Get full access
To view the full article and get unlimited access to InsuranceAsia News's exclusive insight across 5,000+ articles
Already a Subscriber? Please Login
Hit by cat events, South-East Asian renewals will likely be stable to hard, says Hitesh Kotak.
The reinsurance markets have achieved a balance and Munich Re believes it should “maintain that balance the market has currently found”.
“Terms and conditions and structures are likely to remain stable because most of the wordings and the issues on structures were taken care of in the last couple of years,” according to Hitesh Kotak, chief executive for Japan India, Korea and South-East Asia.
However, the market is not without its challenges. The South-East Asian markets that have seen nat cat losses is a case in point, where Kotak anticipates a “stable to hard renewal”.
‘For South-East Asia, it’s actually not been a great year because of Typhoon Yagi in Vietnam, the losses could add up to about a decade’s profit for the industry. Almost 85-90% of those losses are coming to the reinsurance industry,” said Kotak.
“The market effects of Yagi will not be limited to Vietnam, it’s a global business and it will spread over,” he said.
“I expect the Southeast Asian renewals to maintain the trend of last year, overall I think it will still be a stable to hard renewal,” Kotak added.
Each market has its own peculiarities, in Indonesia for example, there’s a lot of correction happening right now as the regulator there has raised the capital requirements to make the market more sustainable.
This will bring more discipline in the market because a lot of losses are taken locally. Similar with the Philippines which is a very Nat cat exposed market as well.
Market overview
However, Kotak is positive on the growth trends in Asia because the under-penetration in most Asian economies is still relatively high compared to developed market and the market is catching up.
“A combination of under penetration, correction of inflationary adjustments and infrastructure and economic growth is driving demand in the region,” he said.
A lot of new risks are emerging: renewable energy, cyber, climate change solutions. We are also seeing a lot of these areas getting a fillip, according to Kotak.
However, he said it is not growing as rapidly as one would have wanted it to be, because affordability is still a challenge across all the segments.
The other big challenge, Kotak said is, “because there is so much growth, competition across the industry, insurance and reinsurance, is causing an imbalance on what we could achieve as a sector”.
“Some players are focusing too much on growth at any cost and that kind of hampers the overall profitability or attractiveness of the industry,” he said.
Primary market softening
The growing competition has also meant that primary markets are seeing prices stabilise or even soften, a trend that Munich Re takes note of.
“We do see a softening in the market and we are concerned by that because as a sector, we have still not built enough reserves or enough return on capital,” he said.
“I have seen many cases where the margin making happens at the claim stage and not at the underwriting stage, which is not a good trend for our industry because then we lose reputation, we lose trust. The only way to prevent this is to price the risks adequately.”
“The reinsurance industry had a good year, but out of the last seven years, four years, it has not even recovered its cost of capital. Some market participants expect that after a good year there should be bounties but one good year is not enough,” Kotak reminded.
“We support and encourage the trend of shifting from proportional to non-proportional treaty structures to the larger insurance companies who have built the underwriting capabilities and the right tools to manage their exposures.”
Hitesh Kotak, Munich Re
Structural changes
“We support and encourage the trend of shifting from proportional to non-proportional treaty structures to the larger insurance companies who have built the underwriting capabilities and the right tools to manage their exposures,” said Kotak.
If more of the underwriting responsibility shifts to the primary insurance companies themselves, it’s better, because it’s more sustainable in the long term.
“We advise our clients to tackle this actively in calm waters instead of waiting for a large event to trigger the change,” he added.
“Start increasing your retention, your capabilities, putting the right pricing tools in place, putting the right accumulation tools in place because when you are forced after an event, it’s very difficult to make the transition,” Kotak said.
“Many clients are already doing this transition and we partner with them in their journey.”
Munich Re strategy
“We want to grow, if the price is adequate and if terms and conditions are adequate. Munich Re has been growing its business in Asia every year. We’ve demonstrated sustainable growth in the market,” said Kotak, adding that Munich Re’s setup in Asia ensures client proximity.
“Every office is more empowered to take underwriting decisions now with the new set-up that we have established in July. Every office has ability to recognize demand and support the growth of our clients with our capacities.
“However, if the market is not showing the right discipline, we are ready to step back and take a pause. We are not greedy for growth, we only want to grow if it’s sustainable,” he said.
“We will not grow for the sake of growth,” Kotak said.
Bridging the gap between risk appetites of cedents and reinsurers is a key theme for the market, says Guy Carpenter’s Hussain Ahmad.
A significant increase in the need to bridge gaps between clients’ risk appetites and reinsurers’ demands for higher retentions continues to be a key theme for the structured solutions market in Asia Pacific as we approach 2025, according to Hussain Ahmad, head of structured reinsurance solutions, Asia Pacific, Guy Carpenter.
“Structured solutions are broadly assisting re/insurers in three key strategic areas: capital management; efficient management of volatility, particularly in the lower layers of excess of loss programs; and market entry and exit strategy support. There is a significant demand for support in these areas across Asia Pacific,” said Ahmad.
However, the level of understanding of the capital and volatility benefits of reinsurance is evolving and varies across the region.
“Guy Carpenter has been at the forefront of educating market participants, and we see a bright future, as industry awareness grows with these solutions,” Ahmad said.
Market transition
“Structured solutions have always been tailored to meet specific client needs. As such, there has been constant evolution in the market. A key trend over the years has been towards more flexibility in terms for buyers, as these products gain mass appeal,” he said.
