Soft market conditions in the APAC reinsurance market are likely to put pressure on margins and raise risk-management challenges for reinsurers, says Fitch ratings in a new report.
However, the market remains exposed to catastrophe events and regulatory shifts, which could temper the softening trend. Reinsurers are likely to emphasise disciplined underwriting and capital management to preserve profitability amid evolving risks.
Relatively benign catastrophe losses in early 2025 supported APAC reinsurers’ profitability and market stability. This, combined with satisfactory performance in recent years, has translated into lower risk-adjusted pricing at recent renewals. However, climate change and severe weather continue to pose significant risks to earnings and capital.
The industry remains well capitalised, but climate-driven volatility heightens the need for risk transfer. Fitch expects a steady rise in Asian insurance-linked securities (ILS) issuance, supported by fixed-income markets and growing climate awareness, while regulatory measures should further spur market development and encourage catastrophe bonds and other ILS activity.