Malaysian Reinsurance Berhad (Malaysian Re) has introduced the seventh edition of its annual regional Thought Leadership publication, ASEAN Insurance Pulse, with a dedicated focus on the impact of inflation on ASEAN insurers.
Ahmad Noor Azhari Abdul Manaf, President and Chief Executive Officer of Malaysian Re, emphasised the novelty of the situation, stating, “The complexity, speed, and altitude to which inflation surged within just a few months present a novelty to most of us in this industry.”
Key findings of ASEAN Insurance Pulse 2023 reveal that the surge in inflation throughout 2022 led to a tightening of monetary policy, resulting in capital market volatility and currency depreciation in certain emerging markets.
Insurers faced challenges on both the underwriting and investment fronts, impacting operations and contributing to a reduction in reinsurance capacity.
The report emphasises that the effects of inflation were not uniform across ASEAN insurers, varying significantly based on their business models.
Insurers specialising in personal lines such as motor, property, and medical insurance were more affected than those focused on commercial lines or reinsurance.
The CEO of Malaysian Re highlighted the anticipation of inflation’s impact on claims, citing the lessons learned from large losses during the Eastern Australian floods in 2021.
The impact on claims payments, replacement material costs, and a shortage in construction workers underscored the need for insurers to adapt to inflation-related challenges.
While insurers had implemented risk management measures to stress-test the impact of inflation on their books and reserves, a major concern highlighted in the report was the risk of underinsurance among policyholders.
Consumers often underestimated the potential risks, posing challenges for insurers in adequately addressing their needs.
The report’s findings are based on 24 structured interviews with executives representing regional and international (re)insurance companies, intermediaries, policymakers, and trade associations.
Ahmad Noor Azhari expressed hope that the report would serve as a valuable reference for industry stakeholders, shedding light on how ASEAN insurers navigated the challenges posed by inflation, identified key issues, and gauged their level of preparedness.
