Asia to lead the charge in the next two decades

During a fireside chat at the 17th Singapore International Reinsurance Conference, Swiss Re’s Mr Moses Ojeisekhoba discussed Asia’s role in the future of the industry as well as how technology will play a critical role in closing the protection gap and helping (re)insurers keep up with the rapidly changing risk landscape.

By Amir Sadiq

The Asian market, compared to the rest of the world, is by far the most dynamic, said Swiss Re CEO reinsurance Moses Ojeisekhoba during a fireside chat yesterday at the 17th Singapore International Reinsurance Conference.

“Today, Asia comprises roughly around 22% of global insurance premiums and by 2040 we forecast that that number will be around 35%,” he said, highlighting the region’s increasing relevance to the global market.

He added that there is also a lot of innovation that takes place across Asia in distribution, in the way products are constructed and sold, and he believes it will continue to be the case as (re)insurers try to keep up with consumer demand.

“The consumers here adopt innovative products, channels … far faster than anywhere else in the world. And the industry itself also will have to make adjustments to ensure that it keeps up with consumers – whether those consumers are individuals or businesses or governments,” he said.

“At the end of the day, that innovation and that drive is something that has to remain across Asia in order for it to meet the ambitious growth targets that we believe will be the case because exposure also continues to grow across this continent.”

Opportunities driven by growing risk

With Asia leading the charge, Mr Ojeisekhoba expects the future of the global (re)insurance industry to be robust, driven by a rapidly changing risk landscape that includes socioeconomic and behavioural changes on top of climate change.

In addition to people having more assets that need to be protected, he raised the issue of how humans tend to locate themselves close to dangerous areas such as near sea fronts or forests.

“You look at all these things – risk, overall, is increasing. And that means you need capital and capacity to ensure that you provide protection for societies [and] for consumers at the end of the day. For me, I see significant opportunity for the industry in the coming two decades,” he said.

Need to do more with technology

Mr Ojeisekhoba also believes that there is still much more that the industry can do to make use of technology and reach more segments of the population. Of the $77bn in economic losses from Nat CAT in the first half of this year, only about $42bn was insured.

Furthermore, this figure is still not as revealing as it could be given that most of the catastrophes this year have taken place in developed markets. In emerging economies, the insured portion of such losses oftentimes is less than 10%.

With the three main reasons for underinsurance often related to access, understanding and price, he pointed to how technology provides an opportunity for the industry to reach more people.

“Technology allows you to deconstruct the product and sell it in a completely different way. Access – almost everybody anywhere in the world has a mobile ‘phone these days so you can deliver the product in an entirely different way,” he said.

“For me, I still think there is a lot more that we as (re)insurers can do to enable them and there is a lot more that the industry should be doing to ensure that we are reaching much more people and I believe that [using] digital platforms and technology is the way to democratise the availability of insurance to just about anybody around the entire world.”

Challenges are significant, but not insurmountable: MAS

By Jimmy John

Apart from the COVID-19 pandemic, climate change poses short- and long-term existential, economic and social risks to the region and the insurance industry must respond by working systematically with policymakers, said Singapore minister for finance and Monetary Authority of Singapore (MAS) deputy chairman Lawrence Wong in his official keynote address at the opening ceremony of the SIRC yesterday.

“The COVID -19 pandemic has disrupted global economic activity, upended livelihoods and exposed the fragilities of our global health and social infrastructure,” he said. At the same time, he said that the global system continues to contend with existential challenges which includes climate change and cyber risk.

Asian economies bouncing back

Asia’s fundamentals remain strong and it continues to lead globally in terms of economic growth, the rise of the middle class, wealth creation and urbanisation, said Mr Wong. “Most Asian economies are working hard to bounce back from the pandemic. Singapore, like many other regional countries, is learning to live with COVID- 19, and progressively re-opening our economy,” he said.

Mr Wong mentioned how growth in the region would need further protection of lives, wealth and assets. Highlighting the growth of Asia’s insurance market, which he said was growing nearly twice as fast as the global market and is forecast to grow at more than 8% per annum until 2030: “The insurance industry can support the region’s economies in seizing opportunities in Asia in two transformative areas, which is climate change and digitalisation,” he said.

He said COVID-19 has accelerated the digitalisation trend in Asia, with technology and big data rapidly transforming the concept of insurance.

“This enables insurers to support not only risk transfer but also risk prevention, leading to better outcomes,” he said.

Collaboration is critical

Meeting Asia’s risk financing needs will require a pooling of expertise, financing, data and talent from policymakers, the insurance industry, and academia, said Mr Wong.

Highlighting the Global -Asia Insurance Partnership (GAIP) which is a tripartite partnership between the global insurance industry, regulators, and academia, supported by the MAS, which he said aims to produce actionable research insights, develop policy recommendations and co-create innovative solutions for structural and emerging risks that Asia faces.

