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Oct 2021

Time for a reckoning

Source: Asia Insurance Review | Sep 2021

The remaining quarter of 2021 is showing signs of being tricky for the insurance industry in Asia. Three fairly significant factors are converging to make the immediate future more unpredictable than usual.
 
The first factor is the coming-home-to-roost of claims arising from COVID-19. Each Asian nation will face a different picture, but figures compiled by the General Insurance Council of India suggest that one third of COVID-19 health insurance claims in the country are still pending.
 
Indian insurers had received a total of 2.3m COVID-19 health insurance claims worth $3.94bn by early August - but had settled only 1.99m claims for $2.39bn. There is much more to come.
 
Meanwhile Munich Re has pointed to India as a significant outlier as it doubled its full-year forecast for COVID-19-related life and health claims and indicated that the Delta variant has pushed up its forecast of losses. In the first half year it booked EUR302m ($354m) in life and health claims compared to EUR105m for the corresponding period last year – but warned that if further virulent strains emerge the picture could worsen.
 
The second factor is the continuing climate catastrophe. The sixth Intergovernmental Panel on Climate Change assessment report released last month points to the causes, but the Nat CAT effects are not hard to see.
 
Extreme heat events in China are on the rise and above global average with intensity of typhoons landing in the country increasing according to the country’s new Blue Book on climate change. Released by the China Meteorological Administration in August, the Blue Book reveals that between 1961 and 2020, China recorded a gradual rise in extreme heavy precipitation. Extreme heat events also increased significantly in the country since the mid-1990s.
 
Aon, in the latest edition of its monthly Global Catastrophe Recap report said that historic rainfall prompted catastrophic flash flooding across China’s Henan Province from 16-22 July. The flooding generated extensive damage to property, agriculture and infrastructure across the region.
 
Significant impacts were incurred in the Zhengzhou metro area on 20 July as all-time rainfall records were broken. Additional flooding and dam failures resulted in fatalities and damage in nearby Hubei Province and the Inner Mongolia Autonomous Region. The total economic cost of flooding in China during July was estimated at nearly $252bn.
 
Meanwhile, an estimated $724bn of GDP of seven major Asian cities will be exposed to the risk of extreme sea-level rise and coastal flooding by 2030 according to a new report from Greenpeace East Asia. By 2030, around 15m people across the seven cities will be living in areas at risk of flooding.
 
The third factor is the uncertainty over the future of Chinese tech firms outside of the mainland. This goes beyond the headlines that SoftBank would be holding back on tech investments for the next couple of years because of the Chinese government’s scrutiny of the sector.
 
Many insurers in Asia – and around the world – had been looking to Chinese InsurTechs and online insurers for signs of where the industry as a whole might be headed with the adoption of cutting-edge digital technologies like AI, big data, machine learning and the like.
 
Players like ZhongAn Insurance, Waterdrop and Chechechexian were being scrutinised minutely by traditional insurers to see what lessons could be learned in order to ensure survival in the new all-digital world. While there are significantly more than 300 InsurTechs operating in APAC, China and India collectively are home to nearly half of them and have attracted almost 80% of InsurTech investments in the region, according to data by S&P Global Market Intelligence.
 
If Chinese InsurTechs are being made to play in a separate sandpit from now on, the effects on their former rivals throughout Asia Pacific could be intense.
 
 
Paul McNamara
Editorial director
Asia Insurance Review
 
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