PIRA Meeting with Senator Gatchalian and his team to discuss the Non-life insurance industry’s position on HB 4339 which is being heard at the Senate, the 3rd hearing of which is scheduled on Monday, February 12, 2024. Present at the virtual meeting were: Senator Win Gatchalian; Atty. Sidhartha Garcia; Atty. Kathleen Marcelo; Atty. Harold Ian Bartolome; Michael Rellosa; Rogelio Concepcion; Atty. Theodore Joseph Campanano; Atty. Eric Ricalde at the 3rd Public Hearing on the PIFITA Bill held today, February 12, 2024 PIRA Exec. Director Mitch Rellosa; PIRA Gen. Manager Roger Concepcion; PIRA Chairperson Denden Tesoro; Atty. Theodore Joseph Campanano; Senator Win Gatchalian

By Michael F. Rellosa Insurance and reinsurance are two sides of the same coin. On the one hand, insurance is a means of protection from financial loss in which, in exchange for a fee called a premium, the insurer agrees to compensate the insured in the event of a certain loss, damage, or injury arising out of a particular event. It is a form of risk management primarily used to protect against the risk of a contingent or uncertain loss. On the other hand, reinsurance is an agreement designed to manage the probable risk of insurers or direct writers. Reinsurers are separate companies that insure or protect the direct writers, so you can call them the insurer's insurer and reinsurance the insurance of insurers. There are basically two types of reinsurance. First is facultative reinsurance, where each risk is marketed separately, and prospective insurers underwrite it accordingly. One can liken this to retail reinsurance; in other words, there is an offer and an acceptance for each risk. In this regard, premiums are shared commensurate to the percentage of risk accepted by the reinsurer, and more importantly, the reinsurer is actively and collaboratively involved in the decision-making process, be it underwriting or claims. The other type is what is known as treaty reinsurance. This is where insurers agree to a business relationship with the reinsurer, who evaluates the direct insurer's underwriting philosophy and risk appetite and, therefore, selects the ceding company to do business with. This is done not on a per-risk basis but rather on a portfolio or wholesale basis. The whole purpose of reinsurance is to allow direct writers to maintain their solvency through risk sharing. Risk sharing, in the meantime, is one of the guiding principles of the industry. It is akin to not keeping the proverbial eggs in one basket. If, for example, a direct writer does not reinsure, theoretically, this direct writer would be writing risk only from the Philippines (as it is a Filipino company). With the Philippines now considered the most vulnerable country to natural catastrophes such as typhoons, earthquakes and floods, it would, in short, be writing risky businesses that are prone to losses. By reinsuring, it shares this risk internationally, where it gets diluted with risks from other "less vulnerable" countries, thereby evening out the risk. The direct writer, therefore, gains by managing his risk, evening out the loss experience, and thereby increasing his own capacity to write more risk. At the end of the day, reinsurance plays a primordial role in bringing stability to not only the insurance company or the direct writer but also to the entire insurance industry and, more importantly, to the insuring public itself. Owing to the diversification that reinsurance provides, it becomes the life-saving device or the shock absorber of the local insurance industry by keeping it from collapsing after a large-scale crisis such as the anticipated "Big One" (a cataclysmic earthquake arising out of the West Valley fault system), or a super typhoon that may hit the country (now a more common occurrence because of climate change). There are also certain classes of business that the local insurance industry is reluctant to go into but are nevertheless needed by the insuring public. Examples of these would be agriculture, livestock, and insurance for fisheries or aquaculture. Currently, insurance cover is almost solely provided by the government's own Philippine Crop Insurance Corp. Cybercrime and insurance on electric vehicles are the other lines, just to name a few. This may be uncharted territory for local insurers, but for the international market, experience in these lines is already developed and far-reaching. Reinsurers who can provide capacity for these lines to local insurers then allow them to get their feet wet and learn until they gain the confidence and expertise to go into it big-time. By mitigating the potential losses that could arise from these relatively new lines of business, reinsurance fulfills its other role of being an enabler of innovation. The local insurance industry relies heavily on reinsurers, and this reliance will remain until our industry matures, grows and becomes more stable and resilient. Source: manilatimes.net

