Home insurance premiums have jumped by 28% in the past year - the biggest rise in two decades, raising concerns that many Australian households may abandon their insurance altogether, according to new research released yesterday by the Actuaries Institute. In response to the research, the Actuaries Institute has outlined a package of urgent policy measures for governments, insurers and other stakeholders to consider in order to ease the affordability pressures and bolster existing initiatives to improve the preparedness and resilience of communities facing threats from floods, cyclones and bushfires. The research, which involves two related reports commissioned by the Actuaries Institute, found that median home insurance premiums rose 28% to A$1,894 ($1,230) in the year to 31 March, with the highest risk properties, such as those in flood-prone areas, up by 50%. The first report, Home Insurance Affordability Update, is authored by actuaries Sharanjit Paddam, Calise Lui and Saroop Philip from Finity Consulting’s Climate Analytics Practice, and looks at it in the context of all natural perils. The report found that the proportion of “affordability stressed” households – those that spend more than one month’s worth of their gross annual income on home insurance – rose from 10% to 12%. These households spend on average 8.8 weeks of their income on home insurance, which is more than seven times what the average household spends. Overall, the report estimated that 1.24m Australian households – or nearly one in eight – are facing home insurance affordability stress, up from one million households a year ago. “This is the largest increase in home insurance premiums I have seen over the last two decades,” Mr. Paddam said. “Half the increase in home insurance premiums relates to building cost inflation, which has spiked during the past two years due to supply chain shortages. There’s also been an increase in natural disasters and higher reinsurance costs, driven by the climate change impacts we’re already seeing”. “Based on science, we expect these home insurance affordability pressures are likely to continue to worsen due to climate change. If we don’t take policy action now, we can expect to have more people abandoning home insurance. Without insurance, households will struggle to recover from disasters and governments, taxpayers, charities and many informal means of support will be left to assist. This usually results in households receiving some support but will not allow them the full economic recovery they would receive if insured.” The research found that the hardest hit households are in the flood-prone Northern Rivers region of NSW, as well as north Queensland and Western Australia, where cyclone risk is high. Among most of the affordability-stressed households in these areas, more than half of their home insurance premiums relate to natural peril costs due to floods. An estimated 171,000 households across Australia were said to be enduring extreme affordability pressure, with riverine flood risk contributing more than half of their home insurance premiums. The researchers estimate that the total flood premium for these 171,000 households, if they were fully insured, to be A$1.5bn per annum, or A$8,800 on average per household. “At the moment, A$1.5bn is the size of the problem,” Mr. Paddam said. “That is our estimate of flood insurance that could already be considered unaffordable.” The research included an analysis of the expected impact of the federal government’s Cyclone Reinsurance Pool, which began phased introduction in July 2022. The analysis found that if all households in areas rated as cyclone-exposed purchased insurance, the Pool is expected to reduce total cyclone premiums by 26% (A$370m) and flood premiums by 9% (A$230m), noting that cyclone-related flood is covered by the Pool. Riverine flood risk The Institute’s second report, Funding for Flood Costs: Affordability, Availability and Public Policy Options, examines riverine flood risk alone and outlines a package of short, medium, and long-term policy measures that should be considered by governments, insurers, and other stakeholders to reduce affordability stress for households who are also facing the highest risk. The measures include continual investment in effective risk reduction initiatives complemented by government actions such as reform of insurance-based taxes or targeted subsidies to provide an immediate impact and encourage the take-up of insurance. They also include the introduction of interim cost-sharing measures, like an insurance or reinsurance pool that includes riverine flood or other types of government funding, if policymakers decide relief needs to be accelerated. Insurance pools generally aim to share the risk and cost across a wide group (or ‘pool’) so that insurance is made more affordable for higher-risk policyholders through a cross-subsidy mechanism. The report’s lead author Evelyn Chow, Head of Portfolio Management APAC for Swiss Re, said, “Risk reduction is the only way ultimately to address affordability stress by lowering the underlying risk and therefore costs in a sustainable way, especially when we factor in climate change. An optimal mix of measures could be supported by using better data, technology and climate risk frameworks. “If the government was to give consideration to an insurance pool, any future model would need to consider the fact that flood risk is highly localized in Australia among a relatively small number of households with significant exposure.” Actuaries Institute CEO Elayne Grace said, “Flood insurance affordability pressures are acute and there is a need to address this problem urgently. We need to tackle this problem holistically, with a well-designed suite of policy measures to achieve long-term benefits for all Australians.” Other policy measures supported by the Institute include: Replacing insurance taxes, such as stamp duty, and the NSW Emergency Services Levy with alternative revenue sources that are more equitable and efficient. Strengthening and future-proofing of building codes and land use planning rules to improve the resilience of communities. Improving the collection and use of up-to-date data by governments, agencies and the private sector to improve flood risk management and strategy and inform the public about a property’s flood risk. Source: asiainsurancereview.com

