31 July 2017Insurance

Economic growth to spur reinsurance demand in Asia: Fitch

The robust expansion of Asian economies and domestic insurance markets will spur reinsurance activity in the region, Fitch Ratings said on July 31.

Reinsurance demand will be supported by higher government infrastructure spending and the emergence of cyber insurance offering, according to a Fitch report.

Fitch expects Asian reinsurers to adopt debt capital as a funding source, helped by sustained investor demand and the prolonged low interest-rate environment. The market is relatively nascent, but Fitch expects issuances to gain traction in the near to medium term, with larger players, such as China Reinsurance Corporation and Korean Reinsurance Company, having led the way.

Several countries have also adopted protectionist measures to expand their reinsurance market. Such approaches may benefit domestic markets in the long term, but could limit foreign interest, knowledge transfer and risk diversification in the near term, especially in catastrophe-prone countries.

Fitch believes protection cover in Asia is inadequate, with catastrophe events in 2016 highlighting the region's protection needs. Asia accounted for almost half of the world's economic losses during the year, but had a disproportionate 16 percent share of the global insured amount. The region's protection gap more than doubled in 2016 from the previous year, with economic losses of $83 billion outpacing modest appreciation in insured losses, which stood at $9 billion.

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