Storm losses demonstrate importance of discipline in underwriting: Lloyd’s
Hurricanes Harvey, Irma and Maria (HIM) serve as another reminder that the re/insurance industry must maintain underwriting discipline, even in the face of such a competitive global market, Kent Chaplin, CEO of Lloyd’s Asia-Pacific, told SIRC Today.
Chaplin suggested the market has been eroding catastrophe rates for many years to deliver more attractive prices for clients.
“This is an ongoing challenge for the market, particularly when capacity is so abundant and competition is so fierce,” he said.
Pricing in a number of lines has not been adequate for some time, according to Chaplin. But when seeking a correction insurers and reinsurers must ensure they also address terms and conditions, which have also been changed in the favour of cedants over the years.
“Where there is sustained large claim activity it would not be unusual for companies to make adjustments not only to pricing, but also to deductibles and terms and conditions, which have been eroded significantly,” Chaplin said.
“Since re/insurance is a global business, companies may choose to apply certain corrective actions across their entire portfolios instead of on a regional basis.”
Discussing the opportunities in Asia, he noted that over the past 10 years, Lloyd’s has made significant investment in the Asia-Pacific region; it opened a branch in India in April 2017, for example.
He said the market was committed to the region for the long term and wanted to help close the protection gap.
“Alongside expansion and growth, it is important that the investments which have already been made are nurtured and supported, and this will be our focus for the immediate future,” said Chaplin.
“Lloyd’s is in frequent dialogue with regulators around the region and we continue to look for ways in which we can help countries across Asia achieve their objectives and to help close the insurance gap.”
Certain regulatory changes are re-shaping some regional reinsurance markets in Asia-Pacific. A number of increasingly stringent regulatory capital requirements have been imposed including China’s C-ROSS, Hong Kong’s upcoming three-pillar RBC (risk-based capital), and Singapore’s RBC 2. Thailand and the Philippines are also introducing new regulatory frameworks.
“Regulatory developments across the region contribute to Asia’s being one of the most dynamic regions for insurance and reinsurance in the world,” said Chaplin.
He believes that opportunities can also be created from some of these regulatory developments, such as the ASEAN liberalisation in marine, aviation and transit.
He continued: “This is a good example of how regulators can work together to foster, through liberalisation, sustainable markets for the Asia region. Lloyd’s supports the concept of liberalised markets and regulators in the region in this regard.”
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