Papua New Guinea Life & Annuity Insurance Market Size

Papua New Guinea Life & Annuity Insurance Market Analysis

Papua New Guinea Life & Annuity Insurance Market is estimated to record a CAGR of approximately 12% during the forecast period.

The pandemic effectively shuttered PNG for several months and reduced global demand for the commodities that drive its export earnings. As a result, the country's real GDP contracted in 2020, although a return to growth is expected in 2021. In response to the pandemic, the government launched a PGK 5.7 billion (USD 1.7billion) stimulus package, with a focus on supporting the health and security sectors, and workers and businesses. The outcome of this initiative and the government's wider efforts to protect citizens and the economy from Covid-19 will play a significant role in determining the future of the country's insurance market. The sector's future will also be contingent on the government's ability to continue important financial sector reforms, as well as the level of demand for mega-project risk-mitigation services and insurers' ability to pay out on pandemic-related claims.

In Papua New Guinea insurance makes up a small part of the overall economy when compared to international levels. The penetration rate as a percentage of GDP is under 2%, while the global average is 7.5%, according to the UN Development Programme. Insurance in the country is also a sector of great opportunity. Access is straightforward given the regulations and low capital requirements, so international participation is high and newcomers are relatively free to enter. In addition, because penetration is low, the market is well placed to grow.

On the ground, the sector is dynamic and quickly evolving. Banks are showing an interest in getting involved in the business, new and innovative products are being introduced, micro-insurance is booming, and local companies are seeking to further expand outside of the country. However, concerns remain. Competition is severe and some companies may be undercutting the market, leading to a lack of margins in some lines. Slower overall growth has meant slower premium growth, and economic troubles have the potential to weigh on the safety and soundness of the sector.

According to the most recent BPNG data, total financial industry assets reached PGK 51 billion (USD 15 billion) in September 2018. Of this total, superannuation funds and life insurance assets represented 25.8%, or PGK 13.2 billion (USD 3.9 billion). According to rating agency AM Best, gross written premium in the life insurance sector amounted to USD 15 million in 2019. At the end of 2019, BPNG reported that life insurance assets reached PGK 233.5 million (USD 68.9 million), up from PGK 198.7 million (USD 58.6 million) the previous year, marking an increase of 17.5%.