Regulatory changes and support play huge roles in how reinsurance solutions are used in the market.
The Asia Pacific region comprises more than a dozen countries and territories, each at different stages of regulatory sophistication and engagement.
“Structured solutions are broadly assisting re/insurers in three key strategic areas: capital management; efficient management of volatility, particularly in the lower layers of excess of loss programs; and market entry and exit strategy support. There is a significant demand for support in these areas across Asia Pacific.”
Hussain Ahmad, Guy Carpenter
“We see a continued push to adopt risk-based capital frameworks, which open up more conversations around the use of reinsurance to manage capital,” Ahmad noted.
Additionally, some regulators in the region have been averse to allowing material changes to reinsurance structures, and we continue to engage with a few to facilitate common understanding of such solutions, he added.
ILS potential
The potential for the insurance-linked securities (ILS) market in Asia has been much talked about, however, it has yet to see widespread adoption.
While the usage and awareness are increasing in Asia Pacific, it is not on par with the US market.
Ahmad noted that there are a few factors that come into play regarding the differences.
One of the primary factors, Ahmad said is that the “availability and quality of underlying data from Asia Pacific remains a concern for investors, despite significant improvements in recent years”.
Regulatory acceptance of ILS and its impact on capital also needs to improve in markets around the region, he said.
“Cat bonds can compete on price/terms with traditional reinsurance particularly well for layers with low expected losses. However, we see the amount of catastrophe limits purchased in certain large countries in Asia Pacific to be lower (with higher expected loss) than their counterparts in the US and Europe, making traditional reinsurance more competitive,” Ahmad added.
“It is just a matter of time before we see markets evolving to adopt ILS in Asia Pacific, by sponsors as well as investors.”
Traditionally the largest issuers in the region have been the Japanese carriers. But Ahmad said that in addition to Japan, Guy Carpenter and GC Securities have helped sponsors in mainland China, Hong Kong, South Korea and Australia to access ILS capacity.
“At Guy Carpenter, we are taking the initiative in educating all the stakeholders on newer tools and structures that are becoming available to manage the evolving natural catastrophe risk,” he said.
Pent-up interest across some new markets for access to business in Asia Pacific likely to dominate and drive longer-term growth, says Markel’s Kevin Leung.
There is an abundance of capacity and a high level of interest in the region from reinsurers that are based outside of Asia Pacific, leading to increased competition and some rate erosion in the non-property classes, said Kevin Leung, chief underwriting officer for Asia Pacific.
However, he said: “The property reinsurance market remains firm due to the elevated level of losses in terms of both frequency and severity driven by climate change.”
“Bushfire-exposed business remains a concern to most reinsurers,” he added.
“We’re noticing that the attitude towards US-exposed casualty business remains highly cautious,” said Leung, adding that reinsurers are actively managing down the treaty and facultative limits deployed for any US-exposed placements.
Expanding on the key themes for the upcoming renewals, Leung said that PFAS exclusions are likely to become more common as the risks have become more apparent.
Meanwhile, “automotive exports to the US remain an area of stress due to the nuclear verdicts impacting almost all the major car manufacturers in the region, he said.
Product “recall is another area, where capacity is scarce due to recent large losses,” according to Leung.
Curiously, Leung noted that financial lines seem to be the area that is most attractive right now for carriers across the international markets “with rates, especially financial institutions rates, falling by high double digits at renewal”.
“In Asia, this is a concern given the challenges in the Greater China property market, which could have a negative effect on the broader regional economy,” Leung pointed out.
Elsewhere, the CrowdStrike incident has had limited effects on the cyber insurance and reinsurance market with the rate continuing to soften.
“However, we’re noting that more attention is currently being paid to terms and conditions where they relate to system outages and social engineering fraud coverage,” he said.
“Competition is likely to intensify across all asset classes, with pent-up interest across some new markets for access to business in Asia Pacific likely to dominate and drive longer-term growth.”
Kevin Leung, Markel
Market in transition
While there has been a lot of apprehension about the softening in the direct markets in the region across classes of business, Leung said that at Markel, they would “characterise the current market as one that’s in transition, rather than a softening marketplace”.
“Whilst there are some pockets of stress, as a direct result of global rates remaining firm, we think there will be many insurance classes that will remain sought after.
“Marine war is one of those areas, with geopolitical instability remaining across various jurisdictions,” he said.
“The terrorism market will be one to monitor with increasing risks, such as the outcome of the US election, while cyber remains an interesting marketplace to watch as we believe this is close to stabilising,” he added.
Despite the nervousness around US exposure, the broader APAC casualty market is likely to stay relatively firm with a host of issues weighing on the global market, while reserves for the US casualty business for the years 2020 to 2023 may start to rise.
“Competition is likely to intensify across all asset classes, with pent-up interest across some new markets for access to business in Asia Pacific likely to dominate and drive longer-term growth,” Leung said.
Singapore head Tay Boon Chuan reflects on the market dynamics of 2024 and the collective gains achieved over the past two years.
As the year-end conference season approaches, market players often declare their underwriting intent and forecast for the upcoming cycle, including pricing expectations and market conditions.
As the conference season coincides with the tail-end of the hurricane and typhoon season, statements of intent or market prognosis often come with caveats.
“Capital may be international, renewal is always local. The risk landscape in Asia is diverse and varied, and each territory’s challenges and opportunities deserve to be treated accordingly,” Tay told InsuranceAsia News (IAN).
