Axis’ Les Loh on rates, capacity and renewals

December 2 2019 by Andrew Tjaardstra

InsuranceAsia News discussed key market trends with Les Loh, president Asia Pacific, Axis Re at SIRC 2019.

InsuranceAsia News (IAN): How are market conditions in the region?

Loh: We’re in a transitioning and improving market but market conditions overall in the Asia Pacific region are still unsustainable. The reinsurance industry needs to hold firm on the need for improved rate and terms and conditions. Heading into the Asia January renewals, we’re taking a measured and focused approach.

We’re optimistic that following the significant cat events of 2019, the Asia January renewals will reflect a pricing correction that is needed to ensure the long-term sustainability of the reinsurance market in the region.

IAN: What factors are affecting Asia’s January renewals?

Loh: The market has sustained significant underwriting losses for a few years now, and it is difficult for reinsurers to continue to invest in this environment. This would drive the decision making of reinsurers for January renewals to be more selective in deploying their capacity.

Even though supply of capacity is still excessive in this region, the demand of buyers to improve the quality of their panel of reinsurers will be a differentiating factor.

On a longer-term basis, there is a need to consider climate change in assessing risk due to increasing frequency and severity of natural catastrophe events globally. Eventually, this will likely influence pricing methodology for the Asia renewals. The market will have to reprice the right intersection between risk and return.

IAN: What are Axis Re’s key lines of business, and how is it looking to grow in Asia in 2020?

Loh: Axis Re is committed to the Asia Pacific market and we continue to invest in growing our presence in this market.

Our key lines of business in the region are property, casualty (including motor) and accident and health. We write most of our Asia Pacific business out of our Singapore office, where we have a team of underwriters, actuaries and cat modellers who have extensive knowledge of the market and expertise across all lines of business. We operate in most markets in the region, including through a desk at Lloyd’s China.

Looking ahead to 2020, we want to expand in both non-cat and non-property business, and are looking for growth opportunities in casualty and health.

IAN: What are the key challenges for Asia growth?

Loh: This is a diverse operating region, with a mix of mature and emerging markets; there are different strategies and demands for each market.

We have a focus on mature markets, such as Australia and Japan, which are key parts of our growth story in the region. We are also watching emerging markets closely to understand where there may be opportunities to grow in those markets as well.

One of the challenges in Asia is the competitive nature of the primary market in the emerging territories. It is not unusual to see rate competition in any growing market, but this has continued for far too long in the industry, sacrificing profit in return for market share. We’re closely monitoring this development in each of the markets in the Asia Pacific region in which we operate.

As reinsurance partners, it is our responsibility to work together with the insurance market to help correct the rating erosion.

 

MORE FROM: Q+A