Hard markets, characterized by high premiums and deductibles as well as stricter terms, will continue to plague risk managers this year, with property presenting bigger challenges than casualty. Insurers accelerated price increases a few years ago when inflation broadly began to increase rapidly. Premiums for commercial property insurance are expected to increase by an estimated 17% or 18% in 2023 compared to a 16.8% increase in 2022, according to Conning, a provider of insurance research and analysis. On the casualty side, increases will likely be smaller but still significant, with premium increases in areas such as general liability and commercial auto coming in respectively at 8% and 9% in 2023, compared to 11% and 12.5% the year before. “We expect a lot of the pressures driving up premiums to ease in 2024 but not subside,” said Alan Dobbins, director for insurance at Conning, adding that inflation will continue to push up property replacement costs while social and legal pressures will increase the cost of claims on the casualty side. However, in both cases, insureds can take steps to improve coverage and make it more affordable. Property Rates Increasing by Location Property insurance premiums could increase by as much as 25% in 2024, according to Carl Smith, national property practice leader at insurance brokerage Risk Strategies. He noted, however, that increases will vary significantly based on location and industry, with those in high-risk catastrophe zones and industries fairing the worst. The hard market became more entrenched for property insurance after 2022’s Hurricane Ian, which caused significant damage. Reinsurers faced major losses that constrained their capital and spilled over to the primary insurance market, ultimately increasing costs for insureds. Losses from hurricanes in 2023 were much less severe than the year before, providing some relief to reinsurers. However, numerous flooding events, often stemming from convective storms, have directly impacted primary insurers. Insureds located in areas predisposed to natural disasters—such as hurricanes in the Gulf Coast, floods in the Midwest or Western wildfires—have felt the impact of the hard market the most. Small- and mid-size offices or other real estate in certain geographical areas like various large cities on the East Coast will see much less of a hard market, according to Fred Barnachaway, chief information officer of business insurance and risk management consultant firm DeshCap. Casualty Lines Moderating The outlook is much kinder on the casualty side. Pricing on workers compensation insurance has been flat to negative for several years, and rates have also come down for directors and officers (D&O) and professional liability policies, Dobbins said. After a couple of years of underwriting profitability, pressure has eased on general liability insurance. Workers compensation insurance continues to be very competitive with few aggravating issues, and premiums may fall further in 2024, according to Mike Vitulli, national casualty practice leader at Risk Strategies. General liability will likely increase by mid-level single digits, he said, and commercial auto will likely go up 5% to 10%, depending on the severity of losses. Carriers have reduced their limits over the past three years, so companies can expect their brokers to continue signing on more carriers to fill programs. In addition, the pandemic dramatically slowed down the court system, so insurers remain uncertain about how much they will be on the hook for, which could be reflected in premiums. “Everybody is now cautiously optimistic that 2024 is going to be a good year, but they are keeping their fingers crossed on how litigation and claims unfold,” Vitulli said. “There could be a bit of a snap back toward the end of 2024 and into 2025 if some bigger claims come to fruition, as people fear.” Cyber Insurance Considerations Cyber insurance tends to sit outside the traditional property and casualty categories, and while it has grown rapidly in recent years in terms of premium, price increases in 2023 were in the single digits, according to Conning. Be careful, however, since much of the cyber insurance market since 2022 has been written on a non-admitted basis rather than an admitted basis, in which the state will pay outstanding claims when an insurer becomes insolvent. Writing non-admitted, “excess and surplus” lines gives insurers more flexibility in determining rates and exclusions that may not be permissible in the admitted market. “There’s been a huge shift to the non-admitted market,” said Steve Webersen, managing director for insurance research at Conning. “That probably means insured companies are paying a lot more for coverage and getting less of it, with more constraints.” Mitigating Hard Market Impacts According to Barnachawy, there are several ways risk professionals can mitigate the impact of potentially higher premiums and less coverage. One approach is to reword policy language so it addresses the company’s specific business operations rather than providing broader blanket coverage. For example, some provisions or sub-provisions covering earthquake or machinery risks are less important to office-building landlords in Manhattan. “Examine the fine print regarding what the company is covered for and what the insurer is charging for, and the company and its broker should be able to negotiate