“All bets are off if another cat 4 or worse makes landfall,” he said.
However, Tay suggested a more meaningful exercise: recognising the collective good the industry has achieved over the past two years.
“2023 was a year of ‘generational hardening,’ a term that aptly describes the significant pricing corrections that were especially difficult for unprepared buyers,” he said.
“In contrast, 2024 brought more balance and equilibrium, with reinsurers generally holding on to gains achieved in the previous year, regardless of rate increases or deductible elevations.”
Tay emphasised that the collective gains over the past two renewal seasons have contributed to wider societal benefits, such as improved risk management through insurance premiums or policy terms that better reflect underlying exposures.
“While the short-term adjustments were disruptive and even painful for cedents, it is in our collective interest to hold on to these hard-won gains and continue pushing for wider benefits,” Tay concluded.
With improved earnings and increased appetite, competition among reinsurers is expected to heighten in the new year. Concerns about climate change and social inflation remain prominent.
Asia’s diverse territorial expanse means not every territory or line of business experienced the same correction or structural improvement in the past two renewal seasons which means “much work lies ahead of us,” Tay noted.
Despite the global trend towards higher attachment points and aversion to frequency losses, many cedents in Asia prefer lower deductibles, according to Tay.
“Our target segment is XL treaty across all key lines of property, casualty, marine, and agriculture… as it offers the best balance between income growth, capacity use, and expected profitability.”
Tay Boon Chuan, Aspen Re
“Aggregate covers are still uncommon in Asia for most lines of business. High-ROL, low-lying layers tend to be more dollar swaps than outright loss leads, as multiple cat recoveries in the same year remain rare in Asia,” he said.
The debate between proportional and non-proportional treaties is perennial as each has its place in a well-designed reinsurance programme, Tay said.
With increasing emphasis on adequate return on reinsurers’ capacity, “the days of 20-line surpluses and generous ceding commissions are over”, Tay pointed out.
“Given the prevalence of loss-sharing and event-limiting features, it’s debatable whether they are still truly pro rata,” he explained.
However, Tay does not foresee a market-wide shift towards non-proportional solutions (gross XL). Instead, cedents who demonstrate responsible use of pro-rata capacity with adequate premium feed, along with well-structured non-proportional protection (net XL), are likely to be rewarded with ample reinsurance capacity.
Aspen Re remains open for measured growth alongside key insurers and broking partners across Asia Pacific.
“Our target segment is XL treaty across all key lines of property, casualty, marine, and agriculture… as it offers the best balance between income growth, capacity use, and expected profitability.”
Aspen Re also engages the wider market, including cedents, who traditionally rely on pro-rata capacities, to seek cost-effective and resilient solutions.
“We pride ourselves on our structuring and modelling capabilities across all key lines of business, with full underwriting resources on the ground ready for deployment,” Tay said.
“To our insurer and broking partners in Asia, within our targeted business segments, we strive to be a reliable long-term service and capacity provider, whatever the pricing cycle,” he said.
The reinsurer expects the market to maintain discipline in underwriting and risk selection despite the increasingly competitive market.
As reinsurance pricing in 2024 has been flattening and shifting towards a softer cycle, a complex interplay of factors, including rising exposure and inflation expectation, is driving this change, said Javier Sanchez Cea, Asia Pacific chief regional officer at Mapfre Re.
Key dynamics consist of increasing sum insured aggregates, changes in frequency or average expected loss, inflation expectations, pay-back of major losses and all compelling reinsurers to adjust their pricing strategies.
“Following several years of unsatisfactory returns, all reinsurers only had the objective to correct the pricing and, due to increased exposure and inflation, also increase the retention levels by the cedents,” said Sánchez Cea.
“Once these corrections have taken place and, following a satisfactory return in 2023 and an adequate first half 2024 (with exceptions), reinsurers are again looking for growth, but in our point of view this stability should still be maintained.” However, Sánchez Cea said the stability should still be maintained.
“The market is still highly volatile, and one or two years of satisfactory results are not sufficient to allow for major changes.
“We expect the market to maintain discipline in underwriting and risk selection despite the increasingly competitive market, maintaining exposure limits for catastrophe losses to preserve profit, and capital adequacy,” said Sánchez Cea.
Mapfre Re should remain technical, looking for continuity in the long term, he added.
“In order to be consistent, we have to be sustainable as an industry, providing not only pure capacity, but services that add value to our clients and to society as a whole.”
“Our main concern is the so-called ‘secondary risks’ that are affecting not only the European markets but also Asia. A weakening of underwriting discipline would reflect a more volatile appetite from reinsurers in the near future, as margins are not able to absorb the increase in losses,” he said.
Besides, with the increasing frequency of cat events and more intensity of secondary perils events, aggregate covers, while appealing to ceding companies, are becoming increasingly costly and less attractive to reinsurers.
“Our main concern is the so-called ‘secondary risks’ that are affecting not only the European markets but also Asia. A weakening of underwriting discipline would reflect a more volatile appetite from reinsurers in the near future, as margins are not able to absorb the increase in losses.”
Javier Sanchez Cea, Mapfre Re
“A weakening of underwriting discipline would reflect a more volatile appetite from reinsurers in the near future, as margins are not able to absorb the increase in losses,” said Sánchez Cea.
Use of structured solutions and alternative risk transfer (ART) that have been becoming more mainstream in the harder market. Sánchez Cea said that they are complementary solutions but cannot substitute traditional reinsurance.
