Non-life insurers want the industry regulator to stipulate that the minimum capital requirement would be maintained at the current level of PHP900m ($17.6m) under a pending Senate bill aimed at raising the minimum to PHP1.3bn by the end-2022. In a letter, last month to Senator Grace Poe, who chairs the Senate committee on banks, financial institutions, and currencies, the industry group Philippine Insurers and Reinsurers Association (PIRA) noted that the current minimum net worth required among insurance players was “sufficient” to maintain insurers' solvency, according to a report on the news website Inquirer.net. Also, the PHP900m minimum capital requirement in place since 2019 is already among the highest in the region, PIRA chair Edgardo Rosario said. PIRA told Ms Poe that non-life companies in Vietnam had a net worth requirement equivalent to at least PHP667.9m; PHP517.7m in Indonesia; PHP480m in Thailand; and PHP363.4m in Singapore. The group said the prevailing net worth level was “more than sufficient as [it acts] as buffer or early warning signal before a company shall be unable to pay its claims and liabilities to policyholders and creditors.” The Philippine Life Insurance Association is also working on its comments on the proposed law amendment, its general manager George Mina said. Source: asiainsurancereview.com

FINANCIAL technology (fintech) player GCash said it has helped provide 100,000 Filipinos with insurance products, which now amount to a total coverage of about P8.3 billion. In a statement, GCash President Martha Sazon described this feat as an “explosive growth” which, she said, reflects that Filipinos are now growing more accepting and trusting of insurance. “With the pandemic unfortunately continuing on in 2021, together with a myriad of other health and life-threatening conditions, insurance is a must. GInsure democratizes insurance to Filipinos through a variety of very affordable insurance products, including protection from dengue and Covid-19, protection from income loss, and hospital coverage benefits,” she said. GInsure is an in-app feature that allows GCash users to purchase insurance products offered by Single and MicroEnsure. “With our partnership with GCash, more people are getting over the notion that insurance is intimidating or expensive or complex. Our alliance is proof that insurance can be affordable, simple and easy to access,” AXA Philippines President Rahul Hora said. AXA underwrites the insurance policies offered by MicroEnsure. “Partnering with GCash enabled Singlife to reach millions of Filipinos almost instantly, giving them access to meaningful protection products without breaking the bank in a modern, fuss-free manner,” said Singlife Philippines CEO Rien Hermans. In the Philippines, only close to 40 million Filipinos have insurance policies, and 22.8 million of which were made through microinsurace. The Insurance Commission targets to bring this number to about 50 million by 2022. By Lorenz S. Marasigan Business Mirror Link to original post: https://businessmirror.com.ph/2021/02/25/more-pinoys-bought-insurance-via-gcash

The Philippines is one of the world’s most vulnerable countries to climate change, with USD 5 billion of GDP at risk from increased typhoons over the next 10 years. Nature in the Philippines represents a valuable cost-effective tool for climate adaptation: Mangroves have been found to be as much as fifty times cheaper than building and maintaining a coastal cement seawall, and restoring them could yield $450 million per year in flood-protection benefits. However, these values are not yet factored into the country’s main financing and investment institutions: the Philippines has already lost 50% of its mangroves to deforestation. Starting in 2017, Earth Security, with funding from the international climate fund (IKI) of Germany’s Federal Ministry of the Environment, Nature Conservation and Nuclear Safety developed a research and strategic partnership programme to mobilise finance decision-makers in the Philippines to recognise the value nature-based adaptation. In 2020, in partnership with the Philippines’ government and the Asian Institute of Management, Earth Security has launched: Source: earthsecurity.org

The Thai insurance sector faces five main challenges in 2022, according to Dr Suthiphon Thaveechaiyagarn, secretary-general of the Office of Insurance Commission (OIC). He says that these challenges are: Economic: The concerns include low interest rates, the contraction of the Thai economy and the increase in household debt that inevitably affect the operating results and purchasing power of the people; Social: The insurance sector will have to cope with an aging society, and increases in the cost of medical care in Thailand; as well as consumers turning to online channels for transactions resulting in the need to introduce new products and digitalise; Technology: Insurers need to adapt and adopt technologies such as smart devices or IoT applications in their insurance product offerings. In the next phase, insurance companies will use AI and data analytics to help analyse risks, underwrite insurance. and settle claims; Environmental: New risks will emerge including pandemics such as COVID-19, global warming, etc. The ESG trend is considered to be very strong; Legal: The Thai insurance industry is in the process of revising rules, including IFRS 17, which will come into force in 2024. The Personal Data Protection Act, which will take effect in June 2022, will affect the insurance business. Insurers will also have to monitor the ongoing COVID-19 situation and be ready to deal with new developments related to the pandemic, including rehabilitating companies that face problems. Source: asiainsurancereview.com

