The International Union of Marine Insurance (IUMI) has published recommendations on the safe carriage of electric vehicles (EVs). The publication, titled “Best practice & recommendations for the safe carriage of electric vehicles”, is in response to growing concerns within the shipping community, including marine underwriters, about fires breaking out on car carriers and roros with the assertion that many of these fires are attributable to electric vehicles. Mr. Lars Lange, IUMI secretary general, explains: “Our paper draws on a body of scientific research which demonstrates that fires in battery EVs are not more dangerous than fires in conventional vehicles, nor are they more frequent. Although statistics continue to be gathered, they currently estimate that, in general, there are fewer fires from EVs compared with fires from conventional vehicles when driven over the same distance.” Research also proves that there is only a minor difference between total energy released during an EV fire and one that is related to an internal combustion engine vehicle (ICEV). Once established, vehicle fires are largely (approx. 80%) fuelled by the car body and interior parts rather than the propulsion system. However, the potential for thermal runaway (when the battery suffers an unstable chemical reaction) exists for EVs whereas it is not a consideration for ICEVs. Thermal runaway makes fires hard to extinguish, hence mitigation measures such as boundary cooling must be employed rapidly. Moreover, the risk of re-ignition is higher for an extended period of time. In the paper, IUMI makes important distinctions between roros and pure car and truck carriers (PCTCs) noting that many roros will stow cars on open decks where air flow makes fire-fighting more challenging. Ropax vessels (where passengers are also carried) present additional issues such as passengers wanting to charge onboard and the possibility of cars being loaded that are older and potentially less safe. Conversely, PCTCs tend to carry vehicles tightly packed leaving little room for emergency access and facilitating the rapid spread of a fire. In light of this, IUMI concludes: Early fire detection and verification/confirmation is critically important to reduce the time between detection and firefighting response to a minimum. Options, in addition to the conventional systems, could include thermal imaging cameras and AI powered systems. Drencher systems are effective for fire-fighting onboard roro and ropax vessels both for EV and ICEV fires and should be installed alongside video monitoring systems. CO2 extinguishing systems, if applied quickly, are successful in fighting PCTC fires and their capacity should be doubled. High-expansion foam fire extinguishing systems have also proved to be effective to prevent heat transfer from one vehicle to another. Early detection, confirmation and a short response time are crucial to fight a fire successfully. On board PCTCs, fixed systems should always be applied before manual fire-fighting is employed. A clear policy is required on which cargo is accepted or rejected. Vehicles should be screened with used vehicles being checked carefully for hidden damage. Charging onboard ropax vessels should be permitted subject to relevant risk assessments and control measures. Safety mechanisms built into EVs are usually activated during charging. The IMO’s sub-committee on Ship Systems and Equipment (SSE) will start work on the “Evaluation of adequacy of fire protection, detection and extinction arrangements in vehicles, special category and ro-ro spaces in order to reduce the fire risk of ships carrying new energy vehicles” beginning in March 2024. Mr. Lange concludes: “The regulatory process will be an opportunity to improve safety requirements making them fit for the new reality of large numbers of alternative fuel vehicles being carried on board vessels. IUMI will continue to contribute to this debate.” The full IUMI paper is available here https://iumi.com/opinions/position-papers. Source: asiainsurancereview.com

Global reinsurers are cutting back on the covers they provide against medium-sized natural catastrophe risks due to investor pressure after several years of large catastrophe losses and improved profitability in other areas according to an analysis by Fitch Ratings. A media release by the rating agency said some companies were already retreating from the property-casualty market in 2022 but even the strongest reinsurers have now pulled back, largely through tightening their terms and conditions to limit their aggregate covers and low layers of natural catastrophe protection. The primary insurers are hence, left much less protected against secondary peril events. The analysis said the reinsurers, however, still offer ample cover against the most severe events. Tighter terms and conditions for Nat CAT cover are a structural improvement that should benefit reinsurers’ risk profiles in the medium term as they are unlikely to be quickly reversed even when market conditions change. There were insured natural catastrophe costs of $53bn globally in the first half of 2023, which is 47% above the 20-year average, according to the broker Aon. Nevertheless, the 18 non-life reinsurers monitored by Fitch reported strong underwriting profitability in the first six months of 2023. This was driven by the above-claims-inflation price increases in many business