“Even in a softening market, the unique ability of ART solutions to offer tailored and innovative risk management strategies ensures they continue to be a valuable resource for many companies,” he said.
Capacity availability
Looking ahead, there is cautious optimism regarding available capacity, with a forecast for stability in the renewals of 2025.
“Our outlook for 2025, as of today, is stability and continuity of existing conditions. This will be analysed market by market, company by company, and treaty by treaty. There is still a need for improvement in several markets while for others we expect much more stability.”
Regarding, Mapfre Re’s growth and expansion plans in Asia Pacific, Sánchez Cea said the company sees significant opportunities in the region.
“Compared to other regions of the world where Mapfre Re is also active, we are still underrepresented in Asia Pacific, despite the fact that this is the second largest region for Mapfre Re. This is why our growth and expansion plans are important in each one of these countries.”
With a newly established branch in Beijing, the company aims to strengthen its presence and foster closer ties with the market.
“At Mapfre Re, growth must be accompanied by stability and continuity, so it may not be impressive from one year to the next, but it is relevant in the medium/long term. We want to grow, but above all we want to be a technical reference in the region,” Sánchez Cea said.
William Ho, MS Amlin Asia Pacific CEO, discusses the evolving regional reinsurance landscape, the impact of recent cat losses, and the reinsurer’s strategic growth plans in APAC.
While Asia experienced strong pricing corrections in 2023, this trend has dampened in 2024 with the increased rates having attracted more capacity to the region from both London and Bermuda markets, William Ho, MS Amlin Asia Pacific CEO, told InsuranceAsia News.
However, “going forward, we are likely to see this capacity reduce where the business is seen as less attractive,” Ho explained.
MS Amlin’s key focus for 2025 is to expand their Phoenix reinsurance sidecar series. The carrier is planning to grow its investor base by attracting both established insurance-linked securities (ILS) investors and new entrants, particularly from Asia Pacific.
“Expanding into non-ILS capital pools is a priority, as we believe there is significant untapped interest in the Asia-focused risk opportunities Phoenix offers,” Ho said.
In its fourth year, MS Amlin has raised over US$160 million and delivered average returns of 8-9% to investors.
Over four years, the carrier has ceded over US$30 million of premiums with less than US$1 million of claims.
“As we increase Phoenix’s size, we aim to broaden the scope of risks and regions included in the portfolio. This will give cedents greater access to Phoenix capital while enhancing their risk diversification options. We will do this while maintaining profitability for our investors,” Ho said.
“We are experts in the Asia region and are focused on carefully selecting, underwriting and building a portfolio – not just transacting risk and passing it through. Ultimately, we want to help investors be first movers in the region, and develop the ILS market in Asia, for Asia,” he added.
Discussing the outlook for 2025 renewals, Ho observed a sustained recovery in available capacity and the retro markets.
“There is more capacity available in the market as capital flows back into the reinsurance sector for 2024. However, without disciplined underwriting and positive results, that capital could easily retract again,” he cautioned.
Ho also noted that capacity falls into two categories: long-term committed capacity and short-term opportunistic capacity.
“Cedents need to make a conscious decision over the capacity they choose and ensure it aligns with their longer-term development plans,” he advised.
“It would be quite risky to be overly reliant on the more short-term opportunistic capacity,” he said.
“There is more capacity available in the market as capital flows back into the reinsurance sector for 2024. However, without disciplined underwriting and positive results, that capital could easily retract again.”
William Ho, MS Amlin
In terms of major cat losses of 2024, Ho highlighted strong typhoons in Taiwan, Vietnam, and China, the Taiwan Hualien earthquake, the most significant loss event to impact the market in ten years, and the Dubai floods, the worst insured loss to impact the MENA region up to date, as significant regional cat events.
“Globally, we have recently seen insured losses exceed US$100 billion for yet another year. As this becomes the norm, we need to ensure retention and pricing adequacy remains across our portfolio to maintain a sustainable product for our clients,” he emphasised.
Whilst there is speculation about potential pressure on reinsurance rates, underwriting discipline will likely remain for the majority of the market with most markets still being bottom-line driven, Ho said, explaining the potential impact of market softening on underwriting discipline, retentions, and terms and conditions.
“In an environment where insured losses consistently exceed US$100bn globally, it would be questionable why a reinsurer would want to lower retentions or provide more frequency loss-driven covers. We personally are not in a position to accommodate such actions,” Ho said.
Regarding the use of structured solutions and alternative risk transfer mechanisms, Ho reminded about the importance of innovation regardless of market conditions: “We are always trying to be innovative for our clients and brokers to ensure we present the most suitable products that are viable and sustainable for both buyers and sellers. Market conditions may influence available capacity, but they should not dictate reinsurers’ levels of innovation.”
As MS Amlin progresses and develops in the Asia region and market, “it is paramount we remain attuned to current climate and trends, ensuring our product offering meets clients’ and brokers’ needs while maintaining the technical expertise required to operate a sustainable business”, Ho said.
The delivery of the London Market’s ambitious digital overhaul strategy, Blueprint, will also serve as a catalyst for change and improvement in the Singapore market, according to Dave Matcham, CEO of the International Underwriting Association (IUA).
Blueprint I and II is a joint initiative including the IUA, Lloyd’s and Velonetic, and seeks to re-engineer the way business is transacted in the market through all aspects of placement and processing of premiums and claims.
