Rising claims pressure Singapore insurers’ profit margins

Despite strong premium growth in 2024, long-term profitability challenges insurers.

Singapore’s general insurance sector expanded in 2024, but rising claims and global uncertainties have put margins under pressure—raising key questions around how insurers manage risks, costs, and climate exposure going forward.

According to EY’s Asean Financial Services Managing Partner Sumit Narayanan, the 16.7% drop in domestic underwriting profit is primarily due to two reasons: “The first being inflationary pressures on the motor insurance business, and the second was a one-off large loss in the marine hull sector,” he added. “Now both of these do not have a long-term impact on the profitability of general insurance in Singapore.”

However, the broader claims environment across property, travel, and health lines continues to weigh on earnings. “There is rising inflation, there is changing consumer behaviors and increasing medical costs, which are actually putting pressure on the profitability of insurers across a whole host of lines of businesses,” Narayanan said.

Despite these pressures, he noted that Singapore’s general insurance premiums “have grown at a fairly healthy rate” and that insurers have remained proactive in managing their loss ratios. “We believe these elevated claims present opportunities for insurers to further sharpen their claims management practices, improve operational efficiencies through investment in technology, and at the same time focus on customer segmentation so that they can continually grow their business profitably.”

Climate-related risks are another critical area of concern. Narayanan pointed out that the impact of extreme weather events goes beyond traditional catastrophe claims. “This is not just on the impact that natural catastrophe claims have on the loss ratios, but also there is the impact of business interruptions and deteriorating credit rating due to the counterparties,” he said.

To counter these risks, he said EY is working with insurers on forward-looking strategies. “We’ve been working with a number of our clients in general insurance in helping them set Net Zero targets, decarbonising their underwriting and investment strategies, and also incorporating climate-related risk scenarios and stress testing.”