Typhoon Conson (locally known as Jolina), the 13th named storm of the 2021 Pacific typhoon season, has caused severe damages after making multiple landfalls and dumping heavy rains in parts of Eastern Visayas, Calabarzon and Central Luzon. It made 8 landfalls within the PAR where the 1st landfall occurred in the vicinity of Hernani, Eastern Samar on Sep 6, 2021 while the 8th landfall was in San Juan, Batangas on Sep 8, 2021, leaving 20 casualties and a total of Php 1.60B worth of damages to structures and agriculture. (Sources: PAGASA, NDRRMC, as at 17 September 2021)

As risk managers, re/insurers and investors, the insurance industry plays a key role in supporting the transition to a resilient net-zero emissions economy. The Net-Zero Insurance Alliance (NZIA) is an Alliance formed by a group of leading insurance and reinsurance companies, under the auspices of the UN’s Principles for Sustainable Insurance (PSI) initiative, the largest collaboration between the UN and the global insurance industry. NZIA members commit to individually transition their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas (GHG) emissions by 2050, consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100, in order to contribute to the implementation of the Paris Agreement on Climate Change. The NZIA was launched at the G20 Climate Summit in Venice in July 2021 by its founding members: AXA (founding NZIA Chair), Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re and Zurich Insurance Group. On 6 September 2021, the Partnership for Carbon Accounting Financials (PCAF), in collaboration with the UN-convened Net-Zero Insurance Alliance (NZIA), also announced the launch of a working group comprising leading insurance and reinsurance companies to develop the first global standard to measure and disclose insured greenhouse gas (GHG) emissions. This will help re/insurers understand the climate impact of their underwriting decisions, laying the foundation to decarbonise their insurance and reinsurance portfolios through target setting, scenario analysis, strategy development, and individually taking concrete actions that have real-world impact through emissions reduction in the real economy. This global virtual event will address these topics while gathering experts in climate as well as industry practitioners who will unpack the concept of net-zero insurance. Register for this free global event and download the programme.

The Insurance Commission is allowing insurers, reinsurers and mutual benefit associations to invest in foreign-currency-denominated debt and equities securities. Only foreign currencies acceptable to the Bangko Sentral ng Pilippinas as part of its international reserves are allowed. This loosening of investment rules was announced by Insurance Commissioner Dennis B Funa in a circular dated 10 September that widens the investment channel for (re)insurers. Also allowed as investments are: Collective Investment Schemes (i.e. mutual funds, unit investment trust funds, exchange traded funds, REITs, etc ) provided, however, that the underlying basket is fully or substantially composed of fixed-income securities or, when the basket is composed of equity securities, it must be that of a broad-market index; certain unrated financial instruments; below investment grade and unrated financial instruments not guaranteed by any third party entity, subject to the approval of the Insurance Commission. For derivatives, aside from swaps and forwards, the IC has added options and futures as allowable instruments so local insurers can hedge risks from their foreign currency-denominated assets. Mr Funa said that the investment vehicles, which are subject to the prior approval of the Insurance Commission, will help insurance companies in risk diversification, hedging and improving portfolio liquidity. This will also allow life and non-life insurers to sell foreign currency-denominated insurance products to their policyholders. The circular also sets out caps on investments in the various financial instruments. Source: asiainsurancereview.com

