3 November 2015 Insurance

Soft market is biggest worry, followed by regulatory change

The continued soft market environment is the biggest worry of many Asian re/insurance executives, according to an online poll of Intelligent Insurer readers in the region—a fact perhaps borne out by recent evidence that rate cuts will again be extensive this year, while terms of coverage are often broader.

Some 50 percent of respondents said this was their biggest worry, with the main concerns apparently coming over some of the more commoditised end of the market including cat business.

“Where we work in niche markets or with our long-term customers, there is usually a sensible dialogue and we can cut a deal that works for both parties,” said one respondent. “However, on any line that is highly modelled or in any way commoditised, rates are cutting right to the bone now. It is a ridiculous situation that could have profound implications if there is a big loss.”

Another added that the competition in the region had intensified in recent years, leading to yet more downward pressure on rates. “We are seeing so much more competition now. You have the local players aggressively seeking growth in the region and increased competition from both the London Market and Lloyd’s on many lines. It feels as if everyone is piling into Asia and the rates are on the floor as a result.”

The next biggest concern of respondents was the changing regulatory environment and elements of protectionism creeping into some countries’ policies.

Several respondents commented on the risks of this. One said: “The whole point of reinsurance is to spread losses around the globe. If you keep risks in their own country, the government becomes the insurer of last resort—whether they realise it or not.”

Another added: “Such measures go against the efficient deployment of capital in which the ultimate losers will be the insurers.”

Others bemoaned the unrealised potential of the region in the absence of such measures. “If the whole of Asia were to become a free market overnight the potential would be enormous and average people would benefit—we can but dream,” one said.

Finally, perhaps surprisingly, the third biggest concern was political instability in some parts of the region.

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