lines, as well as the lower natural catastrophe burden as cedents retained more of the losses themselves. The aggregate ratio included moderate losses of 6.7pp from natural catastrophes. Meanwhile, profits in life reinsurance returned to pre-pandemic levels thanks to significantly lower excess mortality claims linked to the pandemic, and investment performance benefited significantly from a rebound in equity markets and higher reinvestment rates as interest rates stabilized at higher levels. Fitch expects reinsurers to maintain strong underwriting discipline despite higher interest rates and for reinsurance market hardening to persist into 2024. However, price increases are likely to be more moderate than in 2023 as rate adequacy has generally been reached through several rounds of hardening since 2018. Source: asiainsurancereview.com

Total dedicated reinsurance capital in 2022 declined by 7% to $530bn, ending a decade-long upward trend, according to a new AM Best report. The Best’s Market Segment Report, “Dedicated Reinsurance Capital Fluctuates Amid Volatile Market Dynamics,” is part of AM Best’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo. Investments According to this report, the 2022 decline in dedicated reinsurance capital was driven primarily by mark-to-market investment losses in traditional reinsurance capital, which dropped year over year by $64bn to $411bn at year-end 2022. Most of these losses were due to rising interest rates, widening credit spreads and heightened equity market volatility. A measure of fixed-income equity, which anticipates what could be recovered as the bonds mature over time, was included for the first time in the 2022 estimate, mitigating some of the aforementioned losses and bringing total traditional reinsurance capital to $434bn, albeit still a 9% drop from 2021. “The invested asset declines are mainly temporary losses that AM Best believes will be recouped over the near to midterm,” said Mr. Dan Hofmeister, senior financial analyst, at AM Best. “However, a potentially more notable driver of the contraction was a diminished appetite to deploy reinsurance capital to writing volatile property catastrophe lines of business, instead deploying it to writing primary and specialty insurance lines. The weighted average of net premium written allocated to reinsurance lines dropped below 50% in 2022, and there is no clear indication that this trend will reverse.” Third-party reinsurance capital essentially remained flat through 2022, according to the report. Deterrents to the introduction of new third-party capital in recent years include loss fatigue, model uncertainty and opportunity costs for potential new market participants. Additionally, investors were not immune to market volatility in 2022. AM Best works in conjunction with Guy Carpenter to estimate the total amount of capital supporting the reinsurance industry. AM Best estimates traditional reinsurance capital; Guy Carpenter estimates third-party capital. The year-over-year total dedicated reinsurance capital decline in 2022 was the first recorded since the annual examinations began in 2012. Looking ahead AM Best anticipates that through the remainder of 2023, some of the investment losses will dissipate and capital will be generated through operating returns. The initial estimate for 2023 is a 5.6% overall increase to $560bn in dedicated reinsurance capital, predominantly from traditional capital growth; however, this estimate does not include the possibility of new reinsurers being formed, as any formations through the second half of 2023 would likely not provide capacity until 2024. Source: asiainsurancereview.com

ARISE Philippines has accomplished another milestone in its advocacy for disaster resilience with its reelection to the ARISE Global Board of Directors. VAdm. Alexander P. Pama AFP (ret.), ARISE Philippines Co-Chair, representing ARISE Philippines, won in the recent election for the new batch of ARISE Global Board. The virtual election took place from July 24 to August 7, 2023, participated in by members of ARISE networks from around the world. The election result was recently announced by the UN Office for Disaster Resilience (UNDRR). ARISE, the Private Sector Alliance for Disaster Resilient Societies, is an initiative led by the United Nations Office for Disaster Risk Reduction (UNDRR). It brings together governments, businesses, civil society organizations, academe, and other stakeholders to enhance disaster resilience and sustainability, to achieve objectives and goals of the Sendai Framework for Disaster Risk Reduction. Vice Admiral Alexander P. Pama's successful candidacy highlights the global recognition of his extensive experience, expertise, and commitment to disaster resilience and risk reduction. With a distinguished career in the Philippines and his significant contributions to disaster management, Vice Admiral Pama is well-equipped to provide significant value-added participation in the accomplishment of ARISE Global Board’s mandate. Vice Admiral Pama joins a distinguished group of board members from various ARISE national networks who share a common vision and advocacies to promote and implement disaster risk reduction and sustainable development through the international and national networks in coordination with governments and other DRR and resilience stakeholders. The newly elected ARISE Board members are Mr. Satoshi Hijikata from Japan, CEO Brig Bhagat K. Khanna from India, Ms. Camila Tapias from USA, Ms. Susana Fuentez Riquelme from Chile, Ms. Adriana Solano Luque from Colombia, and Mr. David Greenall from Canada. In accordance with ARISE's global Terms of Reference, UNDRR has also appointed three additional Board members. These appointments include Terry Kinyua, from Kenya; Mahmoud Al-Burai, from the UAE; and Liam Carter from the International Cooperative and Mutual Insurance Federation (ICMIF). The new Board will officially assume their roles after the formal induction during the ARISE Global Annual General Meeting (AGM) on September 13, 2023. For more information about ARISE Philippines and its initiatives, please visit https://www.arise.ph/

