Cat models an art not science in Asia
Softening pricing, regulatory change, risk management requirements and catastrophe risks are the biggest concerns for re/insurers in the Asia Pacific market, Connie Wong, managing director-analytical manager, Insurance Ratings, Asia-Pacific Financial Services Ratings, Standard & Poor’s (S&P), told EAIC Today.
She said that against the backdrop of climate change, particular interest is being given to how effective cat modelling is in the region—especially as some major events of recent years were not predicted by the models.
“From our perspective we see the modelling itself not so much as a science but as an art,” she said. “We think the models still have a lot of uncertainty and errors can come from that.
“If you look at Typhoon Haiyan in the Philippines, it was above what the model expected in the region, so the models can’t capture everything.”
Wong named market competition as another major challenge for insurers in the region.
“There is continued softening of the pricing, and in addition to this, they have to face regulatory change and risk management requirements. At the same time there is catastrophe exposure—all of this combines to create a challenge,” she said.
She added that growth in the region is still relatively strong compared to that in developed markets such as the US and Europe.
“Asia is a developing region—the growth is definitely still here. At the same time they have to manage factors such as cat risk and all the uncertainty in this region.”
