Difficult conversations to build sustainability

by Ahmad Zaki

With booming populations in metro areas and the tendency to build in high-risk areas such as along shorelines and on floodplains, insurers must engage politically in order to improve resilience and reduce volatility, said Munich Re member of the board Achim Kassow, during his opening speech yesterday.

Following on that point later during the panel, which focused on creating a sustainable future, Lloyd’s America CEO Dawn Miller said that there is a very large role for the industry to play in working with state, country, regional and district regulators to have a fact-based discussion about why insurance is available, the cost of capital, drivers behind pricing and legacy issues.

“Building for resilience is possible,” she said. “We all live in environments where, over the last 30 to 40 years, whether it’s in developing or developed countries, there are building codes and regulations (to support sustainability) and so we know it can happen. The more that our industry can work alongside regulatory bodies to help them understand the efficacy of doing this, the more insurance will be available.”

She added that regulation will always lag behind innovation, but if the industry can bridge the gap and show that there are ways to deal with Nat CAT through risk management or resilient construction, people will get the capacity they need. “At the same time, it doesn’t take away if someone chooses to rebuild their home in the same zone they were in. That’s their choice. All we can do is try to bring some resilience to the fullest extent possible.”

Giving up profit for good

Dr Kassow also noted that the industry needs to be prepared as an insurance and reinsurance sector to give up the business it considers profitable.

“Part of the debate will always be political,” he said. “If the private sector should have the opportunity to make money on something, or alternatively serve a public good, then that is the choice that should be administered.”

While government pools exist and provide the capacity that people require, being silent for fear of government intervention is the wrong attitude, he said. “Even if we might lose business for a certain period of time, it’s also pretty clear that these pools will see losses and the taxpayer will then be called to pay for it, and that will provoke the next discussion. Then you get to a sustainable solution.”

He also said that the industry shies away from having difficult conversations about habitable and insurable areas. “But I think, as an industry, we must have clear standards based on facts and say, ‘no, this isn’t going to work anymore’. Even if we could rebuild better, this place is unsustainable. And because we have the relevant information, we can provide that clarity.”

Sustainable cyber

An often-overlooked part of building a sustainable future is managing cyber risk. The recent CrowdStrike event showed how vulnerable the world is to a non-malicious event, raising questions about what a black swan event would look like in the modern day.

For investors, the question of cyber is way down the list, said Citizens JMP managing director Matthew Carletti. “Their job is to play devil’s advocate, and they want to manage their downside,” he said.

Compared to the many decades of advancement and data that CAT models have had, cyber models are relatively new and all of the knowledge gained has been over the past few years.

“That’s the scepticism that the investment community has when it comes to cyber, and the industry needs to get past and show that while it actually might not have all the answers, it does know how it’s going to manage that risk,” he said.

He added that investors are most excited about the addition of cyber specialists in the industry, and the loss mitigation tools that are being introduced as part of cyber product offerings.

Social connectedness and reinsurance as the glamorous side of insurance

by Paul McNamara

The fight for talent: Transforming perceptions towards (re)insurance’ was the subject of an insightful panel at yesterday’s SIRC.

The panel was moderated by Partner Reinsurance Asia CEO, Asia Pacific P&C and CEO James Beedle and included AIA Singapore chief executive officer Wong Sze Keed, Guy Carpenter senior VP, global operations Valerie Badcock, Munich Re regional head of HR (Asia Pacific, Middle East and Africa) Moira Roberts and Selion Global founder and global managing partner Thomas Hofer.

Being boring

Mr Beedle kicked off the panel with a preamble about the increasing importance of recruiting and retaining staff as more senior talent is leaving the sector through retirement at a time that it is struggling to recruit younger staff – in part because it is seen as ‘being boring’.

“You’re not alone,” said Mr Hofer. “It’s not just an insurance challenge – many people left during the pandemic and never came back.” Ms Roberts echoed this sentiment and said, “The industry is not good at selling itself, branding itself. There is a degree of humbleness in the industry.”

