‘A long way to go’ to close the gap
There is still a long way to go on closing the protection gap in Asia-Pacific, and unfortunately it may well take large scale events as seen in some of the largest catastrophe buying regions in the world to change market behaviour, Mark Newman, CEO of Sompo Canopius Asia-Pacific, Middle East and North Africa, told SIRC Today.
“In more mature insurance and reinsurance markets, we would expect to see GWP to GDP ratios on or around 5 percent,” said Newman. “In many parts of Asia this number remains as low as 1.5 percent, so clearly there is a long way to go.
“This is significant when we anticipate that by the end of this current calendar year, the combined GDP of Asia-Pacific is expected to be greater than the combined GDP of the G7 countries.”
Against a backdrop of economic expansion and very low insurance penetration rates in a region heavily exposed to natural catastrophe events, there is an overdependence on regional governments to take responsibility for carrying the risk, Newman explained.
“Awareness, expectation, and experience all contribute to this protection gap,” Newman continued. “If we look at some of the largest catastrophe buying regions of the world, including the US Gulf of Mexico and East Coast, Japan earthquake, European flood, and even Australian cats, these are all markets that have undergone significant losses in the last 30 years.
“As a consequence of those events, modelled loss outcomes and expectations and limits of insurance and reinsurance have all shifted significantly.”
Some efforts are being made to help close the gap in developing countries, however.
Considering the stance the government has taken in China, Newman suggests, it is very clear that they are looking to develop and transfer a significant proportion and responsibility for the protection against natural catastrophe, through the creation of multiple natural catastrophe and crop protections and pooling schemes.
“This is a deliberate policy to transfer risk from their own balance sheet to that of the insurance and reinsurance community,” he concluded.
Get the latest re/insurance news sent to your inbox every day - Sign up to our free email newsletters
Other stories from the SIRC Day Three newsletter
Asia Capital Re boss says it will not seek new buyers after sale talks fall through
Asia is ahead of game in use of open architecture platforms for insurtech
IAG insurtech hub aims to drive innovation in Singapore
Reinsurers grapple with ‘new world disorder’
Keep your discipline when innovating
2018 will be year of blockchain for insurers
Swiss Re eyes agriculture growth in Asia
IoT, AI and enhanced data to transform re/insurance
Robust capitalisation helps global reinsurers weather the storms
Reinsurance helps Sri Lankan insurers absorb volatility
New regulations to drive discussions
Global reinsurers’ ‘measured response’
AEC will boost penetration in SE Asia
Pricing for non-cat property stable
Qatar Re appoints new CEO of its Singapore branch
