Despite cyber attack or data breach being the top business risk, according to Aon's 2023 Global Risk Management Survey, the cyber insurance market still remains unstable. According to the survey, factors that have contributed to this rise in rank include growing awareness of cyber threats, high-profile data breaches and ransomware attacks and greater underwriting scrutiny by the insurance market. “The insurance market is interesting because of the behaviours and attitudes within the insurance market and the companies with capital at risk associated with this particular topic,” Aon head of cyber solutions, APAC Adam Peckman said. For instance, he said, rates looked asynchronous in the marketplace due to a lag effect. Spikes in the frequency of ransomware attacks and fluctuations in premiums led to a hardened market. Although capital is available and the underwriting discipline has not changed, the market still has not stabilized as insurers continue to look at capacity, wording of the policy and willingness to take on risk. “In terms of a worsening outlook, we will have to wait to see whether insurers improving diligence and managing tail risk on the front and back ends will either correct or continue to stabilize the market,” he said. Readying for a cyber attack With such high risk of a cyber attack, companies in APAC have been tightening data privacy and security regulations, according to Mr. Peckman. “Companies have been making decisions about use of capital to mitigate and potentially transfer cyber risk,” he said. Cyber also tends to be an interconnected risk, he said, and it has the potential to be an accelerant in velocity and severity. “A company’s portfolio, loss of intellectual property and potential impact on artificial intelligence are some things that come to mind when it comes to data privacy requirements,” he said. Companies are also beginning to understand what a digitally-enabled attack means for supply-chain operations, he said. Source: asiainsurancereview.com

A new survey has revealed that for the first time, businesses are more concerned about extreme weather affecting operations in 2030 than they are about cyber attacks. The new survey conducted by healthcare and risk management solutions company Healix found that extreme weather events have now surpassed threats to IT infrastructure as the top operational risk according to business perspectives. The survey published in November 2023 asked respondents to look at the risks they are most concerned about. The respondents identified extreme weather (43%), cyber attacks (40%), and interstate conflict (38%) as the top three biggest concerns. The survey included 500 travel and security risk managers across eight industrial sectors. Almost three quarters (73%) of businesses surveyed said they have already been directly affected by extreme weather. The highest impacted industry is manufacturing (86%) where operations are widely dispersed among physical environments and geographies. The media industry also ranked high (83%), accounting for the risks involved in reporting on these extreme weather events at source. Of all the extreme weather events, businesses were most concerned about extreme heat affecting employees (41%), followed by heavy rainfall and flooding (37%) and wildfires (33%). This makes sense because not only can extreme heat affect personnel with medical risks such as heatstroke and severe dehydration as a standalone factor, but it can also lead to associated factors related to extreme heat, such as wildfires. Healix risk intelligence manager Andrew Devereux said, “As a global trend, the common theme of all climate-related risks is that they are indiscriminate and lead to tangible risks, whether it’s physical risks to staff or operational risks such as security of infrastructure and supply chain.” With respect to the risks that would have the most impact on operations, natural disaster came out highest (34%) ahead of societal/cultural (30%). Despite this, a quarter (25%) of respondents said they had no plan in place to mitigate risk around climate or sustainability. Mr. Devereux said, “The hard truth is that we’re experiencing more immediate physical and direct operational impact from changing climate patterns. It is crucial that businesses think about climate risk in the same short-term view they have for cultural or societal risk, such as political unrest.” The survey report also looks at other factors that could help businesses develop better risk management solutions, including the role of AI and data, as well as the biggest risks identified by the respondents across markets. The respondents surveyed included the Middle East and North Africa, Europe, the Americas, Asia Pacific and Africa. Source: asiainsurancereview.com