One main reason that Gen Z consumers are hesitant about buying insurance products is a lack of personalization, says regional InsurTech, Igloo. Traditional insurance policies often include broad coverage, which drives up costs. On top of that, many aspects of the policies might not apply to each consumer. Gen Z (born between 1996 and 2012) is incredibly price-sensitive. Combined with its openness to share personal data to enable personalization, this opens up a window of opportunity for insurers to deliver personalized products and experiences. The insurance sector has already recognized this and there are some personalized products available. Going forward, personalized policies in the form of usage-based insurance will be essential to allure and keep Gen Z consumers. An example of this would be stackable microinsurance products that enable one to pick and choose their preferred coverage and create the ideal plan at their desired price point. The emergence of IoT, 5G, AI, and big data have all contributed to this. Apart from personalization, the other top ways Gen Z shape insurance are: Speed and Convenience In an age of digitization, everything is available at the click of a button. This phenomenon has given rise to the demand for both speed and convenience. The emergence of InsurTech has helped the sector keep up with this. Embedded insurance has given rise to new channels of distribution by seamlessly integrating insurance products into the buying process. Trends such as accelerated underwriting and digital assistants also improve the customer experience. Igloo does this through strategic partnerships with major players such as e-commerce giants Lazada and Shopee, leading payment platforms DANA in Indonesia, GCash in the Philippines, and convenience store chain Circle K in Vietnam. Emerging Risks Every day presents new threats, from digital security breaches to novel health concerns. As a result, Gen Z is turning to microinsurance to safeguard against these emerging risks. Thus, insurance products tailored for modern lifestyles, addressing concerns traditional insurers don’t typically cover like online shopping fraud, data breaches, and even device protection are gaining traction. The still-developing economies and rising middle class in the Asia Pacific create an uptake in demand for cheaper, more affordable insurance plans. The emerging risks that insurers are beginning to address aren't limited to those faced by humans. With over 70% of Indonesians, Vietnamese, and Filipinos owning pets, health insurance for pets has become lucrative for insurance companies. On its part, Igloo recently partnered with GCash and Malayan Insurance in the Philippines to offer Pet Insure, which provides reimbursement, pet owner’s liability, and 24/7 pet owner’s personal accident cover. Responsible Consumers Gen Z looks for credible brands to buy from. These include brands that are aligned with Gen Z’s strong personal values and beliefs. Aspects like sustainability, diversity and inclusion are key to this segment, with 58% of Southeast Asian Gen Zs seeing brands as an extension of themselves. Education and Awareness Gen Z consumers have grown up in an age of near-perfect information. Extensive research and parallel browsing are common stages in the purchasing process, especially for complex products like insurance. With comparison and evaluation of features like documentation and claims processes, pricing and premiums, and range of protection, insurers must create clear USPs and fight off competition. Igloo is the first full-stack insurtech firm to emerge from Singapore. It has offices in Singapore, Indonesia, Thailand, the Philippines, Vietnam, and Malaysia, as well as tech centres located in India and China. With a mission of making insurance accessible for all, the firm leverages big data, real-time risk assessment, and end-to-end automated claims management to create B2B2C insurance solutions for platform companies and insurance companies. Source: asiainsurancereview.com

