The surge in inflation influenced much of 2022, resulting in a tightening of monetary policy - and in turn - capital market volatility and a depreciation of currencies in some emerging markets, according to a recent report by Malaysian Re.
For insurers, inflation caused challenges on the underwriting and on the investment sides, in operations and also contributed to a tightening of reinsurance capacity. Inflation did not affect all ASEAN insurers equally across the ASEAN markets, and in fact varied greatly according to their business model. Those with a high share of personal lines as motor, property and medical insurance were the most affected than those focused on commercial lines or in reinsurance.
These were the main findings in the seventh edition of Malaysian Re’s annual regional thought leadership publication, ASEAN Insurance Pulse. The latest edition was launched by Insurance Supervisory Authority of Vietnam commissioner Ngo Viet Trung, and was witnessed by ASEAN Insurance Council chairman Shahrildin Jaya, secretary-general Christian Wanandi and Malaysian Re president and CEO Ahmad Noor Azhari Abdul Manaf during the 5th ASEAN Insurance Summit in Ha Long, Vietnam.
“The ASEAN region, which consists partly of emerging and partly of mature markets, is no stranger to inflation. Nevertheless, complexity, speed and the altitude to which inflation surged within just a few months, present a novelty to most of us in this industry. As Malaysian Re, we were thus interested to know how the ASEAN insurers dealt with this phenomenon, where they saw key challenges, how well they were prepared and what they heard from their policyholders in terms of their needs,” said Mr Ahmad Noor Azhari.
“We had anticipated the impact of inflation on claims on our books in 2022. The large losses from the Eastern Australian floods in 2021 had served as an eye-opener for the impact of inflation on claims payments, as we could see its effects on the cost for replacement materials as well as triggering a shortage in construction workers and thus causing further costs,” he said.
Thus, inflation did not catch the region´s insurers off guard. It had already started to rebound before the end of the pandemic and in some ASEAN markets, had been part of their reality for quite some time. In addition, insurers had risk management measures in place to stress-test the impact of inflation on their book and reserves. However, a major concern was with policyholders, namely consumers, who often underestimate the risk of underinsurance.
“We hope that this year’s report will be a valuable reference as our qualitative interviews and familiarity with the industry and its drivers had allowed us to identify how the ASEAN insurers dealt with this phenomenon, where they saw key challenges and how well they were prepared,” he said.
The findings of this report are based on 24 structured interviews with executives representing regional and international (re)insurance companies, intermediaries, policy makers and trade associations.