THE PHILIPPINE Insurers and Reinsurers Association wants a free market regime for tariffed insurance products, while seeking to reform the system for car and fire insurance policies and surety bonds. The nonlife insurance industry is working on a major shift to a free market system on the three businesses governed by tariff rates, based on a referendum agreed to by its members three months ago, group Executive Director Michael F. Rellosa told an online forum on Tuesday. He said local insurers want to eventually scrap the tariffs on car insurance, craft a new system on tariff for fire insurance products and adopt a more flexible tariff system for surety bonds. “The current tariff rates have been static for some time and may not be reflective of the true/technical rates,” he said in a separate e-mailed reply to questions. “These would have to be analyzed and updated.” Under a tariff regime, insurance companies will have a fixed price list for product premiums, while a nontariff or free market regime allows insurers to set their rates based on their risk assessments. Mr. Rellosa said charging appropriate rates would benefit both the insured public and insurance companies since this would help the sector build loss reserves for claims in times of calamities and enough buffer against rising claims. Insurance Commission chief Dennis B. Funa said the agency is studying the industry’s proposal for a free market regime. “We will decide on what will be the best for the Philippine market,” he said in a Viber message. “But this needs to be studied further.” Mr. Rellosa said the sector still has a lot of work to do before the organization and commission can proceed with the free market shift. The regulator has seen tariff violations amid increased competition, though breaches have been few and far between, Mr. Funa said. At the same forum, Mr. Rellosa asked the Insurance Commission to reconsider a planned minimum capital requirement of P900 million for all insurers, and defer the scheduled hike to P1.3 billion by 2022 so companies can expand their operations. He said 48 nonlife insurers have hit P1 billion in net worth as of end-2020, four are above the P900-million mark, while the capital of three more were around P700 million. Insurers with more than P1 billion in net worth would be considered to be on a solid financial footing and have proven to be resilient to economic shocks such as the pandemic-induced recession last year, he said. “We hope our government would see this as enough capitalization already and would consider the industry’s proposal to keep the capitalization target at the P900-million mark and no longer the P1.3 billion originally set for December 2022,” Mr. Rellosa said. “Doing this would enable the companies to invest their money more in their operations and digitalization, rather than just parking it to satisfy the requirements of law,” he added. But Mr. Funa said the scheduled hike must proceed to give policyholders greater protection. “The Department of Finance has already spoken on the matter,” he said. “The increase to P1.3 billion as provided by law will push through to provide greater protection to the insuring public.” He also said deferring the increase would require lawmakers to amend the law. “It will depend on Congress if they want to amend it or not.” Insurance companies’ minimum capital requirement was increased to P900 million at the end of 2019 from P550 million and will increase further to P1.3 billion by end-2022, according to the Insurance Code. The local insurance industry’s total premium income rose by 28% in the first quarter from a year earlier to P99.89 billion. Source: bworldonline.com

Attended by delegates from our Council Members, the ASEAN Insurance Education Committee (AIEC) Working Group Meeting was successfully conducted virtually on 3 September 2021 at 3pm, local Phillipines time. The meeting itself was a follow-up meeting from the 18th ASEAN Insurance Education Committee (AIEC) Meeting, which was also conducted virtually and hosted by The Philippines. Through the Working Group discussion, the Country Members were able to share and provide updates regarding any developments on the Education Committee’s activities. We wish to express our gratitude to everyone who participated within the discussion, and we truly hope that the good efforts that has been done can be carried over to the following years.

Given the pandemic and the rapid advancement of technology, companies are pushed into going Digital. This presents companies, organizations, and financial institutions with a new set of risks and responsibilities. The company's board is ultimately responsible for its compliance and adherence to good Corporate Governance. In times like these, YOUR board should be on top when it comes to Anti-Money Laundering Compliance. How can fraud and money laundering risks be mitigated? What are the recent laws that companies need to comply with? How can technology enable companies to detect money laundering and fraud? How does one adhere to AMLA compliance in the Age of the Digital World? Click here to register.

