SIRC: Asia’s PV and terrorism market faces second overhaul at 1.1 renewals

November 2 2023 by

The specialty political violence (PV) and terrorism market is set to continue along its evolutionary path of substantive revision at 1.1 renewals, including in Asia, InsuranceAsia News understands.

In tandem with the wider specialty sector in Asia, both pricing and terms & conditions for PV and terrorism covers have shifted meaningfully over the past eighteen months, with an increase in attachment points and the raising of the ‘floor’ on minimum rates on line a key focus for reinsurers.

As former Gallagher Re global CEO James Kent said earlier this year, the gruelling renewals process was most marked in this specialty sector, with PV renewals “especially demanding” in terms of finding a market consensus.

As testing as the process was for both cedants and reinsurers alike, it would appear that the turbulent waters of negotiation have still not calmed down, and that the PV and terrorism market in Asia is still very much in the midst of a process of recalibration as it seeks to digest the continuing geopolitical instability caused by not only the Russia-Ukraine conflict, but also more recent developments with regard to the Israel-Hamas war.

“Reinsurance prices are going up and attachment points are changing,” said Mark Houghton, head of specialty and head of political risk and credit Asia, for Axa XL. “As people continue to go through the Russia/Ukraine fallout, reinsurers will continue to revisit terms & conditions. Last year was the first revision, and this year will be the second revision.”

Houghton said PV and terrorism covers at Axa XL in Singapore are written under the umbrella of crisis management, which also encompasses kidnap & ransom and contingency insurance.

He said that the insurer’s crisis management offering has the ability to grow, but stressed that any such growth is inextricably linked to Axa’s property coverage in the region, given that terrorism covers, for example, are customarily excluded from property policies and that such protection needs to be bought as additional coverage by clients.

When it comes to property cover, we try to limit our exposure to strikes, riots and civil commotion (SRCC) perils in high hazard areas,” he added, noting this has not dampened demand for such cover from major property owners. “If you’re constructing an iconic landmark building, you may be facing potential exposure to a terrorist event, so you are going to want to buy that product. And more often than not, those who finance these sorts of projects will insist on it, especially after 9/11.”

“The demand for cover is increasing; I think people are becoming more aware of it,” Houghton said, alluding to countries such as Thailand and the Philippines, where the climate for civil unrest and politically-motivated violence is noticeably marked in the region.

In the Philippines, there has been on an going insurgency between Maoist rebels and government forces which has been ongoing for decades.

Thailand has a long history of political unrest and protest, but a new wave began recently after a court ordered a fledgling pro-democracy opposition party to dissolve. The Future Forward Party (FFP) had proved particularly popular with young, first-time voters and garnered the third-largest share of parliamentary seats in recent elections, which were won by the incumbent military leadership.

“For political risk and credit there is good growth potential because the market is still evolving, and we’re seeing more customers in the region coming forward to enquire about our business, in a time of both economic and geopolitical stress.” Mark Houghton, Axa XL

Political risk and trade credit
Another specialty are which shows the potential for growth in Asia at present is the political risk and trade credit market, according to Houghton.

He said: “For political risk and credit there is good growth potential because the market is still evolving, and we’re seeing more customers in the region coming forward to enquire about our business, in a time of both economic and geopolitical stress. We are based in Singapore, but this is a huge region which remains untapped with respect to customers who, to a large extent, don’t understand the products and don’t use them in the way that customers in Europe, the US or Australia would.”

“The key geographies at the moment are more around developed countries, so places such as Australia, Singapore, Hong Kong, Japan and Korea, which are the main areas where we see business. But we also have customers starting to approach us from places such as Indonesia and Thailand. India as well is a big opportunity and China . . . but China has a regulatory landscape that is difficult for us to engage with and be a part of, given the size of its population.”

Houghton added that demand is coming from a number of channels, including banks, export credit agencies, and government multilateral initiatives.

He said: “Corporate customers and foreign direct investors are also very prominent as economic stress increases. Banks are a large part of our business and the more banks from this region understand how the product works and see the utilisation for it, the more it helps the growth of the market.”

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