Reinsurance buying habits are changing in SE Asia, reports David Banks.

Reinsurance buying patterns in Southeast Asia are changing due to new regulation and the arrival of foreign insurance groups, an AM Best report reveals.

The report finds pervading trends across Indonesia, Malaysia, the Philippines, Thailand and Vietnam, but says changes in reinsurance buying behaviour differ from one country to another.

In Malaysia, for instance, new regulations on risk-based capital introduced at the beginning of 2009 have led to an increase in reinsurance purchasing as smaller companies are in need of capital relief.

The report’s author, and head of market analysis for AM Best’s global financial services division, Yvette Essen said: “Insurers have been altering their response and ceding an increased amount of business. Smaller insurers have been attempting to optimise their capital to meet the risk-based capital requirements and have been buying more reinsurance, especially proportional reinsurance for larger risks.”

In other parts of Southeast Asia, the arrival of foreign primary insurers has been a major factor in reinsurance.

For example, in Indonesia it has led to an overall decrease in the amount of reinsurance bought, since foreign primary insurance entrants generally have a higher retention level. Meanwhile, in Vietnam reinsurance opportunities continue to expand after the country relaxed its reinsurance ceding rules in 2008.

Essen commented: “Southeast Asia is among the most exciting and rapidly developing insurance markets. It has weathered the economic downturn better than many other regions and has more fragmented insurance markets than some markets in Northeast Asia. It is no wonder that foreign insurers’ interest shows no signs of abating.”