Top executives from the PIRA member companies attend the Forum: Towards a Sustainable Catastrophe Insurance Rate held at the City Club yesterday 14 August 2023. Forum Attendees: 1 Cooperative: Chris Marquez, Jerwin Jay Masigan; AIG: Gary Wong; Alliedbankers: Domingo Perfecto, Ritchie Dones, Eileen Clemente; Alpha: Mar Corpuz, Arnie Bauto; Asia Insurance: Myrna Puzon; Asia United: Emmanuel Que; BPI/MS: Ichiro Iwabuchi, Jose De Vera; CARD Pioneer: Melinda Grace Labao, Anna Chan; CLIMBS: Junevic Item, Louie Jopson; COCOGEN: David Roy Padin, Arlene Garcia; Commonwealth: Jose Paolo Noche, Rowena Ambrocio; Corporate Guarantee: Windsor David, Joan Calayan-Jardenaso; Country Bankers: Elmer Laureto; Etiqa Philippines: Glenn Warren Navea, Fortune Gen: Manuel Maloles, Prima Christie Obias; FPG: Sharon Marjorie Navarro, Pio de Roda, Gigi; GSIS: Valerie Marquez; Insurance Company of North America: Atty. Ma. Patricia E. Foria, Mari Rachelle L. Canta; Intrastrata Assurance Corporation: Sheila Crisostomo; Liberty: Antonio Cabusao; M Pioneer: Kevin Uy; MAA: Danny Go, Martin Dela Rosa, Werhner Parel; Malayan: Denden Tesoro, Paolo Abaya; Manila Bankers: Daniel Narag; Mercantile: Edwin Salvan; Milestone: Virgilio Cruz; Nat Re: Allan Santos, Francis Alvarez; Oona: Ramon Zandueta, Tess Abraham; Oriental: Kent Cotoco, Angel Tolentino, Danilo Cabero; Pacific Union: Joselito Pinlac; Paramount: Joli Wu, George Tiu; Perla Compania: James Alfred Lim; Petrogen: Josephine Triviño, Jose Amiel De Jesus; PGA Sompo: Joel Aguilos; Philippine British: Ronel Serapio; Philippines First: William Tanco, Mauleon Amado; Pioneer Insurance: Armand Pesigan; Premier: Antonio Quianzon, Carlos Bautista; Prudential Guarantee: Joel Belardo; Seainsure: Rebecca dela Cruz, Ronnie Miradilla; SGI: Leandro Estrera; Starr: Derick Narvacan, Jeff Besido; Sterling: Art Reyes, Angelito Dumapi; Stronghold: Joel Almagro, Jun delos Reyes; Travellers: Romeo Arzadon, Judeus Mandap; Visayan: Kenneth Go; Western Guaranty: Johnson Kwan; PIRA: Jhun Benedicto, Mitch Rellosa, Roger Concepcion, Mallou Lorenzo, Agnes Silaya, Alex Pablo; Guest Moderator: Rudy Ang, Francis Papa

The Insurance Commission (IC) has expressed optimism that the country's insurance density and penetration would improve on the back of financial literacy programmes and digitalization. IC Commissioner Mr. Reynaldo A Regalado, in his keynote speech at the first Life Insurance Convention Philippines in Cebu City last week, said that while total assets, net worth, invested assets and premiums increased based on figures collated by the Insurance Commission as of the first quarter of 2023, the insurance density and insurance penetration remained low. The country’s insurance density in 1Q2023 stood at PHP872.56 ($15.32) while the insurance penetration rate was 1.75%, reported the newspaper, Manila Standard. However, referring to 1Q2023, he added, “I am optimistic that our efforts are bearing fruit, especially as total premiums collected by life insurance companies from their new business has increased to PHP15.47bn, or by 18.16% year-on-year.” “To further promote financial inclusion, the Insurance Commission has also introduced digitalization programs such as the online submission and approval of new insurance products and is set to release the regulatory guidelines on Islamic insurance within the year.” Source: asiainsurancereview.com

