- Rising yields on 10-year government bonds should enhance recurring investment yields of insurers
- China’s macro economy remains resilient; rolling out of policy stimulus to support market re-rating
- Easing concerns around LGFV, property risks; improved consumption outlook to support premium growth
- Asia-Pacific regional and China insurers are well-positioned to capitalise on long-term growth
Trump’s presidency favours life insurers. With Donald Trump’s second term in office, we expect rising interest rates and inflation, driven by his aggressive trade policies and increased pressure on European defence spending. These macroeconomic shifts are likely to have mixed implications for global insurers. For life insurers, a higher-for-longer interest rate environment is expected to provide some tailwinds. Rising yields on 10-year government bonds across major markets should support the sale of savings and investment-linked products and enhance recurring investment yields of insurers. Life insurance claims are less sensitive to inflationary pressures as life policies typically have longer durations and more stable claims patterns. Property and casualty (P&C) insurers are likely to face greater challenges due to claim costs which are more exposed to inflationary pressures. This could pressure underwriting margins, particularly if inflation persists at elevated levels.
Eyeing policy stimulus in China. In China, the potential impact of rising tariffs under a second Trump term may be less severe than previously anticipated. While tariffs may increase pressure on China’s export sector, demand from emerging markets and China’s efforts to reduce its trade deficit could help offset the impact. Moreover, the Chinese government’s ongoing policy stimulus measures are expected to provide substantial support to economic growth and market sentiment. The recent announcement of a RMB6bn debt swap plan, aimed at addressing bad debt in local government financing vehicles (LGFVs), is a key step in stabilising the financial system. Additionally, the planned capital injection into major China banks should facilitate loan book expansion, supporting economic activity across both public and private sectors. Combined with consumption-driven stimulus measures, these actions are likely to result in stable economic growth in China. Insurers in China stand to benefit from a reduction in concerns around LGFV and property risks, while an improved consumption outlook should support premium growth, particularly in the life and health insurance segments.
Selective names with robust growth and diversified business portfolio. We continue to favour Asia-Pacific regional and China insurers which are well-positioned to capitalise on secular growth opportunities in the Asia life insurance market. This sector is expected to outpace global peers in terms of growth, driven by favourable demographics and rising middle-class wealth. Additionally, insurers with strong ties to the high-net-worth (HNW) segment in Asia stand to benefit from an increasing customer base and closer connections across China and ASEAN countries. Any upside surprise in China’s policy stimulus could further catalyse a re-rating of regional and China insurers. We also see attractive opportunities in global insurers with strong market positions and a balanced business mix that can pass rising claim costs to customers and maintain strong premium growth. Companies with significant exposure to Asia—particularly those offering attractive shareholder returns (dividend yield >5%, plus share buyback)—remain our top picks in the global insurance space.
Figure 1: US/EU/JP 10-year government bond historical yield and DBS forecasts
Source: Bloomberg, DBS
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