Commercial insurance is growing two to three times faster in emerging markets than elsewhere, according to Swiss Re’s latest Sigma report.

Premiums have grown by an average of 14% per year over the past decade in emerging markets, compared with 5.4% in advanced markets, it says.

The sector in China grew 32% annually in the same period, largely driven by the introduction of compulsory motor insurance.

“Commercial insurance in high-growth markets such as China benefits not only from an expanding economy but also from increasing penetration, so premiums tend to grow faster than the economy,” Swiss Re Chief Economist Kurt Karl said.

Using 2010 figures, the report ranks the US as the largest commercial insurance market, with a premium volume of $US237 billion ($228 billion). It is followed by Japan with $US35.4 billion ($34.2 billion) and China at $US30.7 billion ($29.6 billion). Australia is ninth, with $US11.7 billion ($11.3 billion).

In advanced markets liability insurance lines are also growing faster than overall economies, Swiss Re says, partly because of growth in the services sector, which is more exposed to liability risks than the manufacturing sector.

Property risks are rising because of natural catastrophes and risk management has become costlier and more complex as manufacturing plants relocate to areas where disasters are likely, the report finds.

In the US the construction industry spends the most on insurance relative to revenues, followed by the transport, communications, utilities and mining sectors, Swiss Re says.

Larger US companies spend less on insurance relative to revenue than smaller ones, at less than $US3 per $US1000 compared with more than $US7 per $US1000. This is because they can diversify risks and use more sophisticated risk management process, the report says.

Swiss Re is measured in its outlook. “The commercial insurance industry shows strong cyclicality with intermittent soft-market conditions. The sector has demonstrated resilience, even throughout the financial crisis.

“Commercial insurance profitability is currently under pressure from low investment yields and soft pricing but economic recovery and rising interest rates should eventually – with some lag – boost profitability.”

In the short to medium term profitability will come mostly from market hardening, while investment incomes will rise slowly as the economy recovers, the report says.

In the medium to long term underwriting results, not investment yields, will drive profit for successful commercial insurers, it predicts.