Global reinsurers are ready to take on more natural catastrophe risk, although contrasting approaches toward catastrophe risk remain, S&P Global Ratings says in a report. The report, titled "Catastrophe Risk Appetite Varies Among Global Reinsurers", says that the global property catastrophe reinsurance business continues to observe pricing correction following six years of elevated losses. Amid continued variations in catastrophe risk appetite, more than half of the top 20 global reinsurers maintained or reduced their natural catastrophe exposures during the January 2023 renewals, despite the improved pricing terms and conditions and rising demand. "We expect the top 20 global reinsurers to deploy more capital toward catastrophe risk in 2023 and 2024, because of continued strong demand from cedents, while higher retrocession cost could lead reinsurers to cede less of their risk," S&P Global Ratings credit analyst Charles-Marie Delpuech said. Meanwhile, improved underwriting margins and rising investment returns, coupled with still-robust capitalization (though lower than last year), are providing further buffer against exceptional shock. "For 2023, we expect the property catastrophe business to contribute about 2.5 percentage points to return on equity for the top 20 global reinsurers if losses remain within the annual budgets," added Mr. Delpeuch. "In our view, this would translate into an annual insured natural catastrophe loss of about $85bn for the entire insurance industry." Global reinsurers pull back from Nat CAT cover — Fitch Fitch Ratings says that global reinsurers are cutting back on the cover they provide against medium-sized natural catastrophe risks due to investor pressure after several years of large catastrophe losses and improved profitability in other parts of the market. Some companies were already retreating from the property-casualty market in 2022 but even the strongest reinsurers have now pulled back, largely through tightening their terms and conditions to limit their aggregate covers and low layers of natural catastrophe protection. This leaves primary insurers much less protected against secondary peril events. However, reinsurers still offer ample cover against the most severe events. The reinsurance market appears to have returned to its pre-soft market state of providing capital protection for cedents, rather than earnings protection. Natural catastrophe business has become largely loss-making in recent years as prices have failed to keep pace with increasingly frequent, severe and volatile weather-related losses due to climate change. This has reduced reinsurers’ appetite to provide natural catastrophe cover, particularly as other business lines are now benefitting from price rises that are higher than claims inflation. Tighter terms and conditions for natural catastrophe cover are a structural improvement that should benefit reinsurers’ risk profiles in the medium term as they are unlikely to be quickly reversed even when market conditions change. The 18 non-life reinsurers monitored by Fitch reported strong underwriting profitability in 1H2023, with an aggregate reinsurance combined ratio (claims and expenses to premiums) of 88% (1H2022: 89.4%). This was driven by the above-claims-inflation price increases in many business lines, as well as the lower natural catastrophe burden as cedents retained more of the losses themselves. The aggregate ratio included moderate losses of 6.7ppt from natural catastrophes. Reinsurance price momentum continued during the June and July 2023 renewals. US property-catastrophe markets had the largest price rises, with 30%-75% increases for loss-hit business and 10%-40% for loss-free business. In contrast, premium rates for casualty lines were broadly stable, reflecting the greater capacity allocated to them. Fitch expects reinsurers to maintain strong underwriting discipline despite higher interest rates and for reinsurance market hardening to persist into 2024. However, price increases are likely to be more moderate than in 2023 as rate adequacy has generally been reached through several rounds of hardening since 2018. Separately, AM Best has said that with much harder market conditions since the start of 2023, interest in property catastrophe risks has renewed cautiously among reinsurers.

In order to protect coastal communities from property damage due from flooding, MSIG Malaysia has planted 6,247 mangroves throughout Malaysia in a partnership with the Malaysian Nature Society (MNS). The initiative that has grown in scale each year since establishment in 2019, serves as an important source of biodiversity. In 2022, the carrier partnered MNS to plant 3,415 mangrove saplings in Penang, Kedah, Negeri Sembilan, Melaka, Johor, Terengganu and Perak and they plan to build on that total in 2023. The insurer intends to maintain its support of MNS as part of their commitment to the United Nation's Sustainable Development Goal 13: Climate Action. In addition to financially supporting the planting programme, many employees also took time out of their usual work routines to volunteer in the planting activities facilitated by MNS in various parts of the country. Apart from protecting coastal communities and restoring biodiversity, mangroves are also excellent carbon sinks. They are one of the most effective trees in the world for soaking up carbon dioxide in the atmosphere that causes climate change. Protecting and growing mangroves play an important part in combating and mitigating the effects of climate change. MSIG CEO Mr. Chua Seck Guan said that mangroves are a vital resource for Malaysia given their role of protecting coastal communities from erosion and floods by stabilizing riverbanks and coastlines. “They also serve as significant sources for biodiversity and are the breeding ground and habitat for many varieties of fishes and other marine life. As such it is crucial that they are protected and conserved in order to secure the wellbeing of our coastal communities and future generations,” he said.

