International ratings agency A.M. Best, in a new report, has highlighted the opportunity for global reinsurers to help Southeast Asian insurance companies evolve and develop new solutions.
The A.M. Best report notes that insurance companies across Southeast Asia are looking to develop new solutions and expand outside of the traditional commercial fire and motor lines that continue to dominate non-life markets in which they operate.
“Moving into new lines brings numerous challenges, which will lead these insurers to seek partners to provide advice, support, and risk sharing, especially during the early stage of new product launches,” said A.M. Best.
The ratings agency states that as a result of insurers in the region having a desire to expand into new business lines and niches, this could drive new growth momentum for global reinsurance companies.
“While these niches may be too small to be attractive to large global reinsurers, they will be more attractive for smaller reinsurers, including regional reinsurers,” explained A.M. Best.
As the softening reinsurance landscape has persisted scale, relevance, efficiency, and discipline have become of increased importance for international players, and the pressures of the marketplace has created tension for reinsurers of all sizes. However, some of the larger reinsurers have been able to better navigate the testing landscape, so it will be promising for smaller players to hear that opportunities could exist in Southeast Asia, an emerging market that is seen to have strong growth potential.
A.M. Best explains that only reinsurers with relevant capabilities will be able to assist cedants with the development of new business lines and networks in order to take advantage of the opportunity, ultimately strengthening their relevance in the market.
“For these niches to be sustainable and offer steady growth, reinsurers will need to demonstrate the ability to keep innovating efficiently and to manage concentrations, as the cedants will reduce cessions as they become more familiar and comfortable with the new products,” continued A.M. Best.
For reinsurance companies the opportunity is much more than just providing capacity for regional insurers, and importantly requires assistance with the development of solutions and innovative distribution methods to increase penetration in Southeast Asian markets.
A number of factors are causing cedants across Southeast Asia to expand into new business lines, explains A.M. Best, and helping such entities broaden their reach and product offering could open up numerous opportunities for smaller and mid-sized reinsurers.
“To manage the declining barriers to exit over time, reinsurers will need to demonstrate agility and the ability to frequently roll out innovative and relevant products and distribution solutions, whilst still maintaining efficient operating expenses.
“The potential of the Southeast Asian insurance markets to include more non-motor personal lines (as well as other specialist lines as risks become more complex amidst evolving economies) provides reinsurers with a timely opportunity to position themselves as growth facilitators and innovators, given their size disadvantage as pure capacity providers,” concludes A.M. Best.
