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Welcome to WTW's Global Marketplace Insights series, where our experts bring you the latest risk and insurance perspectives.
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We bring you this report shortly after the Monte Carlo Rendezvous, which traditionally serves as an early indication of reinsurance conditions and market temperature.
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The summit identified the effects of a large number of major loss in Nat-Cat events in 2023, such as a series of typhoons including Typhoon Doksuri, which hit Japan, Philippines, Hong Kong and China.
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In addition, and more concerning for the longer term, is a frequency of secondary losses surrounding climate change, such as wildfires, floods and drought following record temperatures in July 2023, getting hard now to deny the effects of climate change within the insurance indemnity position.
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Geopolitics and resulting sanctions related to the Russia-Ukraine conflict continues to impact reinsurance support from reading energy risks in the region, as well as the sanctions of Myanmar.
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Definitions of strategic industries expand to include chip production which has a particular effect on North Asia.
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Whilst China -US tensions drive narrative in the wider economic sense, little direct impact is being felt on the insurance and reinsurance industry.
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Clients within the region having now fully recovered from COVID restrictions appear to be seeking to rebalance their insurance programs in the context of coverage and pricing that's available in today's markets and we're seeing a flurry of major RFPs.
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Now you will hear from my colleagues and Specialty about the capacity coverage and pricing specific to their market. So, we encourage you to access those reports.
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Broadly speaking in Asia the large and complex risks we've seen property pricing for loss free risks with up-to-date asset valuations between 0% and 10% rate increase with no changes to capacity.
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Other first party lines such as Marine remain relatively consistent on capacity, pricing, coverage.
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Within financial lines, however, the availability of abundant capacity continues to drive competitive market dynamics, especially in commercial D&O markets witnessing premium reductions ranging between 15% and 20% in most Asian markets.
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We expect rates may continue to decrease into soft market conditions.
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However, the extent of the decrease may taper off especially for those clients who experienced material premium reductions in previous renewals.
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In addition, cyber continues to be a volatile environment where earlier in 2023 we saw 45% of the tax with initial demand of over $1 million.
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And while we continue to see claims activity in the Asia region, insurers report that cyber portfolios now back profitability.
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Insurer competition, a new influx capacity has seen some premium reductions in the realm of 10% to 15% for like for like program structures where risks are seen to have higher quality risk controls and are free of losses.
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Many purchases are capitalizing on this more favorable side of the market environment to purchase high limits and they'll expand existing coverages.
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It remains to be seen with if a very strong insurer underwriting results, we've seen in 2023 coupled with potential improvements and investment returns may tempt some of these markets to stray away from those technical rating models and the discipline which corrected the prior years.
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Asia is of course an extremely diverse and unusual marketplace here, but different stages of maturity.
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Each country is driven by its own influences surrounding reinsurance, government policy, and traditional role within the economy.
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Singapore and Hong Kong, for example, have large offshore insurance inflows that provide support for other regional risks, and they're much aligned to the international markets as well as supporting their own domestic economies.
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Japan and Korea tend to focus on supporting their domestic economy and China for example has three of the largest insurance companies in the world supporting their domestic economy and their outwards investments.
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Indian Insurance is moving away from the four state owned densities into a more privatized model with plans to grow reinsurance hub.
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In addition, the creation of the Shanghai reinsurance hub looking at supporting non Chinese earned risks marks at first in pulling capacity to access international risks in a more coordinated way.
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The Vietnam market now has its first AM Best rated A-minus insurer which moves them into a bigger arena of possibilities and in general the mood is one of expansion and optimism.
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Macro issues such as inflation will continue to stall the market both economic and social, affecting the need for more limit and first party lines and increasing the cost of repairs and critical items plus also the size of awards relating to liability placement.
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In addition, the cost of handling claims is impacted which can then affect the primary pricing.
5:51
Insurers are needing to see up to date valuations on asset schedules which reflect their risk exposures and where that cannot be provided are imposing commensurate rate increases.
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Clients should be aware that this will be a sticking point in negotiations, and they're encouraged to keep update these valuations well before renewals begin.
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In countries such as Indonesia and the Philippines, pressures on the reinsurance rates for domestic insurers have driven increased need for faculty reinsurance to establish capacity on the local deals, although in some large and complex risks where a large capacity is required, the international market has not been able to support the rates needed.
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Most of the Asian countries are classified as emerging economies and the insurance penetration in 2023 is still relatively low, around 3.6% according to SwissRe.
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As Nat-Cat losses globally continues to rise, the insurance protection gap of around 70% globally would be keenly felt in these countries with higher natural catastrophe explosions.
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As non-traditional insurance solutions such as Parametric, I've started to gain traction within Asia in areas such as agriculture, renewable energy, manufacturing and hospitality.
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It's understood that there will be payouts surrounding the typhoon events in Hong Kong and could this then go on to show the value of speedy parametric payouts in providing disaster relief in Asia?
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This area continues to be on the cusp of creative and socially responsible thinking where insurance and public private partnerships interact.
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For example, the recent creation of a parametric credit.
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It covers losses for Indian cattle based on temperature triggers, which remains excellent example of insurance as a power to do good.
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I hope you've enjoyed this report and you found it useful.
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Thank you.
