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Reinsurers expected to continue focussing on profitability and expense control
The outlook for the reinsurance industry is deteriorating – or more precisely, softening, because of the ample capacity, said Fitch Ratings head of insurance ratings, APAC, Jeffrey Liew.
Nevertheless, reinsurance companies generally are profitable and investment income yields are high from bond portfolios, he also said.
“The ample capacity could potentially drive less disciplined pricing, which may squeeze margins. I would say the profit margin will remain positive, but it will likely be squeezed because of the ample capacity.”
Mr Liew believes more players will enter the reinsurance industry – both traditional reinsurers and new entrants backed by private equity. The market may also become more active with the introduction of more CAT bonds and sidecars.
“In APAC, this development may take more time. It comes back to reliable data that can be used, especially in markets like Southeast Asia, where data is lacking. But clearly, there is business as risks need to be reinsured,” he said.
Looking ahead at 1 January renewals, he predicts further reinsurance price reductions, saying, “We have already seen double-digit reductions in Japan and Korea.”
He also said, “Attachment points for profitable business might go down, but for unprofitable business, the attachment will remain high.
“Reinsurers will continue to focus on profitability and expense control.”
Value-based renewal strategies to define 1 Jan season
An expansion in buying strategies is expected during the 1 January reinsurance renewal season, given the prevailing softer market, said Anshuman Srivastava, global chief broking officer for reinsurance at Aon.
From the clients’ perspective, he noted, there is growing interest in expanding their buying strategies to derive greater value. Reinsurers, in turn, are focused on delivering value through innovation, while brokers view this as an opportune moment to introduce new capacity and differentiated solutions.
Commenting on the most common concerns in Asia in the insurance broking segment, he said, “Given the way the insurance and reinsurance markets are moving, clients are concerned about whether the buying strategies that they have implemented so far are still relevant.
“They’re looking to renew and continue their strategic partnerships with their reinsurers, in a way that is sustainable for all. And they’re also looking for new capacity, new sources and innovative structures that can support their growth.”“They’re looking to renew and continue their strategic partnerships with their reinsurers, in a way that is sustainable for all. And they’re also looking for new capacity, new sources and innovative structures that can support their growth.”
Mr Srivastava described this year’s renewal discussions as “value-based engagements”. Clients are approaching the season with clear objectives about where they want to grow and what they want to achieve through their portfolios.
He said, “We are helping clients make informed decisions as a consequence of being exposed to various things that are happening around the world. There’s a lot of interesting things like parametrics, emerging risks, as well. So as far as APAC is concerned, I think it’s an area of opportunity that everyone around the world looks at.”
On SIRC 2025, he highlighted Aon’s strong participation. Aon has deployed a large team of about 150 people. He noted that SIRC has been growing in popularity year after year, as reflected by the growing attendance. He said, “You find a lot of global reinsurers, brokers, and clients. This presents a great platform for meetings. So, from my perspective, I think it’s been great so far.”
Taking lessons from Asia to Africa
Touching on the future of reinsurance in Africa, Africa Specialty Risks (ASR) general manager (Morocco) Jalil Ammor (L) noted that economic growth meant complex and bigger risks for clients, with cedants looking for strong support and expertise in specialty lines.
This was one of the factors behind ASR’s presence here for the second time, according to ASR head of marine and aviation Aurelien Sauty (R), who called the event an “amazing platform to meet players” in the relevant markets and ensure their alignment with expectations.
“We can then offer something relevant to brokers, cedants and clients,” said Mr Sauty.
Market optimism driven by digital transformation and AI adoption
“Everyone is talking about the market; it is a soft market, meaning there is a lot more available capital, though costs are rising,” said Xceedence client partner Nakul Vadher.
Mr Vadher also noted the optimism in the sector, driven by digital transformation and AI adoption, though he also called progress “uneven”.
A fantastic event
Said Mr Vadher, “The event has been a fantastic opportunity to engage with underwriters across (re)insurance, along with brokers.
“There have also been great discussions on AI and digital transformation, as well as on consulting services to help companies operate efficiently.”
APAC reinsurance market adapts to rising Nat CATs and soft market conditions
When asked about the biggest drivers of reinsurance demand over the next few years, PERILS Australia head of Asia Pacific and cyber Darryl Pidcock said there’s always a strong need for capital to drive growth.
“But when it comes to Nat CATs, we’ve had many conversations with clients across APAC about the increasing frequency of events. Floods impact multiple countries, and convective storms are a concern in places like Australia. Japan has also seen significant discussions on this earlier in the year. These frequent events affect insurers’ retentions and create global demand for solutions, including within the region,” Mr Pidcock said.
