The disconnect between loss experience and exposures
The opportunities and the challenges in Asia-Pacific are multiple and fast-evolving—and many of them are two sides of the same coin, Philippe Domart, head of underwriting, PartnerRe Asia, told EAIC Today.
“The opportunities and challenges go hand in hand; the opportunities are linked to the low insurance penetration and in the immense need for continued investment in infrastructure,” he said.
“Investment means construction, engineering, and at some point it translates into insured assets that benefit societies with a growing middle class and wealth.”
While there are multiple opportunities in the market, and very good strong fundamentals for the economies—which translate into insurable and reinsurable interests—PartnerRe’s cedants face many challenges, said Domart.
A key issue is the pace of increase in the exposure versus the pace of the premium increase.
“The products are being marketed and the penetration is increasing, sometimes fast enough and sometimes not, depending on how we see it. Therefore the exposure is increasing as well.
“However, the premiums sometimes lag a bit behind. That’s because opportunities in the region attract a lot of capacity, and the excess capacity is in both the primary and the reinsurance space.”
This is an issue the market struggles with, said Domart: excess capacity puts pressure on margins and challenges the growth paths that are offered to cedants and to reinsurers as well.
“It is very easy to map a growth path in Asia; it is much more difficult to make it sustainable and profitable. For a business’s growth strategy to be sustainable it has to be profitable over time.”
Fast-growing exposure combined with a loss experience that has not kept the same pace creates a challenging disconnect, he said.
“Cedants and reinsurers face this situation and these two things basically characterise the market in Asia-Pacific—a lot of opportunities plus the challenges that come with them: getting sufficient premiums and margins in the face of growing exposure.”
