Ben Dunston, Head of Broking Asia, discusses the dynamics for each domestic market in Asia and the impact of reinsurance on capacity and coverage.
Asia insurance market trends
Hear from our experts and learn more about the latest insurance marketplace trends
Transcript:
Asia insurance market trends
Full Transcript
0:03
Welcome to WTW's Global Marketplace Insights series, where our
experts bring you the latest risk and insurance perspectives.
0:19
We bring you this report shortly after the Monte Carlo Rendezvous,
which traditionally serves as an early indication of reinsurance
conditions and market temperature.
0:29
The summit identified the effects of a large number of major loss
in Nat-Cat events in 2023, such as a series of typhoons including
Typhoon Doksuri, which hit Japan, Philippines, Hong Kong and
China.
0:44
In addition, and more concerning for the longer term, is a
frequency of secondary losses surrounding climate change, such as
wildfires, floods and drought following record temperatures in July
2023, getting hard now to deny the effects of climate change within
the insurance indemnity position.
1:06
Geopolitics and resulting sanctions related to the Russia-Ukraine
conflict continues to impact reinsurance support from reading
energy risks in the region, as well as the sanctions of
Myanmar.
1:19
Definitions of strategic industries expand to include chip
production which has a particular effect on North Asia.
1:27
Whilst China -US tensions drive narrative in the wider economic
sense, little direct impact is being felt on the insurance and
reinsurance industry.
1:38
Clients within the region having now fully recovered from COVID
restrictions appear to be seeking to rebalance their insurance
programs in the context of coverage and pricing that's
available in today's markets and we're seeing a flurry of
major RFPs.
1:56
Now you will hear from my colleagues and Specialty about the
capacity coverage and pricing specific to their market. So, we
encourage you to access those reports.
2:06
Broadly speaking in Asia the large and complex risks we've seen
property pricing for loss free risks with up-to-date asset
valuations between 0% and 10% rate increase with no changes to
capacity.
2:22
Other first party lines such as Marine remain relatively consistent
on capacity, pricing, coverage.
2:30
Within financial lines, however, the availability of abundant
capacity continues to drive competitive market dynamics, especially
in commercial D&O markets witnessing premium reductions ranging
between 15% and 20% in most Asian markets.
2:46
We expect rates may continue to decrease into soft market
conditions.
2:51
However, the extent of the decrease may taper off especially for
those clients who experienced material premium reductions in
previous renewals.
3:01
In addition, cyber continues to be a volatile environment where
earlier in 2023 we saw 45% of the tax with initial demand of over
$1 million.
3:12
And while we continue to see claims activity in the Asia region,
insurers report that cyber portfolios now back profitability.
3:22
Insurer competition, a new influx capacity has seen some premium
reductions in the realm of 10% to 15% for like for like program
structures where risks are seen to have higher quality risk
controls and are free of losses.
3:37
Many purchases are capitalizing on this more favorable side of the
market environment to purchase high limits and they'll expand
existing coverages.
3:47
It remains to be seen with if a very strong insurer underwriting
results, we've seen in 2023 coupled with potential improvements
and investment returns may tempt some of these markets to stray
away from those technical rating models and the discipline which
corrected the prior years.
4:05
Asia is of course an extremely diverse and unusual marketplace
here, but different stages of maturity.
4:15
Each country is driven by its own influences surrounding
reinsurance, government policy, and traditional role within the
economy.
4:24
Singapore and Hong Kong, for example, have large offshore insurance
inflows that provide support for other regional risks, and
they're much aligned to the international markets as well as
supporting their own domestic economies.
4:37
Japan and Korea tend to focus on supporting their domestic economy
and China for example has three of the largest insurance companies
in the world supporting their domestic economy and their outwards
investments.
4:50
Indian Insurance is moving away from the four state owned densities
into a more privatized model with plans to grow reinsurance
hub.
4:58
In addition, the creation of the Shanghai reinsurance hub looking
at supporting non Chinese earned risks marks at first in pulling
capacity to access international risks in a more coordinated
way.
5:11
The Vietnam market now has its first AM Best rated A-minus insurer
which moves them into a bigger arena of possibilities and in
general the mood is one of expansion and optimism.
5:27
Macro issues such as inflation will continue to stall the market
both economic and social, affecting the need for more limit and
first party lines and increasing the cost of repairs and critical
items plus also the size of awards relating to liability
placement.
5:45
In addition, the cost of handling claims is impacted which can then
affect the primary pricing.
5:51
Insurers are needing to see up to date valuations on asset
schedules which reflect their risk exposures and where that cannot
be provided are imposing commensurate rate increases.
6:03
Clients should be aware that this will be a sticking point in
negotiations, and they're encouraged to keep update these
valuations well before renewals begin.
6:14
In countries such as Indonesia and the Philippines, pressures on
the reinsurance rates for domestic insurers have driven increased
need for faculty reinsurance to establish capacity on the local
deals, although in some large and complex risks where a large
capacity is required, the international market has not been able to
support the rates needed.
6:37
Most of the Asian countries are classified as emerging economies
and the insurance penetration in 2023 is still relatively low,
around 3.6% according to SwissRe.
6:49
As Nat-Cat losses globally continues to rise, the insurance
protection gap of around 70% globally would be keenly felt in these
countries with higher natural catastrophe explosions.
7:02
As non-traditional insurance solutions such as Parametric, I've
started to gain traction within Asia in areas such as agriculture,
renewable energy, manufacturing and hospitality.
7:13
It's understood that there will be payouts surrounding the
typhoon events in Hong Kong and could this then go on to show the
value of speedy parametric payouts in providing disaster relief in
Asia?
7:25
This area continues to be on the cusp of creative and socially
responsible thinking where insurance and public private
partnerships interact.
7:34
For example, the recent creation of a parametric credit.
7:38
It covers losses for Indian cattle based on temperature triggers,
which remains excellent example of insurance as a power to do
good.
7:47
I hope you've enjoyed this report and you found it useful.
7:56
Thank you.
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