IT is now October and during normal times, the Christmas season would have already started and the malls would be filled with Christmas trees and other decorations. Expectations are high that this year will be a lot better than 2020. The economy is improving with the combined efforts of the government and private sector. Jobs were lost but they are also being replaced. What I consider as a positive and welcome effect of the recent events is the increased awareness for protection — insurance protection. Last week's column in Insurance Insights described the growth in the life sector. The nonlife insurance industry is also performing well now as compared to the previous year. As a matter of fact, companies benchmark their performance in 2021 against the year 2019 rather than 2020 when the pandemic jolted the business sector. Statistics gathered from the website of the Insurance Commission shows that the nonlife sector is as strong as ever. While gross premiums written decreased from P105 billion in 2019 to P98 billion in 2020, or minus 8 percent, the net income of the companies increased from P3.4 billion in 2019 to P5.6 billion in 2020, or a record 63 percent. The very good performance is attributed to fewer losses incurred and reduced management costs. The work-from-home arrangement has contributed to the reduction in the use of utilities and office spaces. Incentives to producers, such as travel and awarding ceremonies, were replaced by less expensive rewards. The nonlife sector had a P106-billion net worth as of the end of 2020, a 1:1 ratio against gross premiums! The rule of thumb is 1:1 vs net premiums. As of the end of 2020, 51 companies (out of 58) had already complied with the requirement of having a minimum net worth of P900 million. Not to worry, clients of nonlife companies! Your industry is strong and stable. Much has been written about insurance agents and insurance brokers as significant partners of the insurance companies in providing needed premiums. But there are other partners in the business of insurance, which I want to recognize today. Reinsurance, or "insurance of insurance," allows the company to write large risks or more complicated ones wherein liability may be more than what the net worth can afford or be exposed to. A portion of the risk is ceded to or passed on to another company, usually foreign, so the risk of the writing company is reduced, hence it is able to write more risks. Professional reinsurers are companies that do reinsurance only and do not write direct business. Most of them have been in the business for many years and are deemed to be very stable. The track record in paying their obligations is well known around the world. They write and support Philippine business and have been our friends from way back. They also provide training and other technical advice to our insurance underwriters and producers. Munich Re and Swiss Re have existed for over 150 years. Locally, we have our very own Philippine National Reinsurance Corp., which serves some of the industry's reinsurance requirements. Just as there are insurance brokers, there are also reinsurance brokers. They act as intermediaries between the insurance company (called cedant or ceding company) and the reinsurers. Reinsurance brokers look for the reinsurance companies (called security) that can best support the risk being ceded or reinsured. They do the spade work like evaluating the risk, gathering data and searching for the best terms possible. They have expertise in almost all the fields of insurance. They may have to go around the world to accomplish this. Technology has made this easy and they can now respond to their clients' needs in record time. They can travel regularly to the Philippines to assist the companies with their reinsurance requirements. Some foreign brokers have set up their offices here so they are within easy reach. There are 20 local reinsurance brokers but the bigger and more complicated risks are serviced by their foreign counterparts. Insurance brings together several parties to be able to write a particular risk but I think that is the reason why the relationship of the parties go beyond business. Trust and confidence make these relationships strong and long lasting just like friendship. Source: manilatimes.net

