Asia’s reinsurers continue to experience hard market conditions in 2023, offsetting the impact of inflation-induced rising claims, climate change and financial market volatility, according to Fitch Ratings.
These comments stem from the rating agency’s most recent report regarding the outlook of the Asian reinsurance market.
Jessica Pratiwi, Senior Analyst at the firm, said, “Asian reinsurers will continue to benefit from hard market conditions during 2023, with favourable rate increases. Reinsurers will also grapple with limited retrocession capacity.
“This leads to a greater focus on improving underwriting quality and risk selection, as well as maintaining solid capital.”
As per Fitch’s report, several regulators in the Asia-Pacific (APAC) region have been continually strengthening their regulatory capital requirements for reinsurers.
The rating agency noted that this will “encourage reinsurers to build more robust capitalisation and should help the industry in becoming less susceptible to economic and climate changes.”
“Capitalisation and leverage metrics for Fitch-rated reinsurers in APAC remain commensurate with their ratings,” the firm added.
Fitch also highlighted enhancing data analytics as crucial for reinsurers to understand the potential impact of their portfolio risk levels to optimise premium pricing.
“Reinsurers will have to optimise portfolio risk as they reassess their risk appetites to navigate the uncertainty amid higher weather-related losses and volatile economic conditions,” wrote Fitch.
The firm went on, “This will include consideration on historical loss experiences, the potential impact of catastrophe events and climate change, underwriting practices, as well as treaty structure.”