There has been a shift toward non-catastrophe risks in the past few years, especially for carriers heavily affected by losses, according to a new AM Best report. With much-harder market conditions since the start of 2023, interest in property catastrophe risks has renewed cautiously, says the Best’s Market Segment Report, titled “Global Reinsurers Face Challenges Even as Conditions Improve”. The report is part of AM Best’s look at the global reinsurance industry ahead of the Rendez-Vous de Septembre in Monte Carlo. Unlike previous cycles, according to the report, the price discovery path has taken longer than expected, as the last six years have seen a slow, protracted process of reinsurers realigning their risk profiles, reallocating capital, re-underwriting and repricing. The global reinsurance market returned an underwriting profit in 2022, despite operating in extremely challenging conditions, with persistent and elevated claims activity, Mr. Carlos Wong-Fupuy, senior director, AM Best, said, “The January 2023 renewals highlighted the mismatch between supply and demand, but it’s also important to recognize the difference between ‘available’ and ‘deployed’ capacity. Available capital is not under pressure; however, the well-established global reinsurers have become much more cautious allocating their capital, which pressures the deployment of capacity.” Reinsurers’ profitability began seeing improvement in 2021, reflecting key players’ shift from the lower and medium layers of property catastrophe risks; tightened contract wording; and the re-deployment of capital toward the casualty, specialty lines and excess and surplus primary segments. In 2022, AM Best’s global reinsurance composite posted a combined ratio of 95.6, a 0.8ppt improvement over 2021. At the same time, investment results were affected severely by unrealized losses on fixed-income securities. The global reinsurance segment posted a return on equity of 0.8% in 2022, following a 9.0% ROE in the previous year. Concerns about economic and social inflation, central banks’ contractionary monetary policies, asset market volatility, and the recent underperformance of the global reinsurance segment have translated into a higher cost of capital as well. Capitalization AM Best believes that despite the severe decline in shareholders’ equity, global reinsurers remain well capitalized. Given reinsurers’ prudent approach to deploying capital, they are likely to preserve underwriting discipline for a longer period than in previous cycles. However, market participants are under pressure to innovate, expand their presence and assert their role in an evolving economy in which today’s emerging risks will soon become the dominant ones. AM Best’s stable outlook on the global reinsurance segment reflects this balancing act between positive and negative factors. “Investors will likely demand a strong commitment to underwriting discipline, as well as flexibility to adjust to changing conditions in the business cycle,” said Mr. Wong-Fupuy. “Well-established, diversified companies with a proven track record are better positioned to succeed in this effort than startups that are pressured to meet top-line targets.” Source: asiainsurancereview.com

Insurers have faced challenges in providing EV drivers with adequate insurance coverage at reasonable prices due to the relatively new and rapidly evolving nature of EV technology. However, insufficient underwriting data and experience have been particular obstacles for them, says Korean Re in a blog posted on its website. The blog, titled “Review of the Electric Vehicle Insurance Market in Korea”, adds that despite these challenges, the rise of EVs also presents new business opportunities for the insurance industry. In line with supervisory guides, insurers in Korea have developed and released motor insurance riders that allow EV drivers to expand or adjust their car insurance coverage. They include covers for battery replacement, extra repair costs for EVs, and longer-distance towing services in the event of an EV breakdown or malfunction, and risks that may occur while charging EVs such as fire, explosion, and electrocution. It is important for the insurance industry to develop and establish underwriting expertise in alignment with how the mobility sector evolves. Battery subscription service In particular, insurers need to prepare for the government’s plan to introduce a battery subscription service for EVs, which allows double registrations for an EV and its battery pack. In other words, when the battery subscription scheme is implemented, the owner of an EV may be different from the battery pack owner, with carmakers or financial service firms running battery rental services for drivers. As the current law on car registration does not allow two separate registrations for an EV, the government is seeking to revise the relevant law to distinguish the owner of an EV from the owner of its battery. In response to this change, insurers may have to take a new approach to pricing and providing appropriate motor insurance coverage, with the ownership of an EV being specified and the scope of the insured and coverage being defined more clearly in the insurance policy. Source: asiainsurancereview.com