The Asian reinsurance market showed signs of stabilisation but continued to soften last year as new players vied for a market share and traditional players reinvented their game with start-ups, re/insurance broker Aon reported in its 2017 Asia review.
Aon explained that reinsurance prices were beginning to bottom out but may still experience some downward pressure over the next six months as renewal cycles are played out and new capacity continues to flow into the market – setting a challenging tone for 2017.
Last year an ever greater number of start-up reinsurers appeared across Greater China, India, and Europe, as private equity and conglomerate companies sought to grow their reinsurance market diversity – fanning the flames for competitors of 2017’s traditional markets.
Aon underscored a growing tendency for insurers to move away from centrally controlled capital strategies by giving line underwriters greater leeway in reinsurance purchasing – a strategy that works to mitigate portfolio exposures at the point of underwriting.
The re/insurance broker reported last year’s major growth areas for specialty lines included treaty and facultative reinsurance coverage for trade credit, agriculture, and terrorism reinsurance, and continued growth is forecasted for specialty reinsurance lines and M&A activity in 2017.
Additionally, in 2016, demand for retrocessional coverage grew amongst Asia-based regional and international reinsurers.
2016’s most significant M&A activity in Asia was the purchase of Asia Capital Re by Shenzhen Qianhai Financial Holdings Co Ltd. and Shenzhen Investment Holdings Co, according to Aon.
Collateralised capacity appetite is expected to remain focused on traditional markets; Japan and Australian/New Zealand catastrophe business, and Asia Pacific retrocessional business.
Other major factors affecting the Asian market are regulatory changes across China, Indonesia, and India which will bring heightened emphasis on minimum capital requirements and reinsurance adequacy, Aon stated.
2016 saw sustained natural catastrophe activity in the region; seven typhoons and major earthquakes in Japan led to extensive attritional losses, but these largely still remained within catastrophe budget expectations.
Natural disasters caused significant property and agricultural losses in the region with Korea and Taiwan hit with earthquakes, and China ravaged with floods and typhoons as well as drought in the north-east.
Re/insurance areas likely poised for growth in 2017 are in the cyber and environmental space – with increased demand for granular loss modelling and focus on flood exposures, says Aon.
Geoffrey Lambrou, Chairman of Aon Risk Solutions Singapore and Head of Specialty Broking, Asia, commented; “As the complexity of risk evolves in Asia and the way Asian businesses view and manage risk matures, it is vital that businesses understand the risk landscape in which they operate in and are able to stay ahead of emerging and underrated risks.
“We look forward to working with our clients in 2017 to deliver creative tailored solutions and services to empower their results.”
