Asia Insurance Market Report 2014

The insurance industry in Asia seems to be in a perpetual soft market, driven by new capital, new capacity, and fierce competition.

Asia will continue to be the most dynamic region for the insurance industry, with opportunities coming in all shapes and sizes.

Asia is a buyer’s market for insurance, with rates generally at historic lows due to the continued flow of capital, capacity, and competition into the region. There are, of course, pockets of increases, but this tends to be on a case-by-case basis, or unique to particular countries or classes of insurance within a country due to local market conditions or loss experiences.

Non-Cat Property Remains Cheap

• Abundance of capacity across the region is keeping rates at historic lows.
• In some markets that do not have natural catastrophe exposures, such as Singapore, rates are known to reach 0.007% per million.
• Local insurers continue to offer very attractive rates, in many cases more so than international insurers, creating intense competition in many markets.

Cat-Exposed Property Insurance Stabilizes

• In Japan, rates have come back down to pre-Tohoku earthquake and tsunami levels, as insurers have recouped losses.
• In Thailand, rates have also come back to levels seen before the disastrous floods in 2011, but limits have not risen significantly.
• In other catastrophe-exposed markets, such as Indonesia, which is prone to floods and earthquakes, rates continue to be stable given the lack of large-scale events in 2013.
• The Philippines, which suffered more than 20 typhoons this season, has seen increases in property rates with catastrophe exposures, but this has been limited.
• Governments across Asia are looking for new and innovative ways to manage catastrophe risks, and this will be a theme for 2014.

Financial Lines Remain Competitive

• The influx of new insurers to financial lines, combined with a benign litigation culture in general across the region, is keeping rates extremely competitive for financial lines insurance, such as directors and officers (D&O) and professional liability.
• New types of insurance, such as cyber liability insurance, are also creating interest among buyers and competition among underwriters, keeping rates contained.
• Public offering of securities insurance, or IPO liability insurance, is expected to pick up in popularity as the IPO market slowly returns, especially in Singapore and Hong Kong.
• Singapore and Hong Kong remain the traditional underwriting hubs for financial lines insurance.

Employee Health and Benefits Increases

• Medical inflation — up to 25% in some markets — is causing medical insurance to significantly increase for companies.
• In addition, underwriters are seeing deteriorating claims experiences, as employees use their insurance benefits, driving up claims costs.
• If left untouched, a company’s benefits program could increase in costs up to 40% with the combination of medical inflation and high utilization rates.
• Companies are turning to innovative program designs and wellness interventions in an effort to address the root causes: prevention is better than a cure.