Ratings agency A.M. Best has highlighted challenges for reinsurers operating in Southeast Asia and India, driven in part by growth in personal lines business which typically requires less reinsurance protection.
As is the case in other parts of the world, reinsurance companies operating in Southeast Asia and India are pressured by an abundance of capital and soft pricing, a trend that is exacerbated by growing inward reinsurance activity from primary players in more mature parts of the region, such as Singapore, Malaysia, and Thailand, says A.M. Best, in its global reinsurance market report.
An additional challenge for reinsurers in Southeast Asia and India is the fact that while personal lines business has driven much of the growth in many markets across the regions, typically, this type of business requires less reinsurance protection.
At the same time, classes of business that do require reinsurance in this traditional sense, says A.M. Best, have lagged.
The ratings agency continues to explain that while India is an extreme example of this, it is nevertheless an example. The country’s non-life market growth over the last five years has been driven by personal lines business, and the profits of the domestic reinsurers struggled until the country’s Crop Insurance Scheme gained traction.
“Personal lines growth may be part of a longer-term insurance and economic development trend in these emerging markets. Insurance demand is no longer limited to corporate entities looking to insure their plants and equipment to protect their earnings capacity,” says A.M. Best.
While challenging, the ratings agency states that there are opportunities for reinsurers in the region to support primary players.
