Asia-Pacific prospects remain a lure for reinsurers

Growth prospects in Asia-Pacific are still appealing to many reinsurers even with the prevailing soft markets, according to an AM Best report.

The rating agency said that many global reinsurers see Asia-Pacific as an opportunity to diversify, particularly in big emerging markets such as China and India.

Amid these growing markets, regulators within these countries are devising reinsurance strategies, and AM Best believes there will be a trade-off between nourishing local players with favourable policies and promoting open markets.

However, AM Best holds the view that reinsurance in the region supports overall financial strength and helps reduce volatility against big losses for primary insurers.

Asia-Pacific accounted for 14.9 percent of global non-life reinsurance gross written premiums, according to AM Best’s Global Reinsurance Review.

China Re, Korean Re, and GIC Re of India are positioned within the top 20 global reinsurers, and the retention ratios of countries in Asia-Pacific remain in the range of about 50 percent to 90 percent.

Business retention capability of direct players varies across the region and AM Best believes that reinsurance is still in an early stage of development in many Asian markets, which are marked by the domination of national reinsurers.

While many countries are on the track of open access, AM Best suggested that regulatory trends have been mixed across the region, and some countries would rather restrict external reinsurers.

Emerging countries usually do not have a sizable reinsurance market locally and their national reinsurers ultimately rely on international markets for retroceding their risks, said AM Best.

“Economic growth is a driver for changing re/insurance regulations and regulators do understand the need for a functioning market in the long run.” said AM Best.

“Most markets appeared to be moving toward deregulation in reinsurance, but recent regulatory changes in some countries moved the emphasis back to localisation.”