less coverage for less premium,” Barnachawy said. “Do your homework first, though, and back up your specific requests with hard data—do not just make a broad-based request.” Another approach, especially for bigger companies with significant cash flows that can cover larger or more frequent claims, is to increase the deductible that the insured must pay before the insurance kicks in. Smaller companies may want to turn to an expert to determine the optimal deductible and coverage levels. Consider the range of coverage your business needs and what would good to have versus what is necessary, Barnachawy said. It may also be beneficial to shop the market and hire an independent expert to send out a request for proposal (RFP) to several insurers to foster competition and more favorable terms. Companies should keep in mind, however, that there will be less wiggle room to negotiate policies that are compliance-driven, such as a bank or franchisor requiring a certain type of property coverage, compared to those that are purely seeking protection against loss. Using Narratives to Fortify Policy Negotiations Casualty policies typically provide more room for negotiation, and it is critical to submit strong proposals to underwriters to explain why they should provide coverage. Vitulli said that most insurers want strong submissions that include a persuasive narrative and good underwriting information, ideally including 10 years of loss data. Risk managers can then talk to the carrier about the company’s specific risks, which can help avoid more generic and less beneficial underwriting. “You have to make sure the carriers underwrite the individual risk on an individual risk basis,” Vitulli said, adding that it may sometimes be advisable for the broker to set up an in-person meeting or video call to convince the underwriter, since risks can sometimes look worse on paper than in actuality. “You may need the company’s general counsel or treasurer to explain why the company is heading in the right direction, the changes it has made to reduce risk and improve risk controls, and why claims from seven years ago are not indicative of the company today,” he said. A company should also work closely with its broker and use analytics to identify and measure its risks and to determine the right limit to buy, how much deductible any given insurer can take, and the financial tradeoffs between premium savings and the deductible level, for example. Larger companies may also want to consider the alternative reinsurance markets, including insurance-linked securities such as collateralized reinsurance or catastrophe bonds that are backed by the capital markets. Overall, lower premiums can be a boon for insurers as well as insureds if they indicate fewer and lower claims. Many insurers analyze insured client data to identify and better understand claim trends and patterns to determine where claims are more frequent and what social and economic reasons prompt those claims. By following recommendations from insurers based on this data, companies can reduce their risk exposure and achieve more favorable rates.  For example, EmPRO Insurance Co., a regional insurer in New York and surrounding states, uses its data to examine medical malpractice insurance claims trends. “We’re able to take that data and convey the message back to the client that these are the areas where suits and claims are more prevalent and where you need to tighten risk controls,” said Brian Nolan, executive vice president and chief operating officer at EmPRO. “It’s a win-win for us and our clients, since a reduction in claims costs ultimately incurs a reduction in premium.” Source: rmmagazine.com

You are kindly invited to attend this Complimentary webinar. Details are appended below. Registration is required to attend this 1 hour event on 8 March 2024, starting at 3:00pm Singapore time. Sign up for free here. Programme Highlights: Join us for a concise yet in-depth 1-hour webinar, co-organized by the Chartered Institute of Loss Adjusters (CILA) and the Singapore College of Insurance (SCI), as we explore a decade of evolution in Business Interruption (BI) Policy Wordings. This complimentary session delves into the dynamic world of BI insurance, drawing on insights from the pivotal 2012 publication "Business Interruption Policy Wordings: Challenges Highlighted by Claims Experience" by CILA and the Insurance Institute of London, and its subsequent 2019 update. Discover the origins of the 2012 report, a response to the industry's call for clarity in BI policies, addressing issues like the disparity between policy language and its practical application, confusion over indemnity periods, and ambiguities in standard BI policies. Learn how the 2019 update reflects significant industry shifts, including redefinitions of key terms and adaptations to tackle challenges like wide area damage, moving towards more comprehensive and transparent BI policies. This webinar is a must-attend for professionals seeking to understand the transformation of BI policy wordings and their impact on the insurance landscape. Register now to join this critical discussion and contribute to the advancement of clearer and more effective BI policies. For Whom: This webinar is targeted at a broad spectrum of professionals involved in the insurance sector, including policy creators, underwriters, claims adjusters, insurance brokers, legal advisors, as well as business owners, CFOs, and risk managers. Academics, researchers, and students in the fields of insurance, risk management, and business administration will also find this webinar extremely valuable. Key Learning Objectives: In-depth Analysis of the 2012 Report: Understand the foundational issues identified in 2012, exploring the gap between policy wordings and practical application in BI claims. 