Excess capital could be put to work in Asia

The re/insurance market has to tackle many opportunities and challenges if it is to get the most out of the Asia-Pacific region, Jacqueline Loh, deputy managing director of the Monetary Authority of Singapore, said in her speech at the Singapore International Reinsurance Conference yesterday (Tuesday November 3).

Loh told the assembled delegates that the industry needed to innovate and create uncontested space in the region, especially as too much capital was still chasing too little risk in the industry globally.

“We have to ask ourselves why excess capacity is not being deployed to Asia, which faces the greatest needs,” she said. “Many of Asia’s risks, ranging from marine to property catastrophe insurance, to directors and officers liability are actually insurable and traditional risks.”

Despite this, Asia continues to evade the gaze of some parts of the reinsurance industry, she said.

Loh claimed that in many cases the cause of this was a lack of risk awareness and insufficient data. She added that the insurance gap continues to widen with every year.

“Over the past two decades Asia has borne 50 percent of the estimated global economic costs of natural catastrophes, yet only 5 percent of these losses in Asia are insured, compared to 40 percent in developed nations,” she said.

“The 2008 Sichuan earthquake is a case in point. Less than 1 percent of the total economic cost of $125 billion was insured. The disaster left the government and taxpayers with a hefty reconstruction bill of almost $150 billion.”

Going forward, it was no longer sufficient to cover traditional risks, she added. As Asia continues to grow and develop, the re/insurance industry must look beyond this to the new risks emergin

The re/insurance market has to tackle many opportunities and challenges if it is to get the most out of the Asia-Pacific region, Jacqueline Loh, deputy managing director of the Monetary Authority of Singapore, said in her speech at the Singapore International Reinsurance Conference yesterday (Tuesday November 3).

Loh told the assembled delegates that the industry needed to innovate and create uncontested space in the region, especially as too much capital was still chasing too little risk in the industry globally.

“We have to ask ourselves why excess capacity is not being deployed to Asia, which faces the greatest needs,” she said. “Many of Asia’s risks, ranging from marine to property catastrophe insurance, to directors and officers liability are actually insurable and traditional risks.”

Despite this, Asia continues to evade the gaze of some parts of the reinsurance industry, she said.

Loh claimed that in many cases the cause of this was a lack of risk awareness and insufficient data. She added that the insurance gap continues to widen with every year.

“Over the past two decades Asia has borne 50 percent of the estimated global economic costs of natural catastrophes, yet only 5 percent of these losses in Asia are insured, compared to 40 percent in developed nations,” she said.

“The 2008 Sichuan earthquake is a case in point. Less than 1 percent of the total economic cost of $125 billion was insured. The disaster left the government and taxpayers with a hefty reconstruction bill of almost $150 billion.”

Going forward, it was no longer sufficient to cover traditional risks, she added. As Asia continues to grow and develop, the re/insurance industry must look beyond this to the new risks emerging in a digital age.

“New risks will emerge,” she said. “We should be proactive in adapting to these. I would like to challenge the industry to raise insurance penetration for traditional risks, to find innovative ways to cast the net wider to cover more insurance risks and to also develop new and innovative risk transfer products for new and emerging risks.”

Loh said that re/insurers needed to look at three issues: new and emerging risks, new capital and new technology and innovations. She pointed out that a rapidly changing world had given rise to a number of emerging risks, many of which are intangible, such as cyber, supply chain and reputational risks.

“Cyber risk is a new catastrophe,” Loh told the delegates. “Its estimated cost to the global economy is between $300 billion to $1 trillion. This is much higher than the average annual cost of natural disasters of $200 billion.

“More than just the burden of costs, cyber risks often bring about much embarrassment and reputational damage to a company and its clients. However, cyber risks are not adequately prepared for and for those that are, the costs and impact are often understated.

“It is estimated that the cyber insurance market will grow 30 percent per annum to $20 billion in annual premiums by 2025,” she said.

Loh urged the re/insurance market to look at this area of the market and to see its potential for even further growth.

g in a digital age.

“New risks will emerge,” she said. “We should be proactive in adapting to these. I would like to challenge the industry to raise insurance penetration for traditional risks, to find innovative ways to cast the net wider to cover more insurance risks and to also develop new and innovative risk transfer products for new and emerging risks.”

Loh said that re/insurers needed to look at three issues: new and emerging risks, new capital and new technology and innovations. She pointed out that a rapidly changing world had given rise to a number of emerging risks, many of which are intangible, such as cyber, supply chain and reputational risks.

“Cyber risk is a new catastrophe,” Loh told the delegates. “Its estimated cost to the global economy is between $300 billion to $1 trillion. This is much higher than the average annual cost of natural disasters of $200 billion.

“More than just the burden of costs, cyber risks often bring about much embarrassment and reputational damage to a company and its clients. However, cyber risks are not adequately prepared for and for those that are, the costs and impact are often understated.

“It is estimated that the cyber insurance market will grow 30 percent per annum to $20 billion in annual premiums by 2025,” she said.

Loh urged the re/insurance market to look at this area of the market and to see its potential for even further growth.