The global nature of the reinsurance industry has enabled the diversification of risk away from concentration in specific regions to the larger global market. However, record catastrophe losses, inflation stemming from increased interest rates, geopolitical tensions and heightened climate risk are putting operating pressures on insurers and reinsurers. The increasing frequency of higher- magnitude natural disasters against the backdrop of a bearish market with rising interest rates sets up a perfect storm for reinsurers to harden their pricing to reflect a more prudent risk appetite. How were all these factors driving 2023 renewals? (Pricing, retention, portfolio pricing and risk appetite) Reinsurers become pricing-driven in light of hard retro and lower dedicated capital Due to unrealized investment losses and the absence of new capital, reinsurers and retrocessionaires tend to deploy their capital strictly to risks with adequate pricing. Dedicated reinsurance capital declined by 12% in 2022, with traditional capital falling 13.5% on an absolute basis. It is expected to bounce back over the course of 2023 due to earnings improvement, but is still likely to only reach 2021 levels. Despite stable retrocession market capacity, the cost and level of attachment rose in the January 1 renewals, with reinsurers taking on more risk. Global property catastrophe pricing increased by ~28% during January renewals, while, on average, Asia Pacific property catastrophe pricing increased by 15%-20% on a risk-adjusted basis. This was driven partly by higher retrocessional costs. In view of high inflation and interest rates, it is expected that reinsurers will continue to prioritize adequate risk pricing for sustainable combined ratio improvement across all lines and regions, particularly on long-tail business. Insurers are forced to retain more risk on their own books in response to the hardening market Lower layers are typically priced at higher ROLs to reflect the higher probability and frequency of losses, constituting the largest cost portion of the property excess of loss program. These are where the dollar impact of industrywide price hardening is most prominent. Decreased capacity from the retro market has reduced available reinsurer capacity that can be provided to the insurance market. As a result, insurers have had to increase their retention to partially offset the impacts of rising costs and decreased capacity. Nearly one-third of Asia Pacific programs had increased their retention toward 1-in-10 years (from previously 1-in-5 years on average), leaving insurers with decreased earnings protection for catastrophe losses at the lower return period. What does it mean for (re)insurers? Insurers should expect higher volatility on their return on equity As insurers increase their retention, they expect to retain all lower-return-period catastrophe losses previously ceded to reinsurers. However, considering heightened climate risk, increasing occurrences of non-peak perils events could leave insurers more susceptible to increased catastrophe loss retention. Without adequate rate movements and proper risk selection in underwriting processes, this could potentially jeopardize insurers’ capital. Retaining more risk may also limit an insurer’s ability to pursue growth opportunities, as more capital may be required to support increased (catastrophe- related) risk exposure. Uncertainty remains whether reinsurers’ ROE will exceed their cost of capital, despite improvement Improvements in pricing adequacy will help reinsurers improve underwriting profitability, as illustrated in their catastrophe loss ratios. These changes are largely in line with the upward ROL trend. Additionally, the unwinding of unrealized losses on matured fixed-income securities coupled with higher investment yield will gradually improve reinsurers’ return on equity (and their shareholders’ equity position). In the past 6 years, global reinsurers’ average ROE (~6%) stayed below their cost of capital. Higher interest rates have increased the cost of capital, from ~8% in 2020 to above 11% in the first half of 2023. It is still too early to tell if the earnings improvement in the first half of this year (before the hurricane/typhoon season began) will become a sustainable trend, as if pricing improvement is adequate to counter the more frequent and severe catastrophic losses in view of climate change. Also, the rebound on investment return remains uncertain, given the current environment of high inflation and interest rates. A more concrete shift in the pricing cycle can be achieved only when reinsurers are earning sustainable returns higher than their cost of capital consistently, in order to allow for more flexible reinsurance pricing and attract more capacity. How Guy Carpenter Can Help Guy Carpenter’s model development team focuses on non-peak perils, such as flooding, hail and other perils that lack credible vendor models. All models are fully probabilistic and include the ability to examine specific climate change scenarios. These models are used globally by our clients for reinsurance pricing, risk management, portfolio management, capital allocation and regulatory requirements. The trend of increased retention and increased price will likely continue until the ROE becomes substantial enough to attract new capacity. Insurers should continue to investigate alternative risk transfer arrangements, such as: Structured solutions: The implementation of structured features can address capital and solvency problems, increase efficiency and volatility management and manage growth. Parametric covers: By paying pre-established costs according to the characteristics of a particular physical event, parametric solutions remove the need for a prolonged adjustment process. Portfolio management: The alignment of a firm’s capital management framework with a catastrophe modeling output enables targeted returns, allowing firms to re-underwrite the “worst offenders” in their existing portfolio and select new areas for growth. Government pools: Guy Carpenter has been involved in designing and delivering several natural catastrophe and terror international pooling schemes, decreasing volatility for insurers. Guy Carpenter has teams dedicated to each of these areas. Click here to read the full briefing. Source: asiainsurancereview.com