“The insurance industry is seen as boring and conservative,” said Ms Wong. “People associate life insurance with agents that only hassle you to buy insurance. We don’t do enough to create awareness.” She went onto point out that AIA is working with Singapore’s Institute of Banking and Finance and the Monetary Authority of Singapore to introduce a minor insurance degree at university this year.

The glamour of reinsurance

Ms Badcock said, “Reinsurance is the glamorous side of insurance.

“Rebranding is something we should all be considering. We need to promote ourselves better. We need to open the doors,” she said.

In terms of attracting new talent, she said, “We need to be looking at a multifaceted method of getting staff – starting at graduate level – but also introducing an apprentice scheme for 18-19-year-olds. We should always be looking at attracting the best talent from universities – and not just from finance and economics courses.

“We also need to be focusing on female talent,” she said.

Ms Roberts indicated that Munich Re had, “started in employee branding” focusing on real staff in real countries showing the diversity of talent it employs.

“It’s about personalisation – about selling the benefits of working in insurance. Hybrid working is a huge factor in attracting talent,” she said and reinforced that this needs to be part of a long-term plan. It is not a quick fix for a short-term problem – and it can be expensive to implement properly.

“It’s not cheap, which is why you need to think it through,” she said.

Ms Wong concurred that it requires a longterm solution. “We need to start in schools with internship programmes – and scholarships to create awareness of the life sector being much more interesting. You don’t get immediate returns, and you need to make sure that it’s sustainable,” said Ms Wong.

“Young people don’t even know what we do. There’s a lot of work to be done.”

Retaining talent

Ms Wong was unequivocal about the most important tool available to help retain talent. “The big draw is flexible work arrangements,” she said. “It’s not just about work-from-home. They want café-style spaces in the office where they can brainstorm with each other.”

Ms Roberts said, “73% of our talent is Gen Y or Gen Z and they want to work differently – more flexibly.”

Also important is mobility within the company. “Mobility is important so that people can increase their skillsets. Managers don’t like it – but people need to be able to move. ‘Stickiness’ is all about having fun at work. Our staff run sessions by themselves. Staff aged between 25-45 want to be able to socialise at work – perhaps meet a life partner at work.”

Social connectedness is of primary importance. “It’s important for younger staff to be in the office to learn from older staff, how to do deals and so on,” she said.

APAC reinsurance market shows divergence

On the ground at SIRC, we spoke to Aon’s Mr John Morley about growth opportunities and trends in the reinsurance market in Asia Pacific.

by Reva Ganesan

The market remains incredibly strong in certain areas, even as we see a general softening globally and shifts within the market itself,” said Aon APAC CEO Strategy and Technology Group John Morley, addressing the state of the reinsurance environment in the APAC region.

“While some sectors show signs of softening, others continue to experience a hard market, particularly in the Pacific and parts of APAC,” Mr Morley said.

“The APAC region, given its diversity, is often viewed in sub regions like North Asia, Southeast Asia, South Asia and the Pacific. Each of these areas exhibits distinct characteristics; some regions are still experiencing hardening, while others like Singapore, are beginning to see softening, especially within ceded impact business,” he added.

Opportunities

“We’re experiencing a surge of inquiries about growth in the region, particularly focused on specific markets. India is currently a hotspot, with many eager to enter this market. We assist companies not only in understanding how to enter but also in determining which lines of business to pursue,” he said.

“Data plays a crucial role in this process, enabling us to provide clarity and confidence through a detailed, data-driven analysis of how and where to enter these markets. Besides India, other areas are also gaining attention, such as Australia, particularly in the renewable energy sector,” he said.

“However, predicting catastrophe risk is becoming increasingly complex, leading to hardening in certain areas. For instance, reinsurance for offshore wind projects is proving to be exceptionally challenging,” he added.

Growing profitability around APAC

When asked about plans to grow profitability around the region, Mr Morley said it is crucial to select the right lines carefully and understand future market conditions.

