Tracking Asia’s pricing momentumNovember 13 2019 by Andrew Tjaardstra
Finally prices are rising consistently in the region bringing relief to a bruised market.
P&C pricing in the third quarter of 2019 in Asia increased by 5% year-over-year, in the largest composite increase in the region in five years, according to Marsh’s latest Global Insurance Pricing Index.
Notably property rates climbed 6.5%, compared with 4.9% with international carriers, in particular, seeking increases across the region; nat cat pricing in several Asian countries — including Singapore, Hong Kong and India increasing by double digits.
“The pricing increases have been driven by the market’s overall underwriting performance.” Michael Garrison, Allied World
Property prices fell in the first three quarters of 2018 before gradually rising in Q4 2018 and Q1 2019; it was only in Q2 when prices rose meaningfully – by 4.9%.
Unfortunately, the pricing trend seems to be more a reactionary trend to poor underwriting results than a calculated curve; there has also been some withdrawal of capital as several market players decided to exit rather than play the long game.
Michael Garrison, president, Asia-Pacific at Allied World, told InsuranceAsia News: “Allied World agrees with Marsh’s pricing figures for Asia. We have only really recently seen the traction and we see this moving into the fourth quarter and the first quarter of 2020. The pricing increases have been driven by the market’s overall underwriting performance.”
Last October, for example, Hong Kong’s strongest ever storm – Typhoon Mangkhut caused widespread damage; according to statistics from 59 insurers, which account for more than 80% of Hong Kong’s market share, there were around 32,000 claims costing firms HK$2.9 billion (US$370 million), according to Insurance Authority statistics.
Far worse, claims from Typhoon Jebi spiralled to around US$12 billion to US$15 billion taking the market by surprise.
Rising prices should help market confidence to flow. In August, Christian Stobbs, managing director of Markel Asia, told InsuranceAsia News: “We have been growing at 34% year on year through a combination of rate increases and new customers.”
“We have seen a number of frequency and severity events – so the rating environment needs to reflect these scenarios.” Bobby Heerasing, Asia Capital Re
While casualty pricing grew a modest 1% in Q3, there has also been healthy rating growth in financial and professional liability pricing with prices increasing 5%.
The next question is whether the the rate increases will seep into the reinsurance market as renewal season takes hold at the end of the year. The mood at SIRC 2019 was that something urgently needs to change.
Bobby Heerasing, chief executive of Asia Capital Re, told InsuranceAsia News: “We have seen a number of frequency and severity events – so the rating environment needs to reflect these scenarios. We have been operating in a low interest rate environment since the financial crisis – we have seen reduced earnings to no earnings on the underwriting side of the business.”
The next six to eight weeks will be critical to ensure this is the case.
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