Evolving risks means more volatility for APAC reinsurers: report

An analyst warns that these could cause some of the data for pricing risk to become obsolete.

Asia Pacific reinsurers will see more volatility as risks continue to evolve, according to a report by S&P Global Ratings

The report warns that APAC reinsurers will increasingly price their insured risk on scenarios that have limited history such as whether that be would be policies covering various catastrophe perils or changing landscapes following rapid urbanization. The result will be higher volatility in claims and earnings.

According to S&P Global Ratings Credit Analyst WenWen Chen, as risk markets rapidly evolve, some of the data for pricing risk will become obsolete.

The report said that climate-related natural disasters are the main key driver of change, as more frequent weather-related events upend historical patterns. Besides COVID-19, in recent years the Asia-Pacific region has endured severe weather and wildfires in Australia, destructive and costly typhoons in Japan and the Philippines, and this year's devastating flooding in Henan province, China.

"New variants of risk put the onus on Asia-Pacific's reinsurers to ramp up risk selection, control, and mitigation," said Chen.

The report also reviewed 15 APAC reinsurers, revealing that many of them are focusing on portfolio optimization whilst improving underwriting profitability. COVID-19 related claims have been manageable, whilst repressed economic activity has also led to fewer claims, particular motor insurance. Moreover, reinsurers with bigger international exposures have endured more volatility.

"But a curveball awaits. Asia-Pacific reinsurers' earnings volatility is set to increase from more extreme weather events, as well as persistent reinvestment challenges brought about by low-interest rates and volatile capital markets,” Chen added

Meanwhile, APAC insurance penetration remains low compared to developed economies, and the region's growth in insurance demand for property catastrophe and agriculture insurance has been accelerating.

“In addition to the rising awareness of environmental, social and governance (ESG), policymakers in the region are seeking to increase the sophistication of domestic insurance markets and foster economic and financial resilience to shocks, particularly climate change. The upside is heightened demand in underlying insurance markets and reinsurance needs,” Chen said.

Join Insurance Asia community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

The new Singapore head has been with Chubb since 2014.
The insurance veteran will also lead AIA’s Group Strategy and Corporate Development.
Policies bought by Mainland visitors also decreased due to travel restrictions.
The Singapore-based reinsurance broker has set up a new subsidiary in the country.
Mitsui plans to rebrand the Singaporean broker.
Insurance income soared 37.3% for the first nine months of the year.
This is despite the prediction that the industry would reach $313b by 2025.
The life insurance subsidiary grew by 8.2% in the first nine months of 2021.
It is expected to grow at a compound annual growth rate of 5%.
The plan offers protection for major critical illnesses such as cancer and heart diseases.
It plans to position the new insurtech as the digital R&D hub of the group.
Only 4% of surveyed homeowners knew precisely what it construe.
The insurer also plans to become a financial group.
This is to encourage them to obtain and retain their private health insurance.
It will become the first wholly foreign-owned life insurance company in China.