Less than half of local government properties were insured with the Government Service Insurance System (GSIS) as of 31 December 2022, according to the agency. While first-class municipalities are mandated to insure their properties, not all of them are fully compliant, reported Rappler.com. The GSIS observed that at least 9% of first-class cities and 28.18% of first-class municipalities had not secured insurance for their properties. The GSIS reported that merely 31.69% of 2nd- to 6th-class municipalities had opted to insure their properties. This was revealed during a Senate committee deliberation on 1 August 2023, on a Bill that seeks to require local governments to insure all of their buildings and physical structures. At present, the Property Insurance Law requires every level of government, except a municipal government below first class, to insure its properties. In the Bill’s explanatory note, Senator JV Ejercito highlighted the vulnerability of the Philippines to natural disasters. Citing a report from the Asian Centre for Flood Control, he said eight of the world’s 10 most disaster-prone cities were in the country. On average, 20 typhoons hit the Philippines every year, according to the weather bureau. Source: asiainsurancereview.com

The ASEAN Reinsurance Programme (ARP) aims to enhance reinsurance education and talent development in the region. It is an initiative under the ASEAN Insurance Education Committee and the ASEAN Reinsurance Working Committee and managed by the Insurance Institute of the Asia-Pacific (IIAP) in collaboration with the Singapore College of Insurance (SCI), the Malaysian Insurance Institute (MII), the Thailand Insurance Institute (TII) and DAI, Indonesia. The ARP is a first of its kind, multi-pronged holistic talent and professional development initiative that combines technical training programmes with simulation and internships. Have yourself ready by accessing here.

"Reinsurers have done mainly two things: withdraw from the market or continue to give support but at a limited amount" Driven by increased risk exposures to natural calamities because of climate change, reinsurance rates in the Philippines have surged by 50%, making nonlife products more costly. Officials of Malayan Insurance said that premiums for nonlife policies have been rising largely due to the hardening of the reinsurance market as well as the abysmal risk rating of the Philippines. In a report from the Philippine Star, Malayan Insurance senior vice president and chief underwriting officer Eden Tesoro said that the rise in cost hit the Philippines harder as it is a catastrophe-exposed country. The pandemic’s continued ripples as well as global geopolitical tensions also continue to pile on the uptick. “Reinsurers have done mainly two things: withdraw from the market or continue to give support but at a limited amount,” Tesoro said. “Now, they have priced it much more than what it was before. And when you have a key ingredient that increases its cost, that also increases the price of non-life products.” Tesoro also noted that while the industry has gotten away with limited increases in the past few decades, the rise has been sudden and significant this time around. She said that such a huge increase would likely stay the same for another year as reinsurers do not just look at past instances but also pricing for exposure and potential hit. Echoing the sentiment made by another insurance boss a few months back, Tesoro said that various national and local government taxes and fees are adding to the burden being presented by the current reinsurance situation. “We are not saying that we should not be taxed. But to review where we are if we compare ourselves to our Southeast Asian peers,” Tesoro said. Currently, the insurance market in the Philippines pays out 24%-25% in combined taxes compared to the 7%-12% for its neighbours. Source: insurancebusinessmag.com

MANILA, Philippines — The Philippines is seeing a 50 percent surge in the cost of reinsurance amid increased risk to natural calamities as climate change worsens, making non-life insurance products more expensive. In a briefing yesterday, officials of Malayan Insurance Co. Inc. said premiums for non-life insurance products have been rising largely due to hardening reinsurance rate and poor risk rating of the Philippines. It should be noted that reinsurance coverage keeps companies solvent and operational despite paying for large losses. It is the largest component in every insurance product. Malayan senior vice president and chief underwriting officer Eden Tesoro said the cost of reinsurance has gone up by 50 percent this year, especially for catastrophe-exposed countries like the Philippines. Also factored in are the impacts of the pandemic and global tensions that drove prices up. “Reinsurers have done mainly two things: withdraw from the market or continue to give support but at a limited amount,” Tesoro said. “Now, they have priced it much more than what it was before. And when you have a key ingredient that increases its cost, that also increases the price of non-life products,” she said. For instance, an individual that has a house insured is now paying a premium of P3,798.63, up from P2,532.42 previously. Tesoro explained that over the past three decades, the industry can get away with a limited increase, sometimes even zero, but this has now jumped significantly. This, as reinsurers globally tend to recover not only from a certain region, but across all areas of operations. The Philippines topping the World Risk Index 2022 in terms of risk from natural calamities and conflict also has a negative impact on how global reinsurers price Philippine risks. Tesoro emphasized that such an increase would likely stay the same for another year as reinsurers do not just look at past instances, but are pricing for exposure and potential hit. “These things do not change overnight and would likely stick for a while,” Tesoro said. As such, the non-life insurance sector are losing clients given more expensive premiums, with the retail segment the first to be eroded, such as household and personal insurance being the most price sensitive. Tesoro said adding to the challenge is the burden of coping with various national and local government taxes and fees, such as value-added tax, documentary stamp tax, and other service taxes, among others. The Insurance Commission and the private sector are now reviewing the insurance tax system to make it more reasonable. “We are not saying that we should not be taxed. But to review where we are if we compare ourselves to our Southeast Asian peers,” Tesoro said. The insurance sector is currently slapped with about 24 to 25 percent in combined taxes as compared to the seven to 12 percent in neighboring economies. Further, Tesoro is looking at a further decline in the share of the sector to the country’s gross domestic product (GDP) as products become more expensive. Currently, insurance penetration of the sector is at 1.75 percent of GDP. Of that, less than 0.5 percent is accounted for in the non-life segment. A member of the Yuchengco Group of Companies, Malayan is authorized to underwrite the following: aviation, engineering, fire, property, marine, miscellaneous casualty, motorcar, personal accident, travel insurance, and surety bonds. Source: philstar.com