Industry experts expressed optimism on the insurance market despite the lingering impact of the Covid-19 pandemic on players, policyholders and the broader economy. In a virtual forum organized by The Manila Times on Tuesday, Insurance Commission (IC) Commissioner Dennis Funa reported the income of life and nonlife insurance companies and mutual benefit associations improved in the first quarter of the year. Citing data from unaudited quarterly reports on select financial statistics, Funa said the first-quarter income of these firms and associations rose by 45.84 percent to P11.85 billion in January to March from P8.13 billion last year. Total premiums earned also posted a double-digit growth of 27.81 percent in the first three months to almost P100 billion from P78 billion year-on-year. Funa said the life sector recorded a 38-percent higher income of P9.4 billion during the period from the previous year's P6.8 billion. The non-life sector's total net income also surged to P1.19 billion in the first quarter from P164 million year-on-year. "Actually, the current amount is even higher than the prepandemic figure of P1.04 billion back in the first quarter of 2019," he noted. Philippine Insurers and Reinsurers Association Executive Director Michael Rellosa highlighted the resiliency of the nonlife insurance sector. Rellosa said the nonlife sector reported a 67-percent higher net income of P5.5 billion last year from P3.3 billion in 2019. He noted that the increase was achieved despite nine out of 10 nonlife insurance companies recording lower premiums during the period. "The income increase was due to the decline in losses paid by insurance companies. Simply put, [fewer] cars on the road resulted in [fewer] accidents and [fewer] accidents meant less insurance claims," Rellosa explained. Collectively, he said, the industry's incurred losses went down by more than 20 percent, which lowered the loss ratio to 41 percent in 2020 from 47.1 percent in 2019. Rellosa added gross premiums of the nonlife sector declined by 16 percent to P75.9 billion from P90.1 billion year-on-year. Net premium of the sector was also down 15 percent to P40.7 billion from P47.7 billion in 2019. Rellosa said the drop in premium was caused by a decline in car sales, which prompted the 16-percent slip in car insurance sales, the decline in shipping activities, which dipped marine insurance by 12 percent, and the reduced mobility, which resulted in other businesses slumping by 49 percent last year. The fire insurance business was the only gainer as it registered an 11-percent increase year-on-year. Despite the weaker figures, Rellosa said the industry remains "on solid ground" as it is "more than adequately capitalized." "Our industry continues to make itself relevant by being proactive," he pointed out, disclosing one big project the industry is working on is the establishment of a Philippine Catastrophe Insurance Facility. According to Rellosa, the Philippines urgently requires the capability to make the industry more resilient and also make catastrophe insurance more affordable for Filipinos. When it comes to insurance rates, the industry is also pushing for a big transition to a free market system. Easy transactions Meanwhile, Funa highlighted the commission's efforts to cope with the global pandemic, which included the acceleration of its digitalization. "For the Insurance Commission, we have converted most of our existing manual operations into streamlined internet-based processes for fast, easy and safe transactions among our regulated entities," he said. The commissioner added the IC crafted and issued policy interventions, which directly helped the public. "When the going gets tough, insurance will keep our people going. This is what we're here for, to bring relief and assistance when contingencies strike and we will not renege on that," he said. "In the future, even after this pandemic, we expect technology will continue to evolve, providing greater efficiency in the way our processes are conducted," he said. Funa said manual operations were converted into streamlined internet-based processes for fast, easy and secure transactions among its regulated entities. Insurance companies used the internet insurance market to distribute their products and provide a smoother customer experience to the insuring public, according to the commissioner. More importantly, he said, his agency has enjoyed the trust, unwavering support and collaboration of its regulated entities, making navigating through these unusual times less difficult. "And because of these, I am confident enough to declare that the industry outlook for 2021 is very hopeful," the IC chief added. He acknowledged "2021 will likely not bring sterling production" given the country's current state of flux. Nonetheless, Funa expressed confidence the insurance industry will remain robust, vigorous and dependable, and capable of adequately and actively securing life, property and health under the pandemic. AI Rahul Hora, president and chief executive director of AXA Philippines, spoke about the opportunities presented by digital transformation. "Truly, digital transformation will ensure the insurance outlook going forward will continue to be very, very promising," he said, adding artificial intelligence (AI) is the first and primary technology used by the sector. Hora said AI has enabled insurance companies to give more efficient, effective and personalized service by allowing them to create custom products. AXA Philippines has created a social media command center and its own app, Emma, which is designed to serve consumers, health and financial concerns. Amid the pandemic, Hora said, health is an important developing trend in the insurance sector, as a large portion of health spending is still borne by Filipinos out-of-pocket. "This is something we see needing to change for the future. And that is a role HMO (health maintenance organization) and the private insurance industry have to play in a very significant way, and we will see this trend emerging in the years to come," he added. Pru Life UK is the business forum's co-sponsor with AXA, Cocogen Insurance, Cocolife and Hungry Workhorse as special partners. The event's organization partners include the British Chamber of Commerce of the Philippines, French Chamber of Commerce and Industry in the Philippines, Davao City Chamber of Commerce and Industry Inc., Financial Executives Institute of the Philippines, Italian Chamber of Commerce in the Philippines, Management Association of the Philippines and The Manila Times TV. Click here to watch. Source: manilatimes.net