The Government Service Insurance System (GSIS) is working with the Japan International Cooperation Agency (JICA) to improve the protection of public properties and assets against disasters. Under the three-year partnership, JICA will support the efforts of the GSIS in improving the protection of government insurable interests all around the nation. On the instruction of President Ferdinand Marcos Jr, the GSIS is working with the Department of Finance in building up capacity in all the aspects of public insurance including underwriting, loss control and management, insurance procurement, and developing strategies and promotional materials to raise awareness and promote public insurance. GSIS is mandated to cover all assets and properties that have government insurable interests under the Property Insurance Law. It provides insurance coverage such as fire, engineering, marine hull and cargo, aviation, bonds, motor car, and personal insurance. “We are grateful to the Government of Japan and to JICA for this technical cooperation project. There is a real and compelling need to re-examine outdated practices, old insurance models, and archaic underwriting systems,” GSIS president and general manager Mr. Wick Veloso said. Among various initiatives, GSIS will launch a property inventory mobile application to make it easy and more convenient for government property officers to register their agency’s properties online. JICA chief representative Sakamoto Takema said, “This cooperation with the GSIS will be of great help to the Philippines in improving public insurance against disasters and protecting development gains from disaster risks in line with the Sendai Framework, which outlines the measures to prevent new damages, reduce disaster risks, and ensure fast recovery.” Source: asiainsurancereview.com

PIRA was ably represented by Executive Director Mitch Rellosa at the Digital Pilipinas Festival 2023. He talks about the insurance protection gap and how, through technology, we could reach the unreserved portion of the populace.

Unlike the usual conferences, the AIS was conceived in 2014 by the then Secretary-General of the ASEAN Insurance Council, Ms Evelina Pietruschka to be a symposium, by which senior insurance industry leaders and practitioners from across ASEAN will have an opportunity to voice and share their perspectives during the panel sessions and contribute to the ASEAN Economic Community (AEC) policy-making process. At the same time, they can keep abreast of the AEC progress and updates on the insurance sector towards the AEC Blue-print 2025. Following the Summit, a Post-Summit Report will be compiled and presented at AIC/ARM meetings as well as to the ASEAN Secretariat. ASEAN is arguably the most exciting insurance market in the world, with a large and rapidly growing population ready to take advantage of new insurance products and services offered in the post-COVID era. This Summit aims to bring together key stakeholders to share the cutting edge of strategy and policy making. The 3rd AIS held in Kuala Lumpur in 2018 had a total of over 200 participants; of which 87% of them were C-suite executives or strategic decision-makers from the ASEAN countries, from insurance regulators’ offices and other insurance and related service companies. For the 4th AIS, around 1000+ industry leaders, including Chairmen, Board Members and Senior Management of the ASEAN insurance fraternity will attend the Summit, including future young leaders of the industry. Source: ais2021.com

We are pleased to announce that the 4th ASEAN Insurance Summit, organized by the ASEAN Insurance Council (AIC) and managed by the Singapore College of Insurance (SCI), will be held virtually on Tuesday, 26th October 2021 from 10.00 am to 5.00 pm, Singapore Time. The theme of this year’s Summit is “Building A More Resilient and Sustainable ASEAN”. Our Guest-of-Honour is Mr Marcus Lim, Assistant Managing Director of the Banking & Insurance Group, Monetary Authority of Singapore who will open the Summit and deliver a Keynote Address. The objective of this year’s Summit is to provide a platform for senior insurance leaders and practitioners to voice and share their perspectives on sustainability issues such as climate change impacting the ASEAN insurance industry as well as contribute to the ASEAN Economic Community policy-making process. Besides an Insurance Regulators’ session, we had also included a forum between the World Economic Forum and the ASEAN Insurance Council members to talk about the Action Plan for Insurance and Asset Management industry. At the same time, we had invited senior officers from the ASEAN Secretariat to share updates on the AEC Blue-Print 2025 as well as the ASEAN Digital Masterplan 2025 and the ASEAN Climate Action-Plan. These sessions will enable industry practitioners and all stakeholders to keep abreast of regulatory and economic/social changes and consider the impact on their business strategy and decisions. We will also be launching an ASEAN School of Insurtech, Analytics & Innovation by the Singapore College of Insurance as well as the announcement of an ASEAN Insurance Diploma framework, initiatives under the ASEAN Insurance Education Committee. Overall Winners at the ASEAN Green Research Hackathon will also be presented with their prizes at the event. This year, the Summit is only open to Invited Guests. We would like to cordially invite member companies of your association to join the Summit. Each member company can register THREE of their senior management team to attend the Summit. Please click on the Invite Card below. Each guest will need to fill up the online RSVP form (link below). You are highly encouraged to use your corporate email address to RSVP for the Summit. SCI will be in touch with the registered guests to follow up on login details to the event. Click here to RSVP and download the programme. Source: ais2021.com

The ASEAN Insurance Council (AIC) invited member-companies to attend the 5th ASEAN Insurance Summit (AIS) to be held on 05 December 2023 at Royal Ha Long Hotel, Vietnam. For more information and registration, kindly click here.