“I always find it interesting to compare digital developments in the various wholesale hubs – London, Singapore, Dubai and Bermuda. London has been getting on with Blueprint, and when that is successfully delivered, I think that will then become a catalyst for other markets like Singapore to see what London is doing and how it can be linked directly to the way Singapore operates at the moment, which is not a joined-up market from a technology perspective.”
“At the moment, much of Singapore’s back office activities are heavily reliant on London- primarily either the back offices of companies or the central back office run by Velonetic. So of course as London develops its Blueprint and… you get into Phase II thinking and the market itself going digital, I believe that global companies will want to have digital efficiencies in all hubs and operations, and not just in London. So I see a natural exportation of what London is doing into Singapore.”
“At the moment, much of Singapore’s back office activities are heavily reliant on London- primarily either the back offices of companies or the central back office run by Velonetic.”
Dave Matcham, International Underwriting Association (IUA)
“However, we’re nowhere near there at the moment. Singapore has a mixed ability in digital capability. It doesn’t have a joined-up approach. It doesn’t have what London has – what you might call binding associations around it. Both the local associations here are fairly small, and don’t have digital transformation as a key objective within them, whereas the IUA, the LMA (London Market Association) and LIIBA ( London & International Insurance Brokers’ Association) do in London. But I think that in time that will come.”
He added that he was confident that there are other individual technology initiatives which are successful in Singapore such as AI, data analytics and data science, where more “forward thinking brokers are perhaps looking to use those tools to aid their regional business”.
ACCORD standards
Matcham added another reason he is in Singapore for SIRC is representing the global data standards setter for reinsurance and insurance, which formed a global advisory council a year ago of which he is chair.
“Its objective is to educate and introduce data standards into the hubs like Singapore. It’s not to say they don’t use them at the moment- they do – but not the wider market context that perhaps London does at the moment. So I’m going to look forward to having discussions with a number of brokers and carriers here to promote the use of data standards, and their natural benefits that give them in terms of operational efficiency and benefits to clients.”
While Singapore remains a formidable player in the global insurance market, its limited proximity to MENA markets may hinder its growth compared to Dubai.
As more (re)insurers and brokers expand their presence in Dubai, the emirate is likely to attract even more global reinsurers due to its flexible regulatory environment, strategic geographic advantage, cheaper talent pool and business-friendly tax environment, industry experts told InsuranceAsia News (IAN).
In July, HDI Global received a regulatory license from the Dubai Financial Services Authority (DFSA) to open an office in the Dubai International Financial Centre (DIFC). The local branch is planning to begin operations in the third quarter of 2024.
Willem van Wyk, the office’s head, emphasised the significance of this move as it is well-aligned with the carrier’s expansion strategy.
“The long-term strategy for a global player like HDI Global is to also be a significant reinsurer in the Middle East within our chosen market segment,” van Wyk said.
This expansion reflects a broader trend, with the market seeing other (re)insurers and brokers entering the Dubai market.
Last month, Mahindra Insurance Brokers received a regulatory license in Dubai to tap MENA reinsurance growth.
Markel’s APAC managing director Christian Stobbs, speaking to InsuranceAsia News this week, also mentioned Dubai as one of the offices where regional economic strength provided favourable tailwinds to the whole book of business.
Van Wyk noted the increasing number of broking and underwriting applications the DIFC has received, suggesting a shift towards less reliance on offshore markets for insurance placements.
“I believe the region will become less reliant on offshore markets, and, except for mega risks, insurance placements will be mostly done within Middle Eastern markets,” he explained.
Besides that, other attractions to the DIFC are the location which is right in the middle of Europe and Asia, strong economic growth, high rate of investment as the region transforms & modernises, as well as low tax environment and high living standards in the region, van Wyk said.
Van Wyk said that he expects to see more (re)insurers and brokers entering the Dubai market, continuing more brokers and capacity entering the market over the last few years.
While Singapore is viewed as a stable and innovative financial hub, characterised by its prudent regulatory framework under the Monetary Authority of Singapore (MAS), Dubai is emerging as a more agile alternative.
Rohit Boda, managing director at reinsurance broker J.B. Boda, describes Singapore as “prudent yet pragmatic,” with an emphasis on innovation and a mature infrastructure that fosters growth in the insurance sector.
His views are echoed by van Wyk who said that one of Dubai’s main attractive points is its flexibility.
“There are different categories of insurance licenses that open up more possibilities for reinsurance services in the region,” he said.
On the other hand, van Wyk describes Dubai as an “agile environment for reinsurance companies to enter the market” as there are different categories of insurance licenses opening up more possibilities for reinsurance services in the region.
This adaptability is appealing to reinsurers looking to enter or expand within the market, positioning Dubai as a favourable alternative.
“With its proximity to the surrounding GCC region, Africa, Central and South Asia, and Europe, DIFC serves as a gateway for companies looking to expand their operations beyond the region.”
Salmaan Jaffery, DIFC Authority
Geographic advantage
Besides that, Dubai’s geographic positioning at the crossroads of Europe, Asia, and Africa enhances its appeal as a gateway to high-growth markets.
“Dubai’s geographic advantage is undeniable,” Boda stated, recognising the emirate’s potential to facilitate access to the expanding markets of the Middle East and South Asia.