Recent inflation trends have significantly increased during the post pandemic economic recovery. Whether this result is a "bounce back" effect or a longer-term trend is yet to be determined, says Willis Re's Strategic & Financial Analytics in a note released earlier this week. However, the negative impact of rising inflation on the insurance industry’s financial position is leveraged and multi-faceted affecting both profitability and capital position, says the note which is titled “Global (re)insurance: Underlying profitability improves at H1 but inflation and rate deceleration remain concerns”. The note outlines the potential impact of inflation on a company’s profitability and capital position. Underwriting From an underwriting perspective, during times of unanticipated inflation, there is usually an increase in loss ratios given the typical lag in pricing response. In the current pricing cycle, companies appear to be proactively taking pricing action, but it remains to be seen whether it is sufficient. For reinsurance, it is important to note that loss trend on excess of loss layers is higher than ground-up trend. This effect increases the relative value of excess of loss reinsurance as an inflation hedge. On the positive side, overall premiums increase with inflation sensitive exposure bases (e.g. sales, payroll) as well as real economic growth. Reserves With respect to carried reserves, if inflation spikes above the historical trends reflected in the actuarial reserving data, losses will tend to ultimately develop greater than currently booked. The impact of inflation on long-tail reserves is greater as more of incurred losses in older years will be paid out with newly inflated costs. Also, writing long-tail business accumulates reserves to a multiple of current premiums magnifying the risk of adverse development. In addition to reserve uncertainty, the economic value of holding reserves has been pressured as recent interest rate increases have lagged the rising trend in inflation making reserve transfer solutions (ADC/LPTs) potentially more attractive. Assets On the asset side, as inflation rates (or fears) increase, interest rates typically go up. As noted, currently interest rate increases have been more moderate than inflation, but they have increased from their 2020 lows. Given insurance companies hold large bond portfolios whose market prices go down as interest rates go up, this poses a significant risk to their asset values. Source: asiainsurancereview.com

The motor insurance sector is facing a churn, as mass lockdowns have forced drivers off the roads and resulted in fewer vehicle sales thus hitting new premium income. The industry must increasingly adopt digitalisation to stay relevant and navigate the impact of the ongoing COVID-19 pandemic, said speakers yesterday, on the opening day of the Virtual Motor Insurance conference organised by Asia Insurance Review. In his opening address, Mr Dominique Roudaut, head of Asia Insurtech Partnership/Innovation Solutions/Personal Lines, Hannover Re, said that designing a customer experience for the next normal was critical for insurers. Mentioning that the number of road deaths in Asia is higher than in Europe, he said that insurers can help in making driving safer and also ensure that customers get something from their insurance product every day and not once every few years. “Whenever there is engagement, it leads to a delightful experience and a net promoter score,” he said. He highlighted the need for insurers to work on prevention and emerging behaviours to stay profitable and relevant. Hannover Re has developed an app that is mobility-centric, through which it educates and empowers its end users through constant engagement. “We regularly communicate with our end users through this app and update them on road safety and the weather conditions,” he said. Digitisation Speaking on the claims experience in the new normal, Mr Sebastian Tan, country director, Singapore & Regional Business Manager, APAC, of Merimen, said that insurers in Asia are enabling a digital touchless customer claims journey in the COVID-19 era. “Digital claims portals are achieving fast registration and reserving and freeing up traditional channels,” he said. He mentioned how insurers today outsource the document upload function to the customers directly, as the insurers automate document processing, thus saving considerable time and costs. “A digital touchless customer claims journey can be achieved with new tools and technology for better customer engagement,” he said. To be successful, he said, insurers must change their legacy mindsets and begin small. In his presentation on the future of claims during the COVID-19 pandemic, Mr Thomas Sam, Senior Manager, EY Consulting, Business Consulting – Insurance said that in future claims must be customer-experience driven, technology and data-powered and partnership enabled. He mentioned how COVID-19 has accelerated the need for a digital claims ecosystem that has minimal in-person interaction. “A touchless claims operating model is one in which a majority of the claims are processed in a paperless environment enabled by intelligent automation, AI, analytics and InsurTech with zero touchpoint,” he said. A panel discussion on the next generation of motor insurance highlighted the critical role of AI and telematics in driving the segment in the future. The two-day conference, with the theme “Rethinking Motor Insurance for the Next Generation of Mobility” ends today. Source: asiainsurancereview.com