The burgeoning Asian reinsurance market is here to stay, says Wee Choo Neo.
2008 seems to have distant echoes of 1998 with febrile stock markets and America at the threshold of a new era in politics. But this time there is a far less vulnerable Asia. There is broadening insurance demand and expanding reinsurance supply. Regulators rule the roost and with the risk landscape as uncertain as the weather, the brokers are in their element.
Asia’s promise of bountiful markets is now being realised as Asian insurance in 2006 accounted for 20% of world premium. The projections for growth are very positive. One of the key drivers is the Asian population base that makes up 75% of world population. China, Japan and India are in the world’s top 10 biggest economies by purchasing power.
It is inconceivable that risk managers will find themselves short of insurance options, but a priority for the region will be for risk managers to establish the level of risk appetite that is appropriate to them, relative to cost. Reinsurance suppliers are getting more scientific about risk pricing. Reinsurers should take a similarly technical view of natural perils and catastrophic perils in pricing reinsurance portfolios.
The progress of Asian reinsurance is clear in such market-building developments as the emergence of newcomers like Asia Capital Re and the vibrant activity of Lloyd’s Asia. Other factors include the growth of India’s GIC as a global reinsurer, the strengthening of reinsurance hubs like Singapore and the growth of brokers, particularly in India.
With an increasingly wealthy population, corporate growth is being supported by consumer spending, which in turn is driving increased financial exposures and lifestyles choices – boosting the regional delivery of insurance. Add the extra spice of infrastructure growth, industrial production, energy, transport and labour, and the regional reinsurance picture looks very promising. Indeed, some of the most rapid insurance and reinsurance growth can be seen in portfolios relating to credit and finance, energy, engineering, health, liability, life and personal accident.
However, there are obstacles ahead for both insurers and reinsurers. For insurers, there are the challenges associated with growing distribution, weak branding, short product life cycles and inflation-challenged asset values. Meanwhile, reinsurers grapple with varying market cultures and the constant dilemma of pricing versus capital costs.