Reinsurance highlights in Asia
Despite entering 2020 on the back of a strong showing last year, both Maskapai Reasuransi Indonesia (Marein) and Tugu Reasuransi Indonesia (Tugure) have been affected by the impact of COVID-19.
In July, Tugure president director Adi Pramana said that Tugure had recorded a decline in premium income as of June 2020. While the decline was not significant, he said the company was working on various strategies to keep its business growing in addition to focusing on liquidity, mainly by increasing the proportion of dollar-denominated assets.
Marein president director Yanto Wibisono said that he expected Marein’s premiums to drop by 7% this year, and that its growth could remain negative for a while. He said the company is trying to maintain business continuity by implementing several strategies including improving the quality of human resources, improving its risk management systems and striving to maintain an RBC ratio of more than 200%.
Terrorism pool approach to pandemic risk
It has become clear, however, that the terrorism pool approach would have to be tweaked significantly to be of real value in its application to a pandemic pool.
Australian Reinsurance Pool Corporation CEO Dr Wallace said, “There is, however, a pandemic pool design attribute which is a negative: The biggest problem with insuring pandemic is the speed and the massive scale of financial response that is required. In Australia, the A$10bn ($7.27bn) guarantee in the TI Act for an act of terrorism would be of limited benefit in a pandemic.
“For example, the Australian government has so far announced over A$289bn in COVID-19 pandemic relief measures to save jobs and businesses, through direct subsidies to businesses and the unemployed.
“Pandemic business interruption can really only work in an insurance setting if it is targeted to small business, time limited in duration, and front-end paid. A traditional insurance or payment after the event will not deliver the support needed. A fast, simple and targeted defined benefit for pandemic peril would provide support where it is needed most.”
Malicious email remains a weapon of choice for a wide range of cyber attacks, with spam emails accounting for 85% of all email sent. Email is also the top vector for both malware distribution (92.4%) and phishing attacks (96%). Ransomware continues to plague businesses and consumers, with indiscriminate campaigns pushing out significant volumes of malicious email.
Around 1.5m new phishing sites are created each month. The average lifetime of a phishing site is five days. Anti-phishing filters receive information about a new threat very quickly and so phishers constantly must register new sites that imitate the official sites of various credible organisations. The most popular phishing targets are financial institutions, email services and internet service providers.
Data drawn from INTERPOL’s private partners and research conducted by the ASEAN desk showed that there was an increase in both quantity and sophistication in phishing campaigns in 2019.
“We saw a more advanced exploitation of social engineering techniques worldwide with e-mail remaining the top vector for phishing (96%). Southeast Asia remains a target for cyber criminals attempting to infect networks and devices through the simple but effective trick of phishing,” INTERPOL said in a recently published report on cyber threats in the ASEAN region.
Given that most cyber crime impacts home users and SMEs, a set of preventive advice for users would raise awareness and empower them to protect themselves against malicious software and threat actors, said the report.
More volatile risk environment
The COVID-19 crisis has had an impact in altering Japan’s risk landscape and Toa Re president and chief executive Masaaki Matsunaga expects a more unpredictable risk environment overall, shaped by a volatility, uncertainty, complexity, ambiguity outlook.
“In such an environment, the importance of risk-based management is bound to increase. It will be essential not only to promote risk reduction but also to be acutely sensitive to risk and be able to take decisive action.
“This means detecting and recognising the diverse risks that will arise along with the change in the era and the business environment, addressing the risks appropriately and capturing the business opportunities thus created,” he said.
In a positive development for Korean Re, regulatory changes introduced this year means that ‘co-insurance’ is now permitted as a type of reinsurance arrangement for both life and non-life insurers.
Co-insurance is a modified type of reinsurance, which is widely used in Europe. Under traditional reinsurance placements, only risk premiums are ceded to reinsurers, but modified reinsurance contracts allow primary insurers to transfer other risks to reinsurers such as savings, premiums and interest-rate risk.
“With the new option given, primary insurers in Korea will be able to raise more available capital or lower required capital by ceding interest-rate risk and insurance risk as well as pure underwriting risk to reinsurers,” said Korean Re.