2019 Updates – A Closer Look: Examine how the industry has responded to the challenges highlighted in 2012, including specific wording changes and their implications on claims handling and legal interpretations. Current Trends and Future Directions: Identify the latest trends in BI policy wordings, focusing on unresolved issues like wide area damage and the industry's movement towards more transparent and customer-friendly policies. Real-World Impact and Case Studies: Analyze how these changes have been implemented in practice, with case studies illustrating the real-world impact on businesses and the insurance industry. Programme Leaders: Damian Glynn deals exclusively with large and/or complex financial losses and has acted as an expert in commercial disputes. He has provided evidence in court as an expert witness, both as a Chartered Accountant and a Chartered Loss Adjuster and has been retained to provide expert determinations. Damian chaired the Chartered Institute of Loss Adjusters’ (CILA) business interruption (BI) special interest group (SIG) for 12 years and has previously set BI examinations. Aruna Chandrapalan is a highly skilled professional in the field of Forensic Accounting, currently serving as the Head of Forensic Accounting Services Asia in Singapore. Aruna is the current Chairperson of the CILA’s Business Interruption SIG. Her career includes significant roles at Sedgwick, Aon, and Marsh, where she gained extensive experience in forensic advisory services. Aruna holds professional certifications such as ACMA CGMA, ACILA, and CFE. Her journey reflects a dedication to excellence and a deep understanding of complex financial environments

The Insurance Commission (IC) of the Philippines has resolved all 5,417 complaints received from policyholders in 2023, as per the guidelines set out in Republic Act No. 11765, also known as the Financial Products and Services Consumer Protection Act. According to year-end data from the IC, these resolutions were achieved either through amicable settlements or by forwarding the complaints for formal adjudication. A breakdown of the types of complaints handled in 2022 and 2023 reveals a varied landscape: Complaints against life insurance companies decreased by 14.19%, from 775 in 2022 to 665 in 2023 Non-life insurance company complaints saw an 11.7% decrease, falling from 949 to 838 Complaints against pre-need companies dropped significantly by 46.54%, from 159 to 85 Health maintenance organizations (HMOs) experienced a 33.76% increase in complaints, rising from 234 to 313 Mutual benefit associations (MBAs) saw a significant increase of 178.26% in complaints, from 23 to 64 Other complaints, including those referred through hotline 888, rose by 19.65%, from 2,885 to 3,452 The total number of complaints increased by 7.80%, from 5,025 in 2022 to 5,417 in 2023 Additionally, the IC reported a 30.77% increase in the number of insurance claim disputes resolved through adjudication in 2023. A total of 51 formal adjudication cases were decided, compared to 39 cases in 2022. The IC holds jurisdiction over disputed insurance claims up to a maximum amount of PHP5,000,000. Insurance Commissioner Reynaldo A. Regalado emphasized the importance of efficient and prompt resolution of complaints in building trust among policyholders. “We believe that if the insuring public becomes aware that valid insurance claims are paid out promptly, and disputed claims are resolved expeditiously either through the mandated complaints resolution channels of insurance companies, our claims mediation process, or through case adjudication, we will be able to build more trust among the people to take up insurance in preparation for financial ruin in times of loss of life or livelihood,” Regalado said. Source: insurancebusinessmag.com

