SIRC 2024: This year’s key talking points
November 1 2024 by InsuranceAsia News
As the who’s who of global reinsurance gather in the Lion City for the biggest renewals jamboree of the year in the region, here is a highlight of the topics that InsuranceAsia News believes are likely to dominate the discussions.
The hurricane effect
What a difference a track makes. At one point as it bore down on the Florida coast, it looked as if Hurricane Milton would barrel into Tampa, with reports that it could lead to industry-wide insured losses of US$100 billion. As it turned out, Milton made landfall on October 9 in Florida’s Sarasota County as a Category 3 hurricane, bringing damaging winds, tornadoes, life-threatening storm surge, and heavy rainfall. At this stage, predictions of insured losses remain variable, with Fitch Ratings suggesting they will range from US$30 billion-US$50 billion and will be a Q4 and 2024 earnings event for large-rated insurers with Florida exposure. The reality of the modern (re)insurance market, however, is that a loss in this range is not enough to be a capital event for the wider market, and is now unlikely to seriously impact rating discussions for APAC cedants and reinsurers: expect reinsurers to have to give up some recent rate gains.
Cyber
Cyber continues to be a growing class, especially outside of its core market of North America, which is great news for APAC insurers and reinsurers that want to grow their market share. Expect an evolving market, however, as reinsurers seek to continue the trend established at the 1.1 renewals to give themselves more room for manoeuvre by moving away from proportional to non-proportional covers- a key indication, by the way, that this is now a mature class of business.
Structured solutions
At SIRC last year, much of the talk was about the growth in so-called ‘structured solutions’ and we can expect this to be a continuing theme of this year’s conference. Bespoke, non-traditional (re)insurance programmes that help manage the volatility in ‘baskets’ of risks will be up for discussion again. Simply put, cedants who have been bruised by increased retentions, tighter conditions and some hefty rate rises in recent years are looking for alternative solutions spread over several years as the market looks to offer innovative deals.
Secondary perils
These small to midsize events that impact the loss ratio are becoming a serious issue for the Asia (re)insurance market, with a number of commentators now asking whether the label ‘secondary’ is even meaningful any more. What we can be certain of is that these events can come with a hefty price tag. Indeed, recent Japanese hail-related insured losses have been pegged at US$1 billion – a serious number by anyone’s reckoning.
Typhoons
The increasing frequency and severity of typhoons in the APAC region continue to be a serious cause of concern, as the ramifications of climate change continue to cause serious disruption. A wake-up call for the market, if one were needed, has been Super Typhoon Yagi, which has been called Asia’s most powerful storm this year, and made landfall on September 7, causing widespread damage to northern parts of Vietnam; in particular, in Hai Phong, which is home to industrial parks that host factories of major multinational and domestic companies, and in coastal regions near Hanoi. Insured losses have been estimated to exceed some US$500 million.
Regional earthquakes
Earthquake risk across the region continues to be a massive issue for the property catastrophe market, and 2024 has been no exception. In April Japan issued its first ‘Megaquake’ warning. Following the magnitude-7.1 earthquake in the Nankai Trough, Japanese authorities warned of an increased risk of a significant earthquake. Taiwan was also hit this year by its strongest earthquake in 25 years, with the island hit by a magnitude 7.2 quake. Given its importance as a global centre for semiconductor manufacturing, the nature of such risk cannot be understated.
Geopolitical uncertainty
In recent years, geopolitical uncertainty has been a key talking point at SIRC. Expect this year’s conference to be no different as the specialty markets continue to respond and evolve to the continuing geopolitical environment, as the war against Ukraine continues and the conflict in the Middle East shows no signs of abating, causing widespread ramifications in particular for the marine market, with supply chain disruption significant.
NZ quake fallout
As no-one will need reminding, claims settlements often move at a snail’s pace. So it surprises no-one that Vero Insurance New Zealand (part of Suncorp) recently won a court case relating to the Canterbury earthquakes 13 years ago, and described by one law firm as “a line in the sand on the obligation to prove what is the appropriate repair strategy for natural disaster damage.” Meanwhile, class action over recent quakes rumbles on.
MGAs
The unregulated elephant in the room for the APAC (re)insurance market. Over the past decade, there has been huge growth in managing general agents, who often are given considerable line sizes and a significant degree of underwriting autonomy. Yet noises are now being made by the regulatory authorities that they will take a closer look. Watch this space in 2025.
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