“India serves as a prime example: While it’s currently a ‘gold rush’ with many looking to enter, it’s essential to consider what the market will look like in two years. The current profitability might not hold up, given the high influx of competitors across various lines.

“Aon’s goal is to provide insights that empower companies and CEOs to make better, data-driven decisions for sustainable, profitable growth. Some businesses seek immediate profitability, while others focus on long-term growth. For the latter, entering the market now - even with thinner margins - may be strategic, allowing them to establish a presence and gradually increase premiums and margins over time,” Mr Morley said.

Trends around the life market

“The life insurance market is increasingly appealing to insurers, especially larger inbound players who are eager to enter this space. Many are adopting a strategy of acquiring composite businesses, retaining the life component and placing the general insurance (GI) segment into runoff,” Mr Morley said.

This approach aligns with current economic conditions – interest rates have peaked and are beginning to decline, which enhances the attractiveness of life books - now seen as valuable assets rather than drags on portfolios.

“Large parts of Asia, particularly in life and health insurance, remain underserved in both protection and investment. This creates substantial growth opportunities, although many companies are limited by outdated infrastructure in policy administration, claims management and actuarial systems. Upgrading these systems could enable faster, more efficient and cost-effective service to new markets,” he said.

Forecast

In the next 12 months, the market can expect ongoing shifts driven by regulatory changes, leading to further consolidation. A general softening trend is likely, although this will heavily depend on Nat CAT activity in the region. Significant storms or earthquakes – such as a major seismic event in Japan – could cause market hardening, particularly in property insurance.

Korean reinsurers face new challenges under IFRS17 and K-ICS

Under the new IFRS17 and K-ICS frameworks, insurers in Korea are adopting more advanced capital management strategies and exploring diverse capital solutions to optimise their balance sheets. Product innovation, identified as a top challenge by over 90% of insurers, is expected to drive growth, with increased collaboration between insurers and reinsurers. RGA Korea’s Mr Micheal Shin tells us more.

by Reva Ganesan

In 2024, the Korean insurance industry regained its growth momentum following a challenging 2023. Total premium income for the first half of 2024 reached over KRW114tn ($86bn), marking a year-over-year increase of approximately 4% from the same period in 2023.

RGA Korea CEO Michael Shin, who is also senior vice president for Japan and chief marketing officer for Asia, said that the growth was primarily driven by robust sales of limited pay whole life insurance, which attracted customers with higher returns at maturity in the life insurance sector.

In the non-life insurance sector, health and accident insurance led market growth, with accident and health sales outpacing life insurance sales, Mr Shin said.

“On the downside, market competition has intensified as all insurance companies are focused on expanding protection products to secure contractual service margins (CSM) under the IFRS17 and K-ICS regimes. Insurers have expressed profitability concerns over new products as margins thin under competitive pressures,” he said.

Biggest demands and market trends

According to the Korean Statistical Information Service, by 2025, South Korea is projected to become a ‘super-aged society’ - with over 20% of its population being 65 or older.

As the ageing population grows rapidly, the demand for life and health insurance among seniors has significantly increased, Mr Shin said.

In 2024, RGA conducted consumer market research of the senior segments across eight markets in Asia, including South Korea.

He said that the research showed that a large proportion of seniors have pre-existing medical conditions, such as hypertension, high cholesterol and diabetes, which often leads to them not passing standard underwriting, resulting in either part of the coverage being declined and/or subject to high premium loadings.

“In super-aged countries like Japan, Korea and Taiwan, the majority expressed that they are not confident in the level of public healthcare in a critical illness (CI) event, hence they see private health insurance, annuity and CI insurance as valuable protection options.

“Nonetheless, they are often frustrated by the higher premiums and challenges in the underwriting process when purchasing insurance or feel that the products do not meet their needs or are too difficult to understand,” he said.

Shift in product design

Mr Shin said due to economic challenges in South Korea, many consumers are facing financial strain and struggling to allocate money to insurance.

This situation underscores the importance of value for money when choosing insurance products.