Ominous trends continue to point the world toward global catastrophe. The war in Ukraine and the widespread and growing reliance on nuclear weapons increase the risk of nuclear escalation. China, Russia, and the United States are all spending huge sums to expand or modernize their nuclear arsenals, adding to the ever-present danger of nuclear war through mistake or miscalculation. In 2023, Earth experienced its hottest year on record, and massive floods, wildfires, and other climate-related disasters affected millions of people around the world. Meanwhile, rapid and worrisome developments in the life sciences and other disruptive technologies accelerated, while governments made only feeble efforts to control them. The members of the Science and Security Board have been deeply worried about the deteriorating state of the world. That is why we set the Doomsday Clock at two minutes to midnight in 2019 and at 100 seconds to midnight in 2022. Last year, we expressed our heightened concern by moving the Clock to 90 seconds to midnight—the closest to global catastrophe it has ever been—in large part because of Russian threats to use nuclear weapons in the war in Ukraine. Today, we once again set the Doomsday Clock at 90 seconds to midnight because humanity continues to face an unprecedented level of danger. Our decision should not be taken as a sign that the international security situation has eased. Instead, leaders and citizens around the world should take this statement as a stark warning and respond urgently, as if today were the most dangerous moment in modern history. Because it may well be. But the world can be made safer. The Clock can move away from midnight. As we wrote last year, “In this time of unprecedented global danger, concerted action is required, and every second counts.” That is just as true today. The many dimensions of nuclear threat A durable end to Russia’s war in Ukraine seems distant, and the use of nuclear weapons by Russia in that conflict remains a serious possibility. In February 2023, Russian President Vladimir Putin announced his decision to “suspend” the New Strategic Arms Reduction Treaty (New START). In March, he announced the deployment of tactical nuclear weapons in Belarus. In June, Sergei Karaganov, an advisor to Putin, urged Moscow to consider launching limited nuclear strikes on Western Europe as a way to bring the war in Ukraine to a favorable conclusion. In October, Russia’s Duma voted to withdraw Moscow's ratification of the Comprehensive Nuclear Test Ban Treaty, as the US Senate continued to refuse even to debate ratification. Nuclear spending programs in the three largest nuclear powers—China, Russia, and the United States—threaten to trigger a three-way nuclear arms race as the world’s arms control architecture collapses. Russia and China are expanding their nuclear capabilities, and pressure mounts in Washington for the United States to respond in kind. Meanwhile, other potential nuclear crises fester. Iran continues to enrich uranium to close to weapons grade while stonewalling the International Atomic Energy Agency on key issues. Efforts to reinstate an Iran nuclear deal appear unlikely to succeed, and North Korea continues building nuclear weapons and long-range missiles. Nuclear expansion in Pakistan and India continues without pause or restraint. And the war in Gaza between Israel and Hamas has the potential to escalate into a wider Middle Eastern conflict that could pose unpredictable threats, regionally and globally. An ominous climate change outlook The world in 2023 entered uncharted territory as it suffered its hottest year on record and global greenhouse gas emissions continued to rise. Both global and North Atlantic sea-surface temperatures broke records, and Antarctic sea ice reached its lowest daily extent since the advent of satellite data. The world already risks exceeding a goal of the Paris climate agreement—a temperature increase of no more than 1.5 degrees Celsius above pre-industrial levels—because of insufficient commitments to reduce greenhouse gas emissions and insufficient implementation of commitments already made. To halt further warming, the world must achieve net zero carbon dioxide emissions. The world invested a record-breaking $1.7 trillion in clean energy in 2023, and countries representing half the world’s gross domestic product pledged to triple their renewable energy capacity by 2030. Offsetting this, however, were fossil fuel investments of nearly $1 trillion. In short, current efforts to reduce greenhouse gas emissions are grossly insufficient to avoid dangerous human and economic impacts from climate change, which disproportionately affect the poorest people in the world. Barring a marked increase in efforts, the toll of human suffering from climate disruption will inexorably mount. Evolving biological threats The revolution in life sciences and associated technologies continued to expand in scope last year, including, especially, the increased sophistication and efficiency of genetic engineering technologies. We highlight one issue of special concern: The convergence of emerging artificial intelligence tools and biological technologies may radically empower individuals to misuse biology. In October, US President Joe Biden signed an executive order on “safe, secure, and trustworthy AI” that calls for protection “against the risks of using AI to engineer dangerous biological materials by developing strong new standards for biological synthesis screening.” Though a useful step, the order is not legally binding. The concern is that large language models enable individuals who otherwise lack sufficient know-how to identify, acquire, and deploy biological agents that would harm large numbers of humans, animals, plants, and other elements of the environment. Reinvigorated efforts this past year in the United States to revise and strengthen oversight of risky life science