23 August 2016 Insurance

Regulatory change in Asia triggers greater demand for reinsurance

Regulatory initiatives in Asia could lead indirectly to a greater demand for reinsurers, as direct insurers re-evaluate risk-management strategies, according to a report by Fitch Ratings.

The full report, titled ‘Asian Reinsurance Markets: Regulatory Reforms to Boost Asian Reinsurance Competitive Dynamics’ highlights that Asian regulators have implemented a range of measures that would alter the operating and business climate in the region, or are in the process of doing so.

Indonesia, Vietnam and India are trending towards more protectionism in their respective legislative changes, for example, with attempts to increase the percentage of insurance business to be placed with domestic reinsurers.

Furthermore, local reinsurers are being constantly challenged in their ability to improve their risk-management sophistication and controls, to keep up with the upcoming surge in premium volume.

While the gap between insured losses and total economic losses from catastrophe had improved in 2015, Fitch believes it is still too wide.

Fitch expects market competition to intensify with several new local reinsurers being set up in China in 2015-2016.

Fitch believes there is solid business growth potential in many of the Asian markets that have low insurance penetration, including the ‘relatively untapped’ Indonesian, Chinese and Indian markets.

The total insured losses in Asia improved to 19 percent of the region's total economic losses in 2015 from 10 percent in 2014.

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