Q&A with Peter Schmidt, chief executive, MEA, APAC, LATAM, Credit & Surety, AXA XL Reinsurance, a division of AXA
Insurance penetration remains low across Asia Pacific’s many different emerging economies, particularly for specialty classes. How can this be addressed?
Allow me to start with a general point: Although the current insurance penetration in emerging Asia – at 3.8% - is still below the world’s average of 6.0%, the values that are created in the region will, over time, require substantial additional risk capacity.
Asia has substantial exposure to large catastrophic risks, and access to international reinsurance capacity and know-how will help to cushion and absorb this.
It is, therefore, important for emerging Asia to drive sophisticated regulatory systems that encourage superior risk management, open markets to assure the allocation of global capital and the reliable and prompt settlement of claims, and access to talent and expertise to develop the products needed to address its protection needs.
How can you link specialty with other business lines to drive take-up?
In non-life we see substantial growth potential in motor, health and agriculture, driven firstly by economic growth, but more particularly by socio-economic changes such as continued urbanisation, modernisation of the agricultural sector, the expanding middle class and the aging population, which will translate into strong demand for improved health protection products.
Beyond personal lines, growth will be driven by the unabated need for investments in infrastructure which will benefit insurance lines such as construction, engineering and surety.
We also see rising demand for liability products as the legal system is slowly changing in emerging Asia, holding individuals or corporations more accountable for their actions and increasing damage awards.
We talk frequently with our clients about ways to adapt services to meet local needs. For example, we recently held a product seminar in Beijing with 50 product experts for Credit and Bond to compare product specifics in various international markets and draw comparisons with the Chinese market. We hope to support the local market with insights on how to successfully develop this new line of business.
Credit and surety represent the sharper end of specialty lines business: is demand increasing for this in Asia?
Asia Pacific’s infrastructure needs are enormous. China is already the world’s largest construction market. According to Oxford Economics’ “Global Construction 2030” report, China is expected to spend about $45trn for construction over the course of the next 12 years. India, which is predicted to spend about $13trn on construction by 2030, will become the world’s fastest growing construction market.
Demand will also be high in other populous emerging Asia markets, while mature markets like Japan need to modernise their infrastructure. These developments will increase the need for surety risk capacity to help ensure the timely completion of these construction projects.
China has already started to encourage insurers to engage in surety/bonding, recognising that the government no longer wants to shoulder the performance risk itself or leave the banks exposed. In addition to local reinsurance capacity, there is a need to access international capacity to cover these risks. Other markets in emerging Asia will follow suit, such as Indonesia or the Philippines, alongside mature markets such as South Korea and Japan.
How are you using insurtech in AXA XL’s product innovation for this region?
Innovation is a key part of AXA XL’s strategy for all regions and markets. AXA XL is working on numerous insurtech iniatives including blockchain, artificial inteligence and the Internet of Things.
For example, we are looking at ways in which satellite imagery and AI can be used to help analyse reinsurance portfolios.
In many of the Asian markets where insurance and reinsurance penetration is lagging, insurtech could prove invaluable in helping to bridge the protection gap.