Diversified region subject to varied pressures

The reality about the insurance and reinsurance markets in the Asia Pacific is that they are not a single market. Rather, they are many local markets each of which is subject to different economic and market conditions and to different pressures.

That is the view of Bryan Joseph, global actuarial insurance services leader at PwC. Therefore, it is difficult to discuss trends in the region. The characteristics of the market that can be generalised (at least for the largest ones) he said, are: high economic growth, large increases to country infrastructure, exposure to windstorm, flood and, in the case of China and other areas, earthquake, low levels of insurance penetration, and a growing (but in some cases still small) middle class increasing the propensity to insure.

Combined, these factors make for many opportunities in the region. Joseph said some of the Asia Pacific markets are vast and rapidly growing and companies are moving to exploit these in a number of ways.

Some companies are forming joint ventures with existing local companies, some by acquiring local entities, others by establishing operations in the region, with Singapore/China and Hong Kong being the major beneficiaries. Finally, others are working with universities and brokers to get better data and to construct bespoke and more granular models.

But there are also challenges to all this. “Data and information to measure and quantify exposure continues to be a problem. The lack of comprehensive cat modelling in areas exposed to catastrophe risk also is a problem for many insurers,” Joseph said.

“Finally, there is a lack of skilled resource in the market so the ability to find good local insurance professionals is limited for many companies and that hampers current and future growth.”

He said the requirements of reinsurance buyers in the region are changing. While traditionally much of the reinsurance placed has been on a quota share basis and other forms of proportional covers, this is now changing.

“The large European reinsurers and Lloyd’s have traditionally had much of these markets to themselves (with the exception of the domestic reinsurers discussed above).

“But the market is now becoming more interested in non-proportional covers, insurance-linked securities solutions, mostly with parametric triggers. The incidence of catastrophes where losses were covered has also increased.

“The Thai floods of 2011, the 2014 Indian cyclone and the typhoon in Japan all produced reinsurance losses to the overseas markets,” Joseph said.