Speaking on how the market will adapt to the softening prices, he said, “Having been through many cycles, the industry always finds a way.”
“Hard markets tend to harden quickly, as we’ve seen over the past two to three years, and they also ease quickly.”
“Reinsurers learn to adapt. While there are peak exposures in the US and, to some extent, Europe, APAC provides openings for reinsurers to support clients in new ways. Even as the market softens, there are opportunities, for example, in addressing frequency risk, offering parametric solutions and filling gaps in insurance penetration in certain markets,” he said.
Current reinsurance market exciting with fresh capacity and new exposures
The current reinsurance environment is very exciting, with fresh capital, new capacities and newer exposures, said Mumbai-headquartered Alliance Insurance Brokers co-founder and managing director Aatur Thakkar.
But there are also markets that specialise in exposures like contingency, specie, space and aviation. “Those markets remain hard while capacity in property, marine, cargo and engineering is doubling up and remains soft. It is a good balance between soft and hard markets.”
The future of the reinsurance industry
Noting that the reinsurance segment will likely be a lot more data-driven, Mr Thakkar said, “We are going to have more software-driven AI approaches.”
Additionally, he believes insurers would be expected to write primary risks, supported by capacity from external providers. He expects more MGAs to come up with delegated authority in the future, as well.
The soft market also means that it is a buyer’s market, said Mr Thakkar, who called it “a good opportunity to bring down retentions”.
“It is also a good opportunity to create better layers of protection and buy them, because a soft market gives more capacity,” he said.
“But it is soft because there were no losses before. But that is the reason why the industry should buckle up.”
Reinsurers to demand stricter treaty compliance amid softening market
Expectations are that reinsurers will demand stricter adherence to terms and conditions in reinsurance treaties, as the market is softening with pricing facing pressure, according to Mr Ronald Pun, the head of the Business Development Department of Taiping Re.
He added, “Having said that, I believe that reinsurers are still focussed on price adequacy and will maintain underwriting.”
Mr Pun asserted, “The market is in the softening phase of the market cycle. Even though some are saying that it is already a soft market, this is something I do not agree with.”
“After 2023, we saw a very hard market with high price levels. But now, although prices are gradually coming down, I do not think it is a soft market, though it is softening.”
Sharing his view of the future of the reinsurance industry, he said, “Reinsurance has to be more innovative and responsive to the market’s evolving demands.
“The industry should also collaborate more with capital markets to narrow the societal protection gap.”
Mr Pun also said that there should be “an integration of advanced technology such as AI and data analytics”, which will transform the underwriting process, improve risk assessment and enhance operational efficiencies.
Philippine reinsurance rates may rise amid recent CATs, market remains stable
Overall, the market is expected to remain stable, with only slight decreases for loss-free accounts, according to KRM Re managing director and CEO Ramon Zandueta.
“However, in the Philippines, rates may rise due to recent catastrophes, including flooding and a typhoon in Cebu, as well as two earthquakes in Cebu and Davao. The full impact on upcoming renewals is still uncertain. In general, terms and conditions remain favourable and capacity is abundant, projected at $735bn, including ILS,” Mr Ramon said.
In terms of how the industry will adapt to the continued soft market, he said markets are expected to remain mostly stable, but the changing climate is a significant factor that prevents overly aggressive pricing.
“Catastrophe models now need to be dynamic, with extensive simulations – it’s no longer a static environment,” he said.
On a lighter note, Mr Ramon said SIRC has been very enjoyable.
“The event is dynamic and diverse, with interesting people and a wide range of perspectives. I’m certainly looking forward to attending another SIRC event,” he said.
A softening market with discipline around attachment points expected
Talking about the current environment in the reinsurance industry, Descartes Underwriting head of distribution for Australia and New Zealand Lynn Roehrig (L) said, “It is a softening market, with more capacity. But there is also discipline around attachment points and availability of aggregate cover.
“We see that as an opportunity from a weather and Nat CAT parametric perspective.”
Descartes Underwriting head of APAC Ben Qin (R) also still expects “abundant capital” to flow through the region, including through investment-linked securities.
“But profitability will depend on large events in the region and also globally, with pricing discipline remaining intact,” said Mr Qin.
Competitive behaviour
When asked what he expected for 1/1, Mr Roehrig spoke about a possible increase in competitive behaviour and opportunities for Nat CAT exposures, with flooding noted as a big driver and focus within Australia and New Zealand’s reinsurance space.
A great event
Calling the SIRC a great event, Mr Qin said, “It is always a great event and a good chance to connect with new folks and reconnect with your network.”