Nat cat exposure rises—but penetration remains low

The rapid growth in the value of assets in the Asia region coupled with rising concentration levels, means there has been a significant increase in the degree of exposure to natural catastrophes, Eduard Held, head of products at PERILS, told EAIC Today.

“In many Asian markets the penetration of catastrophe insurance coverage is low,” he said. “This, combined with the significant exposure of most regions to natural catastrophes and high concentrations of values and populations, often leaves governments and public entities shouldering most of the financial burden resulting from large events occurring in these countries.”

However, at the same time there is an increasing awareness of the role that the insurance industry can play in providing an efficient and sustainable solution to this growing challenge.

“To reduce exposure levels, and to better manage and finance natural catastrophe risk, policymakers, communities and re/insurers must be able to access high quality data. However, such information is often in short supply in these highly vulnerable countries.”

With this in mind, PERILS has joined the NatCatDAX Alliance, which has been set up to help increase data availability for natural catastrophe insurance in Asia.

Held says the initiative has been well received by the industry.

“The response from the re/insurance industry has so far been positive, without exception, as they fully appreciate the value of having comprehensive, granular economic and insurance data for the region.

“This market-wide support for the initiative is also evidenced by the range of NatCatDAX partner companies, which includes key representatives from the primary and reinsurance industries, as well as from the intermediary and modelling communities,” he said.

This fits in with Held’s overall impression of the industry as closely following developments in the Asia region and actively seeking not only to find new insurance products suitable for specific markets and client segments, but also to develop new risk prevention and risk transfer solutions.

Against this backdrop, PERILS is working to cover Asia-Pacific territories where its market data are most relevant.

“This includes not only markets with high catastrophe probable maximum losses, such as Australia or Turkey which we added last year, but also markets with low catastrophe insurance penetration where more data can help to close the protection gap,” he said.