According to international broking group Howden, non-marine catastrophe retrocession rates-on-line for excess-of-loss coverage rose by an average of 15% at the key January 1st 2022 renewal season, outpacing property catastrophe treaty reinsurance rates-on-line by around 6%. Including the latest rate increases, Howden now estimates that non-marine catastrophe retrocession rates are up some 75% since their low in 2017. Consecutive years of catastrophe losses that particularly affected retro and especially frequency covers are of course the main driver of this. But, at the January 2022 renewals, Howden also notes that, “Climate change and the attendant issue of catastrophe model efficacy were decisive factors this year.” Further explaining that, “The unusual mix of secondary events fuelling sentiment that changing weather patterns are now increasing both the frequency and severity of climate-sensitive perils.” The retrocession market was seen to be particularly challenging at 1/1, Howden said, after catastrophe losses through 2021 and the ongoing trapped ILS capital issues. Aggregate retro covers saw sharper than average rate increases, while there were double-digit outcomes for some loss-affected occurrence covers as well, Howden explained. “After five successive years of price increases, the cost of retrocession protection is now approaching levels last seen in 2009. This equates to an average increase of more than 75% since 2017,” the broker commented. Explaining more of the 1/1 retro market dynamics, Howden said, “Confronted by constrained capacity for proportional and aggregate covers, along with flat budgets, some retrocession buyers were forced to restructure programmes or explore alternative solutions. “Strategies included retaining more risk, moving from aggregate to occurrence covers, raising attachment points, narrowing coverage or accessing the catastrophe bond market. All of which had implications for property-catastrophe reinsurance supply.” Conversely, while retrocession was up 15% on average, Howden estimates that global property catastrophe reinsurance rates-on-line rose by 9% at the renewals, which is the biggest year-on-year increase for these since 2009, by its reckoning. The “acute pressures” in retrocession filtered down to the primary reinsurance market, Howden said, which meant that in some cases, “carriers had less clarity than usual around their net positions when offering renewal lines on their 1 January portfolios.” Loss experience in Europe was a key driver of higher rates across the global catastrophe reinsurance market. Howden noted that European catastrophe programs that were loss impacted typically saw double-digit increases, on a risk-adjusted basis, while there were also significant changes to some structures including higher deductibles and a shift towards occurrence covers. “A desire from capital capacity providers to achieve perceived pricing adequacy for lower-attaching perils led to more disciplined underwriting and higher attachment points across a number of programmes in Europe,” Howden explained. “Fears and expectations that these types of events will become more frequent as a result of climate change saw aggregate capacity shrink, with per event capacity more widely available.” The average property catastrophe reinsurance rate-on-line increase in the United States was more muted, coming off a higher base, but still rates were up 6.5% on average. Differentiation was seen to be key in US renewals at 1/1, with lower layers particularly affected and seeing some restructuring in response to recent catastrophe activity. One factor that has helped in buoying reinsurance and retrocession rates at the renewals, is the fact capital levels did not increase dramatically at year-end, especially in the ILS market that focuses on collateralised covers. “A sizeable portion of trapped capital in the collateralised market, where investor fatigue from the five-year run of sizeable losses prevented reloading on the scale seen in previous years,” helped to offset increases in traditional reinsurance capital and catastrophe bonds, Howden notes. Commenting on the renewal outcome and the year ahead, David Flandro, Head of Analytics, commented, “A host of factors contributed to unusually late renewals this year, with 11th hour secondary perils complicating the process further. The market is faced with known unknowns like climate change, inflation and lingering COVID concerns, all of which are creating uncertainty. “Nevertheless, with insurance capital currently at record levels, and premiums rising on the back of higher pricing and heightened risk awareness, this remains a resilient and well-capitalised marketplace that can manage these challenges.” José Manuel González, CEO, Howden Broking added, “Irrespective of market cycles, clients expect the insurance sector to innovate, to develop creative solutions and to offer sufficient capacity during what is one of the most significant periods of change in living memory. “We see climate risk as one of the primary concerns for (re)insurance in this decade. Insurers must be prepared to re-evaluate climate-related risks proactively, and to provide a level of flexibility in underwriting solutions in order to maintain coverage ability whilst also creating new and innovative products. This will be no easy feat, and insurance will be a critical component in driving the mitigation and adaptation needed to confront climate change risks and deliver long-term profitability.” Source: artemis.bm