“Dubai’s – and DIFC’s – strategic location provides insurance and (re)insurance companies with access to several markets. With its proximity to the surrounding GCC region, Africa, Central and South Asia, and Europe, DIFC serves as a gateway for companies looking to expand their operations beyond the region,” said Salmaan Jaffery, chief business development officer at DIFC Authority.
Besides that, growing infrastructure demands in the UAE and surrounding GCC countries, and government mandates in certain markets, like in the motor and health insurance industries are further fuelling this demand, Jaffery said.
In contrast, Singapore, while well-connected to South-East Asia, faces limitations in accessing MENA markets. This geographical disparity could hinder its attractiveness to reinsurers focused on these emerging regions.
Both Dubai and Singapore are investing heavily in infrastructure to support their evolving insurance markets, but the DIFC is specifically well-known for its business-friendly tax environment and strategic initiatives aimed at attracting multinational insurers.
“Dubai’s business culture, coupled with tax incentives and streamlined regulations, allows (re)insurers to quickly scale up in the region and across geographies, making it a top destination for businesses targeting these untapped markets,” Boda said.
The region is experiencing significant growth in sectors such as construction, energy, and healthcare, all of which increase demand for specialised insurance products.
Regulatory benefits
Max Robbie, senior executive director at Markel Dubai, emphasised the DIFC’s regulatory framework as a major draw, noting it is modelled after the UK’s Financial Services Authority.
“This robust structure is particularly appealing to multinational insurers operating in the region,” Robbie explained, highlighting how it enables firms to establish regional headquarters without facing overly complex regulations.
Cross-jurisdictional standardisation, facilitating smoother entry for UK-based firms, particularly insurtechs while also supporting traditional insurance operations, is another regulatory benefit of the city.
¨This “principles-based” regulatory model fosters an environment where insurers feel empowered rather than obstructed, promoting transparency and enabling growth and scalability,¨ Robbie said.
MGAs, with their ability to operate more nimbly and scale rapidly, could find Dubai particularly attractive, especially given the “principles-based” regulatory approach that has been a hallmark of the DIFC. This regulatory environment provides the flexibility and agility that many companies, particularly smaller, specialised insurers, are seeking in order to grow and innovate in ways that might be more constrained in other financial hubs. Dubai’s unique positioning allows these firms to scale efficiently while maintaining the adaptability needed to navigate the region’s evolving market conditions.
In terms of talent, Singapore currently boasts a well-established workforce with expertise in (re)insurance, driven by the presence of global insurers and top educational institutions.
However, the talent competition is fierce, and an ageing workforce poses challenges for the sector.
Dubai, while still developing its local talent base, offers lower costs for skilled professionals and is actively implementing government initiatives aimed at upskilling its workforce.
“While Dubai is still developing its local talent base, its relatively lower costs for skilled professionals can also be a draw for companies looking to scale operations,” Boda noted.
As the demand for insurance products grows in the MENA region, driven by economic expansion and evolving risk landscapes, Dubai is poised to play a crucial role. Boda said that “the economies of the Gulf Cooperation Council (GCC) countries are growing rapidly,” creating a fertile environment for reinsurers to thrive.
Insurance ecosystem, AI and alternative risk transfer markets will reinforce Singapore as Asia’s leading reinsurance hub,
minister Gan Kim Yong said in the keynote address, opening this year’s SIRC.
At the 20th Singapore International Reinsurance Conference (SIRC), Gan Kim Yong, deputy prime minister and minister for trade and industry, and chairman of the Monetary Authority of Singapore (MAS), delivered a keynote address highlighting the pivotal role of reinsurance in driving sustainable development across Asia. The conference, which has grown into a leading forum for the global reinsurance industry, saw a strong turnout of about 3,300 delegates from over 65 countries, reflecting the strength of Singapore’s insurance industry.
The minister began by noting the impressive growth of Singapore’s insurance sector, with general insurance gross premiums reaching SG$13.5 billion in 2023, a 7.5% year-on-year increase. Reinsurance premiums also saw significant growth, rising 31% year-on-year to SG$27.6 billion, accounting for about 21% of Asia’s reinsurance market. This growth is underpinned by a resilient global reinsurance industry, which has seen capital increase by 3.7% since the end of 2023, reaching a new high of US$695 billion in the first half of 2024.
Gan outlined Singapore’s commitment to reinforcing its position as Asia’s leading reinsurance hub. He emphasised the importance of developing a marketplace of insurers and reinsurers, deepening capabilities in AI, and expanding insurance capacity through alternative risk transfer instruments such as sovereign insurance solutions and insurance-linked securities (ILS).
“Through strengthening our insurance ecosystem, deepening capabilities, including in AI, and developing alternative risk transfer markets in Asia, we will reinforce Singapore as Asia’s leading reinsurance hub,” Gan said.
The minister emphasised that the reinsurance industry is well-positioned to support Asia’s growth as it navigates four key transitions: climate, energy, digital, and demographic.
Climate and energy transition
The climate transition is a critical area where the reinsurance industry can make a significant impact. Gan highlighted the increasing pace of climate change and its implications for risk projections. He noted that annual insured losses from nat cats have risen to an average of US$106 billion over the past five years, with future models indicating potential losses of US$151 billion or higher annually.
“Asia is particularly vulnerable to the effects of climate change. Total economic losses in the Asia-Pacific region for 2023 amounted to US$65 billion, of which 91% was not insured. This compares with a 30% protection gap in the United States,” Gan said.
