The Chief Executive Officer (CEO) of Hong Kong domiciled reinsurance company Peak Re, Franz Josef Hahn, believes bridging the protection gap in Asia is one of the re/insurance industry’s biggest opportunities.
The global protection gap (disparity between economic and insured losses post-event) has been discussed in the risk transfer industry for some time, widely viewed as a great challenge and opportunity for the sector.
In an interview with Reinsurance News at the annual meeting of the reinsurance industry in Monte-Carlo, the CEO of Peak Re underlined the opportunity that exists in Asia to create effective solutions that have the potential to close the expanding protection gap.
“Traditionally, in Asia the family society acts like a support backbone, they help and support each other in times of hardship and disaster. They trust their family,” said Hahn. “But in today’s time, insurance is the more efficient protection.”
Asia experiences a dangerously high frequency of both mild and extreme natural catastrophe events, ranging from intense storms to earthquakes, and so on. However, insurance penetration in many Asian countries is still amongst the lowest in the world, meaning that when disaster strikes, many individuals and businesses are at risk of huge financial and social impairment.
One of the challenges in Asia, and other emerging parts of the world, is low incomes. When money is scarce, insuring against natural catastrophes is a challenge that the industry needs to address by providing solutions that are both affordable and effective. But, at the same time, education and awareness of the availability of insurance products is essential if penetration in Asia is going to increase.
Closing the protection gap in Asia is the “biggest opportunity we have in this world, and we have known this for a long time.
“Peak Re was founded on the basis of taking the opportunity to close the protection gap in Asia, and together with our clients we do our best to come out with products that will help to close the gap,” explained Hahn.
As a result of the region’s low insurance take-up rates, governments are often confronted with the recovery bill, and depending on certain political and social factors this can be extremely detrimental to Asian societies.
One way of increasing penetration, according to Hahn, is via government support, which has been seen to increase the positive impact of insurance in many parts of the world.
“Governments are a very efficient way to enhance insurance protection, either by way of regulation or by insuring them against the impact from natural catastrophes and thus assuring that funds are paid out once a disaster strikes,” explained Hahn.
Throughout the annual Monte-Carlo meeting of the sector, the protection gap was a hot topic, and it’s going to remain one of the most discussed issues in the space until penetration in places like Asia improves.
Furthermore, and highlighted by the Peak Re CEO, the protection gap exists everywhere, highlighted by the recent hurricanes in the U.S. that revealed the dangerously low level of flood insurance penetration and the impact this could have on societies and the government.