“We are encouraged to have many industry partners contributing funding and expertise to the GAIP,” said Mr Wong.

Lloyd’s reinforces dedication to Asia Pacific

By Ahmad Zaki

A growing middle class and rising standards of living promise an improved insurance penetration rate across Asia Pacific, said Lloyd’s chairman Bruce Carnegie-Brown during his keynote address at SIRC yesterday afternoon.

“We intend to continue deepening and growing our relationship with firms in the region. That intention is captured in Lloyd’s purpose of sharing risk for a braver world, every aspect of which ties us to this market,” he said.

This ‘braver world’ is a reference to where we find ourselves today, emerging from a global pandemic that has changed the way people live, while also facing the sustained warming of the planet. This combination has demanded new levels of courage and boldness to do what is needed to protect the future.

He also noted that Singapore had long been Lloyd’s favoured gateway into the region, and that the plans for ‘green growth’ that Singapore’s Ministry of Finance had espoused matched its own vision and ambition.

The climate change challenge

The effects of climate change are already obvious, with thinning ice in the Arctic, rising global temperatures and increased frequency and severity of weather events. However, this is comfortable ground for insurers, who are experts at analysing the likelihood of known events reoccurring in the future.

“Less comfortable for our industry are the scenarios yet to materialise,” he said.

Based on current projections if carbon emissions are not addressed, these changes will affect the way people live, the products they buy and the jobs they hold.

“And that poses difficulties for an industry based on assumed conditions and known factors. So, in terms of categorising the risk, climate change is both present and prospective, both real and yet to be realised, and it is also both a moral and a financial risk,” he said.

Balancing catastrophes and COVID

SiriusPoint’s Mr Bobby Heerasing spoke to us about how the industry is dealing with climate and catastrophe risk, now that COVID-19 has loosened its grip on the world.

By Ahmad Zaki

The conversation in the last few years has been essentially: COVID, COVID, COVID, and how the insurance and reinsurance industries should manage its impact.

“That’s been at the front of our clients’ minds,” said SiriusPoint head of international strategic business development Bobby Heerasing.

“But as we start to look beyond COVID, people have again turned their attention to the frequency and severity of natural catastrophes and the impact of climate change – in particular, how we should address the changing dynamics of modelling secondary perils in our por tfolio. This is a global phenomenon and not restricted to Asia.”

Everyone recognises that 2021 is going to be an expensive year from a catastrophe perspective. Natural catastrophe losses reached $42bn in the first half of 2021 according to Swiss Re - this is above the previous 10-year average and is only exceeded by H1 2011.

“In the second half of 2021, we have had some significant CAT events in China, Europe and the US which will probably mean the erosion of CAT budgets. Therefore, it will be another expensive year for the industry, leading to a bout of poor results and pressure on the combined ratios and margins – this has been the trend over the last five years, where we collectively as an industry have struggled to meet the cost of capital,” he said.

Asia’s Nat CAT environment

Asia has not been spared as far as 2021 is concerned; it has had its fair share of Nat CAT events. There were the floods in China’s Henan province in July when record-breaking rainfall flooded underground railway tunnels as well as roads, affecting more than a dozen cities. It was costly in terms of human lives as well as economic and industry losses. There were also floods and landslides in India caused by unseasonal rain in October, with a significant loss of life.

“I’m loath to think of Asian markets in isolation because the reinsurance market is interconnected, and we always view it from a global perspective,” he said. “When we look at rates and margins, the continued aim is to improve the profitability of our portfolio in Asia, these are the same pressures that exist in the rest of our books around the world.”

Asia has 65% of the wor ld’s population, densely populated, with many coastal cities, and can also be adversely affected by floods because a lot of the major cities are close to major river systems or relative low lying. The potential for increased severity and frequency of flooding events, particularly wind-driven water, is at the top of minds in Asia.

Dealing with COVID-19

In the space of two years, the (re) insurance industry and society at large has made enormous strides in learning to deal with COVID from a standing start.

“We’ve put f ramewor k s in place, people have adjusted their lifestyles, workplaces have changed immeasurably to manage COVID, and we’ve had the vaccine rollout. Whilst vaccine availability is not uniform across the world, we’re seeing more and more people being vaccinated, more effort, time and resources going into research which will lead to better vaccines and treatment for COVID,” he said.

“While we haven’t got rid of COVID completely, societies and government have done a huge amount to minimise its impact. It is going to be an ongoing effort, especially as we get through the northern hemisphere winter and into 2022. We won’t necessarily be rid of COVID for the next 10 years, but the world needs to learn to live with and not fear it and, more importantly, to manage it safely with the least impact to society.”