AS we move toward the last quarter of the year, the positive outlook, which we had at the beginning of the year, seems to be taking a back seat to the events currently prevailing. New Covid-19 cases have reached the 20,000-level as predicted by health experts and are expected to stay there during this month. The imposition of modified enhanced community quarantine has caused stoppage of work in many offices, and transport has become more limited. It is time to look at the economy again and perhaps make a new forecast. The insurance industry, especially the nonlife sector, which is very sensitive to the status of the economy, will have to calibrate its performance in the light of the new developments. The Insurance Institute for Asia and the Pacific sponsored a webinar, "Economic Briefing for 2021," with noted economist Dr. Cielito Habito last Aug. 26, 2021. Doctor Habito is a columnist of the Philippine Daily Inquirer in a column titled "No Free Lunch." After describing the present situation, which has resulted in persistent recession due to the lockdowns and slow business activity, he has a two-wheel proposal to push for the recovery of the economy. The two must durable sectors amid the pandemic are the digital economy and agriculture/agribusiness. Agricultural production is prevalent across all regions of the country and can provide labor and other linkages, which can make the regional economy recover fast and be a major contributor to the gross domestic product (GDP). The other wheel for recovery, according to Doctor Habito, is the digital economy and allied industries. Digitalization of almost all business processes became the solution to the immobilization of people and other movers of the economy. Sales and marketing, risk evaluation of insurable risks, payment of claims, commissions to agents and compensation of employees can be done remotely or without going to the offices of the companies. These two wheels of recovery are benefiting the nonlife insurance sector since it covers many agriculture-related risks. Micro insurance should be strongly promoted among farmers, poultry, swine and other food growers. In previous columns, I described how the insurance industry has utilized to the maximum the benefits of digitalization. It is no surprise, therefore, that Insurance Commissioner Dennis Funa, in his talk in the virtual forum organized by The Manila Times, expressed optimism despite the lingering impact of Covid-19 on the insurance players and policyholders. He reported that the income of life and nonlife insurance companies and mutual benefit associations improved in the first quarter of 2021. The life sector posted higher growth in both premium and net income of 28 percent and 38 percent, respectively, in the first quarter of 2021 compared to the same period last year. Mr. Rahul Hora, president and executive director of AXA Philippines, spoke of the benefits brought about by digital transformation to the operations of the companies. The use of artificial intelligence enabled the companies to customize their products and systems, which allowed them to service their business partners as fast and efficiently even in a work-from-home environment. For the nonlife sector, resiliency is the key word. The year 2020 was a very difficult time for the industry since everybody, insurers and clients, had to adjust to the changes caused by the pandemic. Car sales were down, which pulled down the insurance premiums on this line. Car insurance is the major contributor to the premiums written by the sector. Despite the lower premium income, net income for the year 2020 was 67 percent higher than the 2019 net income as reported by Mr. Michael Rellosa, executive director of the Philippine Insurers and Reinsurers Association, which was attributed to lower losses and savings in expenses. Reconciling the insights presented in the two recent forums, the economic briefing by Doctor Habito and the "Industry Outlook" by The Manila Times, we are optimistic that the insurance industry can ride out the negative effects of the pandemic. We can start by providing the support to the two wheels of economic recovery - strengthen our agricultural capabilities and continue with the digital transformation of business operations and people's mind sets. We should aim to do better than the GDP growth forecast of 3.5 percent for 2021. Source: manilatimes.net

TODAY, I will be writing about the First Virtual Summit of the Philippine Insurance Industry, which was held last July 21 and 22, 2021. This summit has been held for the last 15 years mostly in the Dusit Hotel in Makati City. It attracted many participants from both the local and foreign markets. It provided an opportunity to meet and greet one another and exchange business on the side. Unfortunately, the pandemic prevented this much-awaited event from happening. But not to easily give up, the organizers namely, Insurance Philippines and the Insurance Institute for Asia and the Pacific, decided to hold a virtual summit with the theme of "Climate change, cyber risks and other unpredictable risks: Can the insurance industry deal with these challenges?" Updates on the life insurance industry were presented by the Philippine Life Insurance Association president Benedict Sison. The life insurance companies showed modest growth in 2020 and 2019 in premium income, total assets and investments. Net income was down by 16 percent but the industry is expected to recover this year. The nonlife or general insurance report was presented by the Philippine Insurers and Reinsurers' Association (PIRA) chairman Allan Santos. Reductions in gross premiums and net premiums (after reinsurance) amounting to 16 percent and 15 percent, respectively, were caused by the slowdown in business when the pandemic came in 2020. Source: manilatimes.net

One of the most delicate modes of transportation is not just via air, but through water as well - there’s just no telling when an untoward incident can occur. Aside from natural circumstances, ships constantly face the possibilities of piracy and hijacks, especially when crossing borders. For every corporation in the industry of cargo and transportation, marine insurance is a must. Marine insurance provides coverage and safety of ship trade and freight whilst cargo is being moved or transported. It protects transporters from the exposed risks, such as tsunamis, lightning, typhoons and storms. It also covers risks including piracy, jettison and barratry. Depending on the plan and coverage needed, companies providing marine insurance in the Philippines offer premiums dependent on ship size and routes. The carried cargo and freight are not the only ones insured - but the whole marine vessel as well. When applying for marine insurance, there are instances where the transporter need to apply for every shipment. Some companies, however, offer open marine insurance policies, which does not require the transporter to re-apply under certain circumstances. It is also best to note that when applying marine insurance, the captain of the vessel must always be alert and considerate with the routes declared in the policy. Should the captain change course, any untoward incident which may occur will not be covered because of the crucial change.

