics, regulatory requirements, economic trends, and other factors shape each environment. Insurers cannot simply import operating models that have worked for them in other markets and expect success. They must thoroughly consider whether their current and potential capabilities align with those necessary to thrive in each unique market.

Best’s Review contributor Bill Pieroni is president and CEO of ACORD. He can be reached at

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