Losses from natural disasters in the Asia-Pacific region remained modest in 2021, according to a report by global reinsurance Munich Re. With overall economic losses of $50bn, of which $9bn were insured (indicating an insurance gap of 83%), the region accounted for just 18% of overall losses and 7% of insured losses worldwide. The costliest natural disaster in the Asia Pacific region was a severe flood in Henan Province in central China, where countless rivers, including the Yellow River, burst their banks. Hundreds of thousands of homes were flooded. Overall losses came to some $16.5bn, with only about 10% of these insured. A 7.1-magnitude earthquake struck off the east coast of Japan on 13 February 2021. The earthquake was not far from the epicentre of the Tohoku earthquake off Japan’s northeast coast, which 10 years earlier had triggered a devastating tsunami that led to the Fukushima nuclear disaster. The latest earthquake caused substantial losses of $7.7bn, with insured losses in the region of $2.3bn (insurance gap: 70%). Dr Achim Kassow, a member of the board of management of Munich Re said, “The natural disasters of 2021 have highlighted the enormity of the insurance gap in the Asia-Pacific region. For example, only about 10% of the Henan flood losses in central China were insured. The earthquake close to the epicentre of the 2011 Tohoku earthquake saw insured losses of only around 20%. In spite of the obvious risk, earthquake insurance there is especially lacking among small businesses. And Super Typhoon Rai (Odette) in the Philippines was a humanitarian catastrophe. Greater insurance density would help disaster victims return to normality more quickly. Munich Re is willing and able to offer more insurance capacity in the form of suitable solutions that meet all region-specific needs.” Global Nat CAT losses Globally, natural disasters caused overall losses of $280bn in 2021, of which only US$120bn were insured, says Munich Re. The average global insurance gap was 57%. Worldwide, natural disasters caused substantially higher losses in 2021 than in the two previous years. Based on provisional data, storms, floods, wildfires and earthquakes destroyed assets worth $280bn (vs $210bn in 2020 and $166bn in 2019). Source: asiainsurancereview.com

It was 2 years ago when the Taal Volcano erupted again after 43 years. Taal Volcano is located 50 kilometers south of Manila, in the province of Batangas. On January 12, 2020, the day started with PHIVOLCS announcing an Alert Level 1. The day ended at Alert Level 4. Before the strike of the pandemic, this eruption marked the start of the use of face masks for many Filipinos. PHIVOLCS Director Dr. Renato Solidum narrated then that seismic swarms started at approximately 11 in the morning. The phreatic eruption followed some time at 1:00 PM. The explosion was about 100 meters high or roughly 328 feet, which was seen by tourists and locals in the area. Continuous eruption at 10 to 15 kilometers high were recorded prompting an Alert Status Level 4 at 7:30 in the evening. The next day, January 13, ashfall was recorded in many nearby areas and in Metro Manila, with levels considered as dangerous for the health of sensitive groups. Approximately 200,000 individuals were displaced and evacuated. Heavy ash rained and poured down on the villages, which ruined livestock, infrastructure, and houses alike. Sources https://edition.cnn.com/2020/01/17/asia/taal-volcano-philippines-fatal-attraction-intl-hnk/index.html https://interaksyon.philstar.com/trends-spotlights/2022/01/12/208431/2020-taal-volcano-eruption-marked-the-start-of-face-mask-use-filipinos-recall-on-2nd-anniversary/ https://ndrrmc.gov.ph/20-incidents-monitored/4006-taal-volcano-eruption-2020.html

Continuing COVID-19 restrictions in most Asian jurisdictions, potential challenges in the property market (whether related to Evergrande or otherwise) in combination with global supply chain issues, rising energy prices, increasing inflation and the withdrawal of temporary pandemic relief measures suggest that 2022 will be a bumpy ride for the Asian insurance market, even without further resurgent COVID-19 outbreaks. Mr Alex Derham, a senior associate with the London-headquartered international law firm RPC, wrote this outline of what the insurance industry in Asia is to expect in 2022. The industry outlook is carried in the firm's "Annual Insurance Review 2022". Mr Derham also commented on the following areas: Cyber The continued growth in cyber claims is expected to continue into 2022 as cyber criminals continue to become more sophisticated. Asia remains an attractive target, particularly given as it is set to overtake the US as the largest market for data centres by 2024. COVID The longer-term effects of COVID-19 are likely to continue in the form of insolvencies in 2022, potentially leading to a further increase in D&O and trade credit claims. On the back of the current hard market in both sectors, further rate increases are expected for these high-demand products, in conjunction with increased focus by insurers on policy terms and pre-inception enquiries. In contrast, other lines of insurance business can expect to see diminishing rate increases as premiums stabilise. Political risk Political violence (re)insurers are expected to remain cautious amid growing concerns as to the potential for international sanctions, the political uncertainty in Myanmar and broader potential for social and political unrest in various countries around the region as countries wrestle with the economic challenges of transiting to a post-COVID-19 era. ESG Further growth in renewables can be expected, particularly in the solar and onshore/offshore wind spheres. Consumer awareness is also feeding mounting consumer and regulatory pressure on insurers to perform in accordance with ESG principles, including being selective of the types of businesses they choose to insure, particularly within the oil and gas sector. Growing interest in the ESG agenda is also expected to further propel the ILS market’s long-term growth into 2022 and beyond. Source: asiainsurancereview.com

Speaker: Jenz Diaz - Senior Data Specialist III, Technology Consulting, KPMG in the Philippines Doris Pastoriza - Senior Manager, Technology Consulting, KPMG in the Philippines