Asia-Pacific reinsurers face weather-related catastrophe losses from flooding and drought, such as the major floods in eastern Australia and China in 2022. Reinsurers are re-assessing risk modelling and catastrophe management frameworks to help quantify potential natural-hazard losses for underwriting, pricing and capital setting
Singapore:
Covid-19 pandemic-related claims are likely to linger for the remainder of the year, but Fitch Ratings expects claim severity to subside as the world continues to adapt. That said, the risks posed by persistent inflation could dampen the profitability of the reinsurance market, while weather-related catastrophe losses are likely to climb as the climate continues to change.
“We believe prolonged high inflation could raise claims and reserve deficiency of reinsurance. It could also slow business growth as purchasing power is eroded, leading reinsurers to focus on price adjustments and underwriting discipline. Reinsurers are also boosting risk mitigation capability to help manage the complexity and uncertainty surrounding climate change, said Fitch on Tuesday in its report “Asian Reinsurance Market – Reinsurers Grapple with Economic Challenges and Climate Risk”
For example, Asia-Pacific reinsurers face weather-related catastrophe losses from flooding and drought, such as the major floods in eastern Australia and China in 2022. Reinsurers are re-assessing risk modelling and catastrophe management frameworks to help quantify potential natural-hazard losses for underwriting, pricing and capital setting.
A greater awareness of environmental, social and governance (ESG) issues, particularly extreme weather and natural catastrophe exposure, has led reinsurers to adjust policy terms and conditions. More overseas retrocessions are also refining their underwriting positions on fossil fuels, making ESG a higher priority for Asian reinsurers’ underwriting risk assessments.
“We expect continued market momentum for catastrophe bonds, with two catastrophe bonds issued in Singapore so far this year. Hong Kong also issued the second insurance-linked securities catastrophe bond sponsored by Peak Reinsurance Company Limited to cover industry losses inflicted by typhoons in Japan,”said Fitch.
Fitch also expects the capital positions of Asian reinsurers to remain commensurate with their business profiles, based on available statistics for selected reinsurers. The quality of shareholders’ equity is sound, consisting of capital stock and retained earnings.