Friday, January 19, 2018

Outlook for Asia insurance sector stable, says Moody’s

Asia’s insurance sector has a stable outlook for 2018, according to Moody’s, as steady economic momentum across the region, led by China, drives demand for insurance.

The rating agency’s conclusions are contained in a report that says good growth and ageing demographics are spurring insurance sales, in particular, in view of still low insurance density and penetration rates in most Asian economies.

“The solvency positions of insurers across Asia Pacific remain solid despite increasing capital requirements, while product margins and asset liability management have improved,” says Qian Zhu, a Moody’s senior credit officer.

“The insurers have also adapted to low interest rates by shifting to less interest-sensitive products and increasing their allocation to higher-yielding non-traditional assets, although for some — such as Chinese life and property and casualty insurers — the latter has resulted in rising asset risk.”

These alternative investments by Chinese insurers also introduce additional layers of credit risks, thereby weakening asset transparency, return stability and liquidity profiles.

Specifically, for Chinese P&C insurers, loss ratios have increased generally for small to mid-sized players as a result of lower premium rates following the liberalisation in motor pricing, but expense ratios have improved, reflecting the regulator’s efforts to reign in excessive acquisition costs.

Moody’s adds that deeper adoption of technology is changing the industry’s business model and operations, as well as the delivery of insurance products. In particular, new technology should ease claims processes and broaden insurers’ customer bases and sales channels.

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