Protection gap offers reinsurers opportunities despite headwinds

Despite strong economic headwinds and increased financial market volatility, the protection gaps that exist across Asia represent a significant opportunity for reinsurers that cannot be ignored, Moses Ojeisekhoba, chief executive officer of Reinsurance Asia, Swiss Re Asia, told SIRC Today.

He said that the mortality protection gap across Asia is approximately $58 trillion with potential annual new premiums of $173 billion. “When we consider both the life and non-life protection gaps across Asia, this represents a significant reinsurance opportunity,” Ojeisekhoba said.

The outlook for reinsurers in Asia is not necessarily all positive. In line with the economic performance of Asia more generally in the last few quarters, premium growth in the primary insurance market has seen a slowdown, Ojeisekhoba pointed out.

“But the good news is that emerging Asian markets are continuing to out-perform. We are currently seeing below-average cat losses, which is helping underwriting profitability remain strong,” he said.

He added that this has been driven partly by changes in the way insurers are operating, but the changing regulatory environment would also be a big influence on future growth.

“Primary insurers are looking to enhance their profitability by adapting how they operate, by becoming more client-centric, and by using capital more efficiently. Technology is helping insurers make distribution more effective, and their underwriting is being enhanced through predictive modelling,” Ojeisekhoba said.

“Primary market growth and changes to the regulatory landscape will be influential in determining the outlook of the region’s non-life reinsurance sector. The demand for re/insurance in the years ahead will also be influenced by factors such as infrastructure investment and increasing levels of urbanisation.”

Turning to life insurance, Asia’s primary life insurance market remains vibrant, with China, the Philippines and Vietnam in particular seeing healthy growth rates. This in turn means the life reinsurance market outlook also remains positive, Ojeisekhoba said.

But he also warned: “This all comes against a backdrop of strong economic headwinds and increased financial market volatility. There are still a number of challenges that will impact the profitability and competitiveness of insurers in the region: upcoming regulatory changes, increased regulatory oversights on consumer protection, increased capital requirements, and persisting low interest rates.”