Aon leaders outline regional challenges and strategies for sustainable growth in APAC

Aon’s regional CEOs tell SIRC Today how insurers across Asia-Pacific are confronting market challenges – from capacity and affordability to regulation.

Key points:
Insurance affordability biggest challenge
Premium growth slow in most markets
Lower reinsurer appetite for risk in Japan

Aon’s regional CEOs share their perspectives on the biggest challenges facing insurers across Asia-Pacific with SIRC Today – from sourcing reinsurance capacity and managing affordability to navigating regulatory change. Data, analytics and capital efficiency sit at the centre of strategies designed to drive sustainable, profitable growth across diverse markets.

Shailendra Sapra, India CEO for Aon’s Reinsurance Solutions

The biggest regional challenge for our clients is to source reinsurance capacity for emerging lines of business that are growing exponentially in India – which include cyber, surety, engineering/construction and marine hull. So we are using our unparalleled access to reinsurance and alternative capital globally to secure capacity for clients, while engaging our regional product leaders to develop and tailor appropriate solutions for the India market. By taking a data-driven, analytical approach, we can generate portfolio scenarios that highlight the potential margins available on the business. For their part, if reinsurers become more agile and creative around the solutions they provide to Indian insurers, they will also gain access to profitable commercial business in the region.

“Clients across Asia are generally operating in highly competitive domestic markets and are facing challenges from increasing regulatory demand, economic uncertainty, and emerging risks.”

The other challenge the industry will face is the advent of a risk-based capital (RBC) regime in the next two years, and so we are working with insurers to help them understand the impact of new governance structures around both RBC and IFRS17 – how it affects their profitability, and how reinsurance as a form of capital can be useful to improve their return on capital and also their book values.

John Carroll, Australia and New Zealand CEO for Aon’s Reinsurance Solutions

The biggest regional challenge is insurance affordability. ANZ has an extremely mature insurance market with strong penetration, where the premise remains that the losses of the few are paid for by the premiums of the many. A run of relatively poor underwriting years has meant that premiums have increased materially across the board, creating broader concerns around insurance affordability. The industry is addressing these affordability concerns by increasing the focus on data granularity and address-level pricing, which may mitigate affordability issues for the broader population, but can put significant pressure on pricing levels – and even appetite to offer cover – for higher hazard exposures. 

There is a potential concern that increasing the data sources and insights may therefore – regrettably – also increase the insurance protection gap for those most in need of protection. The upside of this scenario, however, is potential growth opportunities. 

Philippe Sommer, Japan CEO for Aon’s Reinsurance Solutions

Despite several benign catastrophe years, Japanese insurers still face headwinds from reduced reinsurer appetite for risk, and sharp price increases. Regulatory changes to the domestic insurance agency system and the incoming economic solvency framework (ICS) further challenge established market practices and require agility.

Recognising Japan’s still significant protection gap, Aon is investing in local, dedicated resources and innovation. We partner with clients and reinsurers to develop solutions for new and evolving risks – such as secondary catastrophe perils, parametric covers, offshore wind, casualty and specialty lines or mortgage risk.

Through advanced data tools and advisory services, Aon enables better, more informed decision-making, the identification of profitable growth opportunities, and increases in capital efficiency. 

Soeren Soltysiak, Asia CEO for Aon’s Reinsurance Solutions

Our clients across Asia are generally operating in highly competitive domestic markets and are facing additional challenges from increasing regulatory demand, economic uncertainty, and emerging risks.

Despite low insurance penetration rates, premium growth has slowed in most markets in recent years, so we work closely with our partners to address these challenges through a combination of advanced analytics, global market access and bespoke advisory services.

We encourage insurers to consider all available coverage options: targeted facultative reinsurance, the use of customised facilities, and advanced capital solutions, enable the most effective leverage of their balance sheets, while retaining flexibility to react to a changing market landscape.

In our conversations, every reinsurer is looking to grow. Our demand of carrier partners is to take a broader view in building long-term relationships. Capacity is available in abundance, but differentiating the offering by providing creative solutions will be key to stronger partnerships.

Qin Lu, Greater China CEO for Aon’s Reinsurance Solutions

Overall, we see strong reinsurer capacity, intense competition, and a drive for innovation and efficiency characterise the region. Softening rates are expected in property lines, while life and health faces structural challenges, but also new growth opportunities, especially in green energy and specialty products. Rising cost pressures and heightened client expectations will drive further differentiation and innovation among reinsurers in the coming year.

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