research are useful, but much more is needed. The dangers of AI One of the most significant technological developments in the last year involved the dramatic advance of generative artificial intelligence. The apparent sophistication of chatbots based on large language models, such as ChatGPT, led some respected experts to express concern about existential risks arising from further rapid advancements in the field. But others argue that claims about existential risk distract from the real and immediate threats that AI poses today (see, for example, “Evolving biological threats” above). Regardless, AI is a paradigmatic disruptive technology; recent efforts at global governance of AI should be expanded. AI has great potential to magnify disinformation and corrupt the information environment on which democracy depends. AI-enabled disinformation efforts could be a factor that prevents the world from dealing effectively with nuclear risks, pandemics, and climate change. Military uses of AI are accelerating. Extensive use of AI is already occurring in intelligence, surveillance, reconnaissance, simulation, and training. Of particular concern are lethal autonomous weapons, which identify and destroy targets without human intervention. Decisions to put AI in control of important physical systems—in particular, nuclear weapons—could indeed pose a direct existential threat to humanity. Fortunately, many countries are recognizing the importance of regulating AI and are beginning to take steps to reduce the potential for harm. These initial steps include a proposed regulatory framework by the European Union, an executive order by President Biden, an international declaration to address AI risks, and the formation of a new UN advisory body. But these are only tiny steps; much more must be done to institute effective rules and norms, despite the daunting challenges involved in governing artificial intelligence. How to turn back the Clock Everyone on Earth has an interest in reducing the likelihood of global catastrophe from nuclear weapons, climate change, advances in the life sciences, disruptive technologies, and the widespread corruption of the world’s information ecosystem. These threats, singularly and as they interact, are of such a character and magnitude that no one nation or leader can bring them under control. That is the task of leaders and nations working together in the shared belief that common threats demand common action. As the first step, and despite their profound disagreements, three of the world’s leading powers—the United States, China, and Russia—should commence serious dialogue about each of the global threats outlined here. At the highest levels, these three countries need to take responsibility for the existential danger the world now faces. They have the capacity to pull the world back from the brink of catastrophe. They should do so, with clarity and courage, and without delay. It’s 90 seconds to midnight. Source: thebulletin.org

JAKARTA, Jan 10 (Reuters) - Indonesia has raised the minimum equity for insurance firms to hold to at least 250 billion rupiah ($16.06 million) by 2026, 67% higher than the previous minimum level, the regulator said on Wednesday, following policy defaults in the past few years. Under the previous rules, the minimum paid up capital for insurance firms was 150 billion rupiah. The Financial Services Authority (OJK) will increase the minimum to between 500 billion rupiah and 1 trillion rupiah by 2028, it said. "Limited capital capacity is one of the main issues that has potential to disrupt the sector's resiliency and stability in anticipating potential economic crises," OJK said on Wednesday. A number of insurance firms, including state-owned Asuransi Jiwasraya, an insurer for military officers Asabri and one of the country's oldest insurers, Bumiputera, got into financial difficulty after a wave of unpaid claims. The new regulation also called for new investors to put in at least 1 trillion rupiah to start a new insurance business. For reinsurance firms, the minimum capital requirement was raised to 500 billion rupiah in 2026, and set to go up to 2 trillion rupiah at end-2028, OJK said, compared with 300 billion rupiah under previous rules. ($1 = 15,565.0000 rupiah) Source: reuters.com

The tensions between the US and China made the global economy shudder in 2023. The ramifications of the Ukrainian war echoed beyond the country’s border. In Africa, the coup d’état in Niger and Gabon contributed to the global democratic retreat of recent years and the Hamas/Israel conflict has so far resulted in thousands of deaths. Such trends of global power tensions, open war, democratic decline and extreme job market fluctuations are likely to continue in 2024. With this in mind, here are five global geopolitical and economic trends to watch out for. Power shifts As the Brics (Brazil, Russia, India, China, South Africa) organization expands to include Egypt, Ethiopia, Iran, Saudi Arabia and the UAE, its growing economic influence could dramatically change the global balance of power. From January 2024, Brics will represent about 46.5% of the world’s population, US$30.8 trillion (£23.7 