Gan stressed the urgent need for the insurance industry to address this protection gap by enhancing risk models, scenario analysis, and data on the physical impacts of climate change. He encouraged the industry to leverage Singapore’s growing applied climate risk research ecosystem to improve risk assessments and offer tailored insurance products.
“Through strengthening our insurance ecosystem, deepening capabilities, including in AI, and developing alternative risk transfer markets in Asia, we will reinforce Singapore as Asia’s leading reinsurance hub.”
Gan Kim Yong, Monetary Authority of Singapore (MAS)
Energy transition is another area where reinsurance can play a crucial role. Asia’s reliance on fossil fuels and its rising energy needs make it imperative to catalyse investments in renewable energy. Gan pointed out that investments in renewable energy generation in Asia Pacific are expected to double to US$1.3 trillion by 2030. He called on specialty insurers and reinsurers to develop risk financing and insurance solutions for renewable energy and decarbonisation technologies.
Gan also highlighted the potential of parametric insurance covers and pre-Final Investment Decision (pre-FID) insurance solutions to address specific coverage needs. He noted that MAS is studying ways to support the growth of parametric insurance and encouraged the industry to innovate and pilot solutions offering protection during critical early stages of project development.
Digital transition
The digital economy in the Asia-Pacific region is expected to reach US$2 trillion by 2030, driven by e-commerce, fintech innovations, and AI and cloud services. With this growth comes increased risks associated with cyber threats.
“The Asia-Pacific cyber insurance market is estimated to double from 2023 to 2027, as companies seek coverage for data breaches, ransomware attacks, and other cyber threats,” Gan said.
Demographic transition
Changing demographics in Asia, including ageing populations, urbanisation, and increasing wealth, will drive demand for life and health reinsurance. Gan highlighted that many countries in Asia are experiencing rapidly ageing populations, which will increase demand for long-term healthcare, pensions, and financial products.
“Many countries in Asia, such as China, Japan and South Korea, are experiencing rapidly ageing populations. Singapore is no exception – we project to attain ‘super-aged’ status by 2026, with about one fifth of our population aged 65 years or older,” the minister said.
The reinsurance sector is undergoing significant transformations, driven by regulatory changes, emerging risks, and evolving investment strategies, says Jeffrey Liew of Fitch.
Reinsurers in APAC have seen a sustained improvement in equity levels, shareholders’ equity and return on equity on the back of stronger underwriting performance and rebound in investment gains.
“The quality of shareholders’ equity is satisfactory and the equity level is increasing, supported by retained earnings,” said Jeffrey Liew, head of insurance, APAC.
This stability is particularly evident among reinsurers in Asia, where several companies in Japan, South Korea, China, and Hong Kong have successfully implemented IFRS 17.
These firms report “stable-to-improved returns on equity (ROE), driven by improved underwriting performance and investment gains.”
Regulations
The regulatory shifts in Hong Kong and Indonesia are expected to have moderate impacts on reinsurers’ strategies.
“The new RBC regime, effective from 1 July 2024, aims to enhance financial stability by being more responsive to each insurer’s risk profile and aligning with international standards,” Liew said.
This will likely prompt reinsurers to adopt more rigorous risk management and capital allocation practices to ensure compliance and maintain solvency.
In Indonesia, the increase in minimum equity requirements will likely reduce the number of operational companies, fostering a healthier competitive landscape.
“Reinsurers will need to bolster their capital positions to meet these new thresholds, which could lead to consolidation or exits by smaller players,” Liew said.
In Indonesia, tougher minimum equity requirements are set to reshape the competitive landscape.
“The tougher minimum equity requirements for Indonesian insurers are likely to reduce the number of companies operating in the sector and encourage a healthier competitive landscape,” Liew said.
By 2026, insurers must meet a new regulatory threshold of IDR 500 billion, with a higher requirement of IDR 2,000 billion by 2028.
Currently, “one out of the eight reinsurers in Indonesia has not met the new regulatory requirement,” prompting concerns about market consolidation and operational viability.
Capital management
Reinsurers must focus on disciplined risk selection and prudent investment portfolios to remain profitable in a tighter regulatory environment.
This may involve a strategic shift toward lower-risk investments that require less capital buffer.
Additionally, “several reinsurers increase their use of retrocession by ceding more risk to retrocessions,” which supports them in reducing the capital required to cover higher risks, particularly those arising from natural catastrophes.
“Rising awareness of cyber risk protection is driving potential premium growth, but reinsurers face challenges in exercising proper risk management and underwriting practices to effectively mitigate this emerging risk.”
Jeffrey Liew, Fitch
ILS
Liew anticipates a gradual increase in insurance-linked securities (ILS) transactions across Asia, stating that this growth is “supported by rising investor interest and emphasis on climate change mitigation.”
Besides that, the establishment of an ILS hub in Hong Kong in 2021 is expected to bolster market growth and stability.
However, challenges such as “the need for further development and increased participation from Asian investors” have emerged.
Cyber risk
“Rising awareness of cyber risk protection is driving potential premium growth, but reinsurers face challenges in exercising proper risk management and underwriting practices to effectively mitigate this emerging risk,” Liew said.
Recent ransomware attacks and cybersecurity incidents, such as the CrowdStrike outages in July 2024, highlight the systemic nature of cyber threats.
Liew said that “the reinsurers’ ability to manage the systemic nature of cyber risk has not been established,” emphasizing the need for robust reserving and pricing policies.
