Global insurance and reinsurance broker Willis Towers Watson (WTW) has underlined challenges for insurers in Asia, warning that the dominance of large and complex risks in the Asian commercial insurance segment is revealing that current business models are unsustainable.
2018 was an active year for catastrophe activity across Asia, with numerous insurance lines of business being severely impacted by a range of events, including the Lombok earthquake, the Osaka earthquake, and also typhoons Mangkhut and Jebi, among others.
The events resulted in substantial attritional losses and continued negative pressure on rates, with many insurance companies that operate in the region feeling the impacts across their portfolios. According to WTW, these losses, combined with the very complex global and economic backdrop, has led many international insurers to adjust their portfolios.
Ron Whyte, Chief Operating Officer (COO), Corporate Risk and Broking Asia, WTW said: “There have been a tighter scrutiny of underwriting practices and withdrawals by insurers from certain countries, lines of business and, in some cases, the region altogether. This is evidenced by the toughening of the market with insurers returning to technical underwriting.
“However, not all domestic markets have had the same experience nor are all countries seeing a hardening marketplace. China continues to ‘buck the trend’ and grow as an increasingly important hub for non-Chinese business.”
WTW, in its 2019 Asia insurance market report, calls for a new approach to risk and insurance in Asia, driven by a more sophisticated marketplace and growing, global political and economic pressures.
Scott Burnett, Chief Executive Officer (CEO) of Corporate Risk and Broking Asia, WTW added: “A different risk management approach is needed and, in particular, one that focuses on risk mitigation. Cyber exposure has expanded beyond data breaches and must now be considered in the context of disruptions to supply chains. Liability exposures are further evolving with the rapid adoption of new technologies and must be carefully considered to ensure that the insurance policies remain relevant and responsive.
“Geopolitical risks are abound across the Asian region with unforeseen and uncertain impacts. It is therefore important for companies to understand, prevent, protect and then respond with the right insurance and risk strategy for their businesses.
“Too often, we hear clients struggle to quantify the financial impact and likelihood of risks to their business. Today, companies need to know, with certainty, that the insurance strategy they have in place is exactly right for their business. With new and emerging risks on the accelerated rise, they need to adopt a data-driven and actuarial approach to support all aspects of their insurance procurement process to yield better business outcomes.”
For global insurers and reinsurers, Asia’s risk landscape offers ample opportunity, but as highlighted by WTW, challenges remain across the region and when coupled with macroeconomic and political pressures, as well as the rise of technology, it’s clear to see why the broker expects challenging market conditions to persist.
“2019 will be a challenging year for clients particularly on large and complex risks. Whilst challenging market conditions will continue, we believe that a more professional marketplace will emerge,” said Whyte.