Homeowners and residential real estate investors in US should be prepared to face a rise in property insurance rates according to real estate financing solution provider SitusAMC. The company in a recent white paper, ‘Weathering the Storm: Burgeoning Insurance Costs for Real Estate,’ said the impact of natural disasters on the residential property market has not been limited to California and Florida, where several high-profile disasters have taken place. In fact, in 2020, the states hardest hit by natural disasters were Texas, Virginia and South Dakota. Winter storms in Texas accounted for 40% of the total losses in the US property insurance market during the first half of 2021. The white paper reveals that the rise in the number and severity of hurricanes, wildfires, tornadoes and other events tied to climate change has created significant risk for insurance companies, which will lead to a rise in insurance premiums and reductions in coverage for property owners. SitusAMC vice president and head of thought leadership Jennifer Rasmussen said, "The growing number of climate events has left the insurance industry reeling. Many insurers and reinsurers have already seen their 2020 financials severely downgraded.” Dr Rasmussen said, “As the intensity and scope of future catastrophes grow, insurance rates for property owners will likely rise significantly in the near future." The white paper says recent demographic and migration trends are exacerbating the problem, as more people are moving to fire-prone and flood-prone areas in the west and southeast. Current migration trends will place an additional 1.2m homes at risk for flooding over the next 30 years, an increase of 10% from today according to data from First Street Foundation. As insurance premiums rise, many homeowners who cannot afford private market options may fall back on state-backed insurers of last resort which are available at steep discounts. However, this typically offers bare-bones policies that place property owners at increased risk for losses following a disaster. Dr Rasmussen said, "Most people may not be surprised to hear insurance rates are going up, but few understand how precarious the situation is for the insurance industry. As the number of climate-related disasters increase, many homeowners and residential real estate investors could be in for a rude awakening in the years ahead." Many insurance companies draw from reinsurance policies to protect themselves from natural catastrophes. However, the reinsurance industry has been experiencing losses for years, and is currently passing along cost increases to insurers, which will ultimately impact property owners, the white paper stated. Source: asiainsurancereview.com

As airports reopen and flights become available again, aircrafts face risks now more than ever. The COVID-19 restrictions on travel caused a detrimental decline on flying, which left majority of planes placed in prolonged storage. This extended storage resulted into causing crucial errors and dangerous malfunctions in plane engines and systems. Aside from manmade errors by out-of-practice pilots, both technical and mechanical problems can cause big issues for airline companies. Hence, today is the perfect time to glance and take a comprehensive look at aviation insurance. Aviation insurance provides coverage geared towards risks concerning commercial aircrafts and general aviation. But why the need of it? With an aviation insurance coverage, the aircraft, together with the passengers and the pilots, are ensured of a comprehensive cover should an unforeseen circumstance or hazard occur. These covers may include third party liability, property damage, cargo, and ground risks. Depending on the situation (or should you be a commercial owner, renter, or private owner and/or operator), insurance companies in the Philippines provide a wide range of products for your consideration. Specific and tailor-fit coverages are also offered, conditional to the airline’s circumstance, needs, or structure. Sources: https://www.bbc.com/news/business-55313504 https://www.oecd.org/daf/fin/insurance/4.DavidGasson-background.pdf https://www.bloomberg.com/news/features/2021-10-14/plane-crash-risks-rise-as-covid-19-leaves-airline-pilots-out-of-practice