Reinsurers can enhance their data analytics capabilities and collaborate with cybersecurity firms to better prepare for potential cyber catastrophes.
Improved data on cyber incidents will lead to more accurate reserving and pricing models.
Implementing cyber risk models and conducting regular stress testing can help assess vulnerabilities and ensure that reserves are adequate.
“Clear and updated policy terms are essential to reflect evolving threats,” while conservative pricing strategies can help manage the inherent uncertainties, Liew said.
While countries like Australia, New Zealand, and Japan have reliable geocoding and risk data, other markets, including China, India, and South-East Asia, still face gaps.
Although nat cat modelling in the Asia Pacific has made significant progress, a key challenge remains – a lack of the availability and quality of exposure data, said Ashish Jain, vice president and managing director of extreme event solutions at Verisk Singapore.
As the region is experiencing rising nat cat losses, driven by several factors, including climate change, inflation and rapid urbanisation, which increases risk exposure as populations are concentrating in cities vulnerable to hazards, it’s critical for insurers to obtain accurate property data and up-to-date replacement values in order to produce reliable loss projections, said Jain.
However, while countries like Australia, New Zealand, and Japan have reliable geocoding and risk data, other markets, including China, India, and South-East Asia, still face gaps.
“Collaboration with insurers in these regions will contribute to better data collection practices, but there is still considerable room for improvement to ensure more accurate risk assessments,” said Jain.
To address these challenges, catastrophe modelers are utilising advanced technology to refine coarse data by distributing exposure to finer geographical resolutions and making informed assumptions about missing risk characteristics, such as construction type, building height, and year of construction.
“Verisk integrates probabilistic modeling techniques to account for uncertainties in incomplete datasets. These innovations improve modeling outcomes, even with limited data availability,” said Jain.
For China and India, critical markets due to their size and rapidly increasing insurance penetration, Verisk offers insurers with advanced models for earthquake, typhoon, cyclone and multi-peril crop risks. Regarding flood risk, Verisk has introduced high-resolution probabilistic flood hazard maps for both countries, providing insurers with the tools to better underwrite and quantify flood risks at a granular level.
“Together, these solutions enable the insurance industry to comprehensively evaluate natural catastrophe risks, supporting sustainable growth and resilience in these high-growth markets,” said Jain.
“As an industry, it is essential that we continue to work together, raising awareness about the importance of high-quality exposure data while providing technological solutions that help developing markets overcome these challenges and build long-term resilience,” Jain added.
He also called for insurers to regularly reassess their exposures, especially during periods of high inflation and implement long-term strategies to address the incremental effects of climate change, ensuring that insurance remains affordable and sustainable.
“As an industry, it is essential that we continue to work together, raising awareness about the importance of high-quality exposure data while providing technological solutions that help developing markets overcome these challenges and build long-term resilience.”
Ashish Jain, Verisk
Modelling emerging risks
In addition to nat cat risks, emerging risks, such as political violence and civil unrest, are also in Verisk’s focus. It has developed a global predictive scoring model for strikes, riots, and civil commotion (SRCC), which are human-driven peril with irregular patterns and fewer historical insured losses compared to natural catastrophes
“Recent trends—five SRCC events in the last five years each exceeding US$1 billion in insured losses—highlight the growing need for precise forecasting,” said Shane Latchman, vice president and managing director of Extreme Event Solutions at Verisk London.
“We leverage detailed claims data and large historical datasets of riots, applying machine-learning algorithms to identify socio-economic and political conditions predictive of future unrest.”
By integrating these insights, Verisk could better assess the frequency and severity of SRCC events, helping insurers improve their ability to understand and manage their exposure to this evolving risk.
The 20th Singapore International Insurance Conference (SIRC) is now in full swing, and it’s great to see such a vibrant conference. Rooms are fully booked out, and there is a real buzz about this place. I’ve been to many a (re)insurance conference over the years, and I can genuinely say that SIRC is right up there as one of the very best- so congrats to all concerned, and for the APAC market in making this such a success.
However, amidst all the back-patting, there remains the elephant in the room: the protection gap across Asia. As long as I’ve been writing about this market the disparity in take-up rates of insurance (which after all underpins all follow-on markets) across most territories in Asia when compared to other mature insurance markets remains an issue. Quite simply, given its huge population and prospects for continued economic growth, it remains the case that insurance penetration rates across a swathe of product lines remain too low.
Don’t just take my word for it. According to no less an authority than Swiss Re, Asia’s protection gaps are substantial and growing. In 2022, the protection gap in the Asia Pacific region was estimated at some US$886 billion in premium terms, a staggering 38% increase from 2017, representing half of the global protection gap. The fact remains that large segments of the Asian population remain underserved by insurance and other risk management solutions, leaving communities and economies vulnerable to financial hardship from unforeseen risk events such as natural disasters and health emergencies.
There are many reasons given for this gap continuing. For financial lines products, for example, I often here cited a continuing cultural gap compared to Europe and North America, with considerably different legal systems and a consequent unwillingness to litigate underpinning a continuing lack of growth across several territories in the region. Of course, this is not the case everywhere (one thinks of Australia and New Zealand, for example) but it remains broadly true.
However, I spoke to one market veteran at SIRC and he offered a perhaps more telling reason for the protection gap, which is simply that many insurers and reinsurers operating across APAC have failed to engage with people on a local level. What’s needed is dealing with small sums insured and working outside of 9-5 hours to suit local markets and local needs. Asia (re)insurance: think small!