trillion) about a third of global GDP and 45% of global oil production. A related economic consequence is that the Brics’ expanded trade network can reduce their dependence on western markets, particularly through preferential trade agreements and possibly the use of a common currency. For countries that have been sanctioned by the west, such as Iran, becoming a Brics member increases their diplomatic options. This may make Brics attractive to other sanctioned countries. The Brics’ expansion can also enable members to strengthen their impact by pursuing their political and economic interests more easily. Challenging the west may not take the form of direct confrontation, but occur by gradually moving away from current institutions such as the IMF. Global election cycle The list of general elections in 2024 includes countries from all continents and the participation of billions of people. At the core is the US election where former president Donald Trump is likely to be the Republican candidate. If re-elected, he may continue with his policy of “global engagement abstention” as evidenced by his past willingness to disengage from Nato. Such a stance may weaken the global economic and political system and contribute to the rise of other countries searching for greater global clout. Another important aspect emerging from the cornucopia of general elections is the potential erosion of democracy. In the US, for instance, there is talk of a possible Trump dictatorship. In Russia, a win by President Vladimir Putin can see him remaining as president until 2030 with the possibility of a further sixth term up to 2036 (or about 32 years in power). In other countries, such as El Salvador, some politicians are willing to circumvent their constitutions to be re-elected or to ban efforts to monitor elections, as is happening in Tunisa. Such practices are likely to weaken democratic institutions or constrain their development. Heightened tensions in the Middle East The Israel/Hamas war will continue to have repercussions beyond the Middle East. The risk of further escalation of the conflict regionally has intensified after an air strike in Beirut. Some nearby states, for example, have strongly condemned Israel’s overall response to Hamas’ attack. Jordan called that response a “war crime” and Egypt a “collective punishment.” The war is likely to compound regional uncertainty and instability. Some evidence suggests that increasing political instability will also affect the health of the region’s financial institutions. In turn, greater instability could increase refugee flows to the US and Europe. The latter will exacerbate the already tense political debate over immigration policy. The Israel/Gaza war is also likely to discourage investment in the Middle East and disrupt trade routes leading to increasing shipping costs. Hong Kong’s population is ageing fast. Tony Kwan/Alamy China’s economic pressures Recently, China’s economy has been described as a “ticking time bomb” as a result of slow economic growth, high youth unemployment, the property sector crisis, lower Foreign Direct Investment (FDI) and weaker exports. Growth prospects are expected to remain “structurally weaker” with low consumer confidence and spending and declining external demand. Lower internal Chinese consumption means lower demand for raw material and commodities which, in turn, will affect larger exporters such as Australia and Brazil. Multinational corporations are likely to experience some negative impact on their profits as relocation of production and supply chain diversification continues as a result of trade frictions and armed conflicts. This may have a knock-on effect, not only on their suppliers but also on their workforce in terms of salary growth, if not, downsizing and job losses. More generally, the increased risks for China’s economy will hit global growth, according to the OECD. Ageing populations In 2022, Japan, Italy, Finland and Germany were among the countries with the greatest share of populations over 65 years of age and by 2050 it is projected that the list will include Hong Kong, South Korea and Taiwan. By 2050 the percentage of the world’s over 60 population will increase from 12% to 22%. At the same time, life expectancy is increasing. Such a population trend has implications for social security and other parts of the economy. Demands on governments and health providers to deliver greater volumes of care will grow because of potential escalating risks of disease among the elderly. The ratio of workers to pensioners is falling which is also putting pressure on the sustainability of current pensions systems. In addition, there is evidence that the ageing of the population affects labour productivity and labour supply. It can, therefore, have an effect on economic growth, trade, savings and investment. All in all, 2024 could be another rocky year. Source: theconversation.com