The controlling shareholders of Syn Mun Kong Insurance are exploring the sale of a majority stake in the insurer and have picked several strategic players to advance into the next round of bidding, reported Bloomberg citing people familiar with the matter. The insurer is raising funds to improve its liquidity position in order to pay COVID-19 claims that have surged. Syn Mun Kong is working with an adviser on the deal, which could be valued at about $200m, they said. The sale could include a fresh investment of about $100m, they added. The Dusdeesurapot family led by chairman Reungvit Dusdeesurapot owned a 36% stake in the general insurer as of 27 May 2020, the company's annual report shows. The family held another 25% via Dusdeesurapot Holding Co. Liquidity enhancement Syn Mun Kong is one of three general insurers which have received the approval of the Office of Insurance Commission (OIC) to implement liquidity enhancement measures to improve their liquidity so as to be able to pay outstanding COVID insurance claims. The grace period is from 30 September 2021 to 30 June 2022. The other insurers are Thai Insurance and The One Insurance Public Company. Over at One Insurance, shareholders at an extraordinary general meeting yesterday did not agree to an increase of THB2bn in the capital of the insurer. The shareholders are reluctant to pump in money especially because of fears of a new wave of COVID-19 infections. The Omicron variant of the coronavirus is also a concern. The insurer could lose its operating licence if it were to fail to correct its capital position to meet COVID claims. Meanwhile, Thai Insurance plans to stop accepting new business in the first quarter of 2022 so as to avoid conflict of interests within the Thai Group Holdings stable following a sale of a stake in the insurer to a company within the group, according to a statement lodged with the Thai bourse. The first insurer that is a casualty of the COVID-19 crisis is Asia Insurance Company that was ordered in September 2021 by the OIC to suspend insurance sales. Separately, several insurers that have sold COVID-19 insurance policies are hoping that the OIC would allow them to revoke the policies. At least 10 of the insurers are listed on the Stock Exchange of Thailand, reported Nikkei Asia. They have reported a combined THB5.8bn loss for the third quarter through September. The insurance regulator had already in July this year rejected such a request. However, the OIC allows insurers to alter insurance coverage on a case-by-case basis if customers agree to the change. Scale of claims Thai General Insurance Association (TGIA) president Mr Anon Vangvasu has said that cumulative claims from the sale of COVID-19 policies since last year could reach THB40bn by the end of this year or 30% on average of their risk-based capital prepared for all types of general insurance. As of 15 November, he said, COVID-19 claims exceeded THB37bn while insurers’ risk-based capital stood at THB132bn, reported The Bangkok Post. Mr Anon added the percentage could reach an unsustainable level of 60%-70% in the event of a new wave. If that happens, 70m policies of other types of general insurance could be affected. He thus urged the OIC to allow insurers to cancel the COVID-19 policies. He says that COVID-19 is an emerging risk, with little data to support the accurate calculation of coverage and claims. Pricing was initially based on available data at the time. Source: asiainsurancereview.com

The insurance industry in Indonesia could develop more rapidly if the unhealthy competition in the credit insurance business line is immediately addressed. Mr Nurmadi Harsa Sumarta, an economic and business observer and an academic at Sebelas Maret University (UNS) made this comment, saying that cut-throat competition has resulted in lower premium rates and widened the gap between the risks faced and the premium value, according to a report by Antara News Agency. In 2020, credit insurance business experienced a fairly high surge in claims when the premium income actually decreased. The economic pressure due to the COVID-19 pandemic disrupted the ability of the public to repay loans, thus affecting the credit insurance business line. At present, credit insurance claims still have the potential to grow, considering that the threat of bad credit has not disappeared given that the economy has not fully recovered yet, Mr Nurmadi says. Aggravating the issue is the fact that governance and risk management in the credit insurance line are still inadequate. Mr Nurmadi said, "Fortunately, the risk can still be minimised through the relaxation of bank credit terms so that debtors are able to meet their obligations to creditors." He adds that insurers must always study their credit insurance portfolio and calculate the claims ratio. This needs to be done to ensure that the portfolio still provides positive underwriting results. State-owned insurance group IFG He gives an example of what the government did by forming the Indonesia Financial Group (IFG) as a holding company of state-owned non-bank financial institutions including insurers. IFG is able to ensure the consolidation and overall transformation of the financial health and sustainability of its subsidiaries, he says. IFG is tasked with ensuring that all subsidiaries implement good management and governance, as well as avoid competition for market share and price wars, and apply prudential principles in portfolio management. Mr Nurmadi said, "This includes strengthening the business climate, especially in credit insurance, as has just been done between PT Asuransi Kredit Indonesia (Askrindo), PT Credit Guarantee Indonesia (Jamkrindo), and PT Asuransi Jasa Indonesia (Jasindo)." The consolidation creates a healthy, sustainable and mutually beneficial credit insurance business for the parties involved. Source: asiainsurancereview.com

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