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Feb 2023

Time for hard negotiations

Source: Asia Insurance Review | Nov 2022

If it’s November, it must be Singapore International Reinsurance Conference (SIRC).
 
The reasons for the continued growth of the SIRC as a staple of the region’s reinsurance calendar, in spite of the vagaries of COVID-19, have a lot to do with the impeccable content – coupled with the impeccable organisation – that the conference offers the sector at a crucial time of the year.
 
As far as many players are concerned, while the annual renewal conversations may start in Monte Carlo in September and then continue in Baaden-Baaden in October, by November Singapore is the forum to progress the big decisions.
 
As fate would have it, Singapore is simultaneously emerging as an increasingly important centre for financial services in Asia Pacific – and so holding the annual SIRC there seems more like prescience and less like luck.
 
As Singapore’s star has waxed, so has Hong Kong’s waned. While once Hong Kong was seen as the unrivalled commercial hub of the region, that enviable position has been undermined savagely by, amongst other things, the pandemic. Unpredictable lockdowns and stringent self-isolation and quarantine requirements took their toll on the free passage of C-suite financiers in and out of the territory.
 
It would be naïve to imagine that geopolitics does not play a significant part in where financial services business deploy their capital around the world – and the thorny issue of the relationship between China and Taiwan does little to calm troubled waters.
 
The CEOs of Bank of America, Citi and JPMorgan told the House of Representatives in mid-September that they would comply with any US demand to pull out of China if force is used to reunite Taiwan with the mainland.
 
It’s not much of a stretch to imagine that large US-owned insurance groups might feel compelled to act in a similar way under similar circumstances. This could have a constraining effect on their further levels of investment in both China and Hong Kong.
 
Singapore, in contrast, handled the pandemic with machine-like efficiency and safely and securely got business firing on all cylinders as quickly as it could.
 
This is not to suggest that the balance of the year will offer calm waters either for the reinsurance sector or for Asia Pacific. There are too many imponderables for any level of complacency.
 
As the reinsurance renewal season enters the home stretch, inflation still looms over discussions like the spectre at the feast. Then there is the issue of rising rates – which could prove to be a double-edged sword for insurers and reinsurers.
 
Some observers believe that only when interest rates match the inflation rate will equilibrium be restored. This could point to interest rates anywhere between 6% and 12% in the not-too-distant future.
 
Then there is the issue of recession. Some, like JP Morgan CEO Jamie Dimon, believe that recession is likely within the year. Others believe that we are already in recession.
 
Add to this patchwork of pain Russia president Vladimir Putin’s invasion of Ukraine. At the time of writing, he has begun shelling civilian centres in Ukraine in attacks that have been widely condemned as war crimes. The prospect of nuclear Armageddon remains remote but possible. 
Lest there be any confusion, Armageddon means the end of times – and that is an uninsurable risk.
 
Paul McNamara
Editorial director
Asia Insurance Review
 
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