“To offer affordable prices with wider coverage, there has been a shift in product design from diagnosis-based lump-sum payments to treatment-based continuous payments. This approach has helped provide affordable premiums while covering advanced medical technologies.

“Recently, a new cancer treatment product that offers comprehensive coverage for all types of cancer treatment at an affordable premium has been launched and has quickly become one of the best-selling items in the market, with RGA’s support,” he said.

Regulatory challenges and adjustments

When asked about challenges facing Korean reinsurers in 2024, Mr Shin said IFRS17 and K-ICS “have introduced more discipline and significant changes to business strategies”.

“Insurers are now focusing on top-line sales of high CSM products, leading to fierce competition in the protection market. This shift has resulted in an increasing demand for new protection products,” he said.

“As regulatory adjustments put pressure on the K-ICS ratio and economic changes add more volatility under IFRS17, insurance companies are seeking diverse capital solutions. These include reinsurance solutions, issuing subordinated bonds and hybrid securities, among others,” he said.

Bringing the market back into balance

by Ahmad Zaki

Market conditions for global reinsurance are in the best state they have been in 20 years, said AM Best chief rating officer Stefan Holzberger, while on-the-ground at SIRC.

“We have a positive market segment outlook for the global reinsurance industry, and that is a combination of the prospect for reaching a good level of profitability and maintaining strong overall fundamentals in the market,” he said.

This positive outlook is not typical for the ratings agency, as competition within the industry tends to temper growth potential. However, with investor demands for sustained returns at or above the cost of capital, reinsurers will report good performance for 2024, despite some recent and significant CAT activity in the US. “But those events, if anything, will maintain hard market conditions, make it less likely that you’re going to see an erosion of terms and conditions,” he said.

Reinsurers in Asia could show a smoother performance compared to their European and US counterparts, due to the nature of insurance and reinsurance that is purchased here. “Reinsurers across Asia Pacific typically are writing a lot more proportional covers,” said AM Best managing director of EMEA and Asia Pacific Gregson Carter. “Globally, we’re seeing that positive pressures and the pressure to maintain pricing discipline, but that’s less evident in Asia Pacific. But reinsurance is a global business. So many of the capital capacity providers here are global players and they’re feeling the pressures elsewhere. We’re not expecting to see a huge differential in those pricing pressures and pricing trends.”

Investor pressures

Hurricane Ian in 2022 marked the beginning of the current hard market and contributed to several consecutive years of $100bn insured losses. “The reinsurance industry was reading the signals from their investors, and that signal was, if you want us to continue to back your business, you need to produce a better return in line with your cost of capital,” said Mr Holzberger.

This investor pressures carried across the entire industry, from traditional reinsurance investors to the ILS markets. “Now, while there have been very significant CAT losses, they’re mostly being borne by the primary markets. Reinsurers have moved out of income state protection. They’re protecting that tail event balance sheet volatility, and it’s proven to be a pretty good recipe for the reinsurance segment in terms of growth,” he said.

He added that most global reinsurers are also involved in the primary market and several big markets in North American and Europe have seen good underlying rate increases, which has only benefited these reinsurers.

Sustainable cycle

The primary insurers also have to bear these increased losses at a time when their customer base is facing rising cost-of-living prices. This negatively affects their ability to reprice and to let the market know that they are facing increased losses, putting them in a difficult position.

“There is a balance to be had here,” said Mr Carter. “The reinsurance industry is holding firm in its stance of not wanting to become an earnings smoothing tool. But even if you just keep the attachment points where they are, inflation means that losses will start to creep up into those reinsurance layers relatively soon. And there may be some of that tension between the reinsurers not having losses, and the primary markets bearing the losses, which will force the market to come back into balance.”

At the same time, reinsurers had seen an extended period where they were showing very poor returns for their investors and something had to change.

“It is a question of at what point are investors happy with the returns but also willing to entertain more risk and to take on more of the working layers?” he said. “Right now, we don’t see signs of that just yet.”