Canopius’ Mark Newman on marine, growth and talent

March 3 2020 by Andrew Tjaardstra

Singapore-based Mark Newman, chief executive Canopius Asia Pacific and Middle East & North Africa, spoke with InsuranceAsia News about the hardening marine market, reinsurance growth opportunities and developing talent in Asia Pacific.

Newman has over 30 years of market experience and was previously head of Asia and chief executive Asia Pacific at XL Catlin (now Axa XL).

InsuranceAsia News (IAN): How do you see the outlook for the Asia marine insurance market in 2020?
Despite the number of market participants shrinking, in both the company market and Lloyd’s, during 2018 and 2019, sufficient capacity remains in the region. In fact, it’s strengthened as a result, and is more balanced and robust.

This supply correction means that the capital providers and underwriters that remain are more disciplined and have a sharper underwriting focus. Much more responsible behaviour is evident from market leaders and followers in terms of pricing terms and conditions.

The market has levelled out, stabilised and is back on a solid footing, following six to eight years of softer market conditions, rate erosion, wording creep and some frankly irresponsible underwriting in certain quarters. Since the middle of last year, rates have increased in a pronounced way. Coverage has returned to more normal and appropriate conditions, meaning clients are well-protected and adequately insured, with a much more sustainable premium base returning to the market.

We’ve seen this across our marine hull and cargo book over the last 12 months, with increases between 5% and 15%. The second half of 2019 and into 2020 has seen even higher increases, with between 7.5% and 20% being reported across the market as an average, which our data bears out. Accounts that have under-performed or had significant loss activity will continue to pay higher premiums and there’s an element of payback for the worst performers, which is fully justified.

In marine (and more broadly), there are fewer carriers, but they are more dedicated – committing resources and expertise with appropriate risk management and claims capabilities in the region. They are therefore better placed to support client needs, which is contributing to a more professional, mature and sustainable market.

The emergence of fewer carriers with stronger capabilities and greater commitment are hallmarks of an evolving and maturing market.

IAN: How is the demand for reinsurance in the region changing and which areas are gaining traction?
Based on the activity and demand across most lines and markets, it’s a blanket trend that reinsurance demand remains strong, driven largely by events over the last 12 to 18 months. These include typhoons in Japan, bushfires, hail and flooding in Australia, flooding in India and significant agricultural claims across the region.

Other macro-fundamentals are also a factor. As the economic force of Asia continues, there is a growing asset base to insure and underlying penetration is increasing while urbanisation drives South-East Asian economies.

The upcoming introduction of accounting standards IFRS 17 is also likely to drive the need for reinsurance from cedants. Catastrophe models, while imperfect, are becoming much more sophisticated in many markets. With more perils being modelled, this is likely to increase client ceding company awareness, leading to the purchase of higher levels of catastrophe cover.

Increasing volatility due to climate change may also lead to increased client demand for additional limits. Technology, digitisation and innovation will propel demand and underlying premium income growth will seep through to reinsurance.

In China and across the region, there is increasing reliance on the agricultural sector for domestic growth and food production, so demand for agricultural insurance is expected. Governments will also need to transfer more risks from their own balance sheets to the commercial sector.

Through significant investment Canopius has established Asia as our global area of expertise for agriculture. We have seen exponential growth in India over the last three years and agricultural reinsurance demand has risen significantly in other South-East Asian countries. All arrows point toward greater demand for reinsurance in the region over the rest of the decade.

IAN: What are the key priorities for Canopius to help foster growth in Asia-Pacific?
In 2016 and 2017 we took a deliberate and significant decision to substantially invest in our APAC operations, with a focus on building a portfolio of geographical diversity to achieve sustainable profitability.

The economic and demand fundamentals in this region are in no doubt. It’s more a question of matching supply to regional requirements in terms of technical capability, service and claims integrity to meet that demand – we must recognise and deliver what clients and brokers want and expect.

We’re building a business on the understanding that what’s required is local underwriting expertise and knowledge of emerging and complex risk, and consistency of approach and pricing in terms of coverage and wording. It’s also essential to instill confidence that legitimate claims will be paid quickly and efficiently.

By aligning our capabilities we are looking to assist the market’s growth to maturity. Structured credit is a very fast-growing area, mirroring the growth in the economy. Cyber risk, agricultural reinsurance, natural catastrophe and liability are the fastest growing sectors in APAC that align with our underwriting capability and appetite.

Our responsibility is to ensure we fulfill local expectations in such a way that sets our business apart from the competition.

IAN: Do you feel there is sufficient talent in the region and what can be done to help boost it?
Newman: In our experience, Canopius doesn’t find it difficult to attract talent at any level in the region. That may be driven by our culture of opportunity and empowerment – which resonates strongly here – so may not be reflective of the market.

The region is going through unprecedented levels of growth, meaning the demand for talent is unlike anything we’ve ever seen before in our market. One trend we’re seeing is the reduced reliance on the import of foreign expertise into the region. This is noticeable in Singapore and Hong Kong in both broking and underwriting, as the regions become much more self-sufficient in terms of talent.

The Monetary Authority of Singapore and Singaporean authorities have done an exceptional job recognising the talent shortage of 10 or 15 years ago, and have offered financial support and incentives to train people in order to fill that gap. That’s gone a long way in creating a much larger pool of talent for the region from Singapore and other countries could take a leaf out of their book and adopt a similar model.

The next evolution will be exporting talent from Asia rather than importing it. There’s probably a lack of representation of Asian talent at global board and executive level within many international carriers. As the increased importance and contribution of Asia to those global businesses increases, hopefully that gap will begin to close and alleviate the growing log jam of talent becoming frustrated by a lack of opportunity.

The middle management level in Asia is now very experienced and I would like to see more exporting of Asian talent.