Demand rockets for insurance products in South-East Asia: Moody’s
November 1 2024 by InsuranceAsia News
To thrive amid climate change and regulatory shifts, reinsurers are adopting advanced data analytics for better risk management and pricing, says Andrew Hare from Moody’s.
IAN: What’s your outlook for premium growth and the underwriting losses of reinsurers in the region in 2024?
Hare: Rising demand for insurance products in emerging regions such as South-East Asia is propelled by factors such as expanding middle class and an increased knowledge of insurance coverage. These factors continue to drive premium growth for reinsurers and contribute to an increase in premiums.
The ability of reinsurers to adapt to changing market dynamics has also led to a positive outlook for premium growth in 2024, as technology and data analytics advancements help reinsurers assess risks and price policies accurately, potentially reducing underwriting losses.
However, natural disasters, regulatory changes, and industry competitive pressures continue to impact underwriting performance. Trends such as the growing impact of climate change and increasing frequency of cyberattacks present significant challenges for (re)insurers.
Reinsurers can leverage technology and data analytics to improve risk management strategies and mitigate future losses.
IAN: How can reinsurers overcome the burden of retro costs in terms of underwriting quality and risk selection?
Hare: By utilising granular exposure data and advanced risk analytics technology, reinsurers can gain insights into specific risks within a portfolio, leading to more informed underwriting decisions and refined risk selection processes. This enhances risk understanding which is vital when mitigating retrocession costs that cannot be transferred to direct insurers.
Embracing a data-driven approach enables reinsurers to effectively address challenges associated with retrocession costs. This can lead to improved competitiveness and sustainable growth in the market, with cloud platforms facilitating efficient communication and collaboration around a view of risk, streamlining processes, and improving profitability.
IAN: What are your observations and outlook regarding the pricing strategies, terms, and conditions in APAC, and how are they aligned with the global trends?
Hare: Global trends are increasingly influencing pricing strategies, terms, and conditions in the (re)insurance market in the APAC region. Insurers are looking to optimise their retrocession costs and are seeking more cost-effective solutions to remain competitive.
The adoption of data analytics and technology is becoming more prevalent in the region, mirroring the global trend towards a more data-driven approach. Overall, the outlook for pricing strategies and conditions in APAC is one of adaptation and alignment with global industry standards to ensure sustainability and profitability.
IAN: Which strategies can reinsurers use to diversify their books and reduce volatility in their underwriting?
Hare: Reinsurers in the region can consider diversifying their portfolios by exploring new lines of business such as cyber insurance, or entering emerging markets, to help spread risk and reduce volatility in their underwriting portfolios. Additionally, focusing on specialty and casualty lines may offer higher margins and more stable returns than aggregate covers, which are typically more susceptible to large losses.
By aligning strategies with global industry peers and leveraging data analytics, reinsurers in APAC can position themselves for long-term success in a competitive market.
IAN: How can reinsurers optimise their portfolio risks?
Hare: Effective risk management relies on a deep understanding of risks, facilitated by enhanced analytics and data capabilities that enable thorough investigation and mitigation of natural peril risks, which is a common challenge faced by reinsurers globally. This ensures that a business can manage in a world of more frequent, more severe events. Reinsurers now possess a variety of instruments to evaluate and select risks and develop new strategies.
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