Losses from natural disasters in the Asia-Pacific and Africa region totalled $64bn in 2023, slightly lower than the $66bn seen in the previous year, says reinsurance giant Munich Re. Approximately $8bn of the $64bn was insured (2022: $11bn). Japan, a country highly exposed to natural hazards, was largely spared major damage in 2023. While Typhoon Doksuri was the year’s costliest disaster in terms of overall losses, two major catastrophes in New Zealand together accounted for the highest insured losses in Asia-Pacific (around $4bn). In early February, there were massive floods in and around Auckland, New Zealand’s biggest city, causing insured losses of nearly $2bn and overall losses of $2.9bn. In mid-February, Cyclone Gabrielle hit New Zealand’s North Island and Norfolk Island, resulting in huge damage. Losses from the cyclone were at a similar level to those from the floods. In the northeast of Australia, severe flooding occurred in mid-December as a result of tropical storm Jasper in the state of Queensland. According to media reports, there was more than 800 mm of rain in just one day. Numerous rivers burst their banks. It is still too early to reliably quantify the damage. El Nino and El Nina effects As in other regions, the El Niño-Southern Oscillation (ENSO) conditions influence weather extremes in Asia, in addition to climate change. The ENSO expression peaked at the end of 2023 and will most likely subside by mid-year. Australia can therefore hope for a mild cyclone season overall, lasting until the end of April. In contrast, the risk of forest fires is likely to increase as the lush vegetation of recent months begins to dry out, increasing flammability. If El Niño turns into its counterpart, La Niña, in the second half of 2024, the risk of flooding in eastern Australia could increase. The outlook for the typhoon season in the northwest Pacific remains unclear due to the uncertainty of ENSO development in the second half of the year. In the event of a La Niña phase, typhoon activity in the northwest Pacific could be below average. However, more storms could hit the Philippines, as storms under La Niña conditions tend to move westwards rather than northwards. Worldwide, natural disasters in 2023 resulted in losses of around $250bn (2022: $250bn), with insured losses of $95bn (2022: $125bn). Overall losses tally with the five-year average, while insured losses were slightly below the average figure of $105bn. Unlike in previous years, there were no mega-disasters in industrialized countries that drove losses up (such as Hurricane Ian in 2022, which caused overall losses of $100bn and insured losses of $60bn). Economic losses from natural disasters were dominated by severe storms: 76% of overall losses were weather-related, while 24% had geophysical causes. Source: asiainsurancereview.com

The global reinsurance industry demonstrated a significant recovery of prior-year capital losses in 2023, driven by strong technical results, unrealized capital gains and higher reinvestment rates, according to a new AM Best commentary. In its Best’s Commentary, “Strong Recovery in Total Reinsurance Capital Countered by Surplus Distributions,” AM Best states that traditional reinsurers capitalized on the improvement in their technical results throughout 2023, as higher rates and stricter terms began to earn out on portfolios. Investment losses in 2022 were partly reversed in 2023. When combined with higher fixed-income reinvestment rates, investment portfolios generated strong overall investment income for the market. The improved underwriting and operating results also helped to bring about the significant recovery in 2023, although this was partly counterbalanced by market participants’ capital distributions. Capital AM Best projected in August 2023 a 12.2% year-over-year increase in traditional reinsurance capital to $461bn for 2023, but as the North American hurricane season ended, reinsurers were on pace to nearly double that projected increase. However, the dynamic between available and deployed capital remains, and according to the commentary, some reinsurers have yet to determine their capital strategies, while others elected to pay special dividends out of their regulated balance sheets—most notably, Berkshire Hathaway-owned National Indemnity’s special dividend of roughly $83bn in third-quarter 2023. “With still-high discount rates and significantly improved operating results, reinsurers need to determine whether to release capital or double down in the hard market,” said Mr. Dan Hofmeister, associate director at AM Best. “Regardless, our original projected increase of 12.2% in traditional reinsurance capital still appears adequate, albeit with some potential variation if reinsurers avoid deploying the new capital generated in 2023.” Third-party reinsurance capital is expected to increase modestly by 4% for 2023, according to Guy Carpenter, aided by record-high issuances of catastrophe bonds in 2023. Overall reinsurance capital for 2023 is expected to be $561bn, which is less than 2% below the prior high watermark of $570bn, set in 2021. Even with much more orderly renewals expected for January 2024, market participants have not indicated any softening in market conditions. Furthermore, although multiple high-profile management teams have announced their intention to launch new reinsurers, no material business plans have been funded at this point. Source: asiainsurancereview.com