As the UK makes world leading strides in the race to net zero, insurers are at risk of being left behind. Tom Helm, formerly Chief EV Officer at Abacai and Head of EV Strategy at LV =, reveals the EV unique risks impacting insurance and the front runners driving the EV revolution. Who are the trailblazers driving the global EV revolution? What qualities set them apart as frontrunners? The obvious one is Tesla. In only 20 years Tesla have revolutionized a 100-year-old industry. The Tesla Model Y is now the best-selling car (not EV but car overall) in some countries. It’s not just the fact they are building EV’s but their entire approach to car production from in housing as much as possible, to direct sales and having their own charging network their desire to own every part of the value chain means they have unparalleled control over the product and customer experience. When we look at China though, we shouldn’t forget Build Your Dreams (hereafter BYD) who are on course to be the largest EV manufacturer in the world. Whilst they might be a new name in the UK and Europe, BYD have been going for quite a while producing high quality EV’s at a low price point. Their new Sodium-ion battery looks like a gamechanger when it comes to affordable EV’s with a sub £10,000 EV possible with it. “In only 20 years Tesla have revolutionized a 100-year-old industry.” How can insurers keep pace with innovation in mobility? Do they have a role to play in shaping the future of transportation? “insurers can be a real engine for change.” Insurers are vital in shaping the future of mobility they can be champions for the latest in mobility through innovative products and keen pricing or blockers through restrictive underwriting criteria and price loading. We’ve seen in the commercial space where insurers can be a real engine for change through reducing or removing capacity for coal fired power plants whilst bringing new products to market for solar farms, insurers can do the same in the mobility space by bring products to market that support people in the switch to electrification. Are insurers ready for the unique risks associated with electric vehicles? What should they do to prepare? Some insurers are further ahead than others. When it comes to EV’s it’s still a box with 4 wheels with people inside so the biggest cost for any insurer will be bodily injury however when it comes to understand the risk and ensuring cost effective repair insurers need to be preprepared. Instant torque in an EV means supercar acceleration in business saloons and family SUV’s which leads to a slightly different risk profile. When it comes to the repair does the insurer have a repairer with the capability to repair an EV? Have they got the right skills and qualifications, do they have the right tools, are they able to discharge and charge a car? These are all the considerations insurers need to think about to be ready for insuring EV’s. Will electric vehicles become a permanent part of the automotive landscape? What could the fuel of the future look like? When it comes to car’s EV’s will be the mainstream solution. On a total cost of ownership basis, they are already cheaper than their internal combustion engine competitors and the cost of EV’s are dropping all the time. Elements that had limited their appeal such as range are improving all the time with most new EV’s easily able to do more than 200 miles and with the top end EV’s not touching 400 miles of range. Charging times are getting faster too with the latest cars and ultra rapid chargers able to charge a car in less than 15 minutes. We might also see Hydrogen where the weight is a consideration so transport like heavy commercial, marine and aviation. “ultra rapid chargers are able to charge a car in less than 15 minutes.” Source: marketforcelive.com

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The health maintenance organization Caritas Health Shield Inc. (CSHI) is facing possible liquidation after the Insurance Commission (IC) placed it under receivership and prohibited it from doing business. Also, two of CSHI’s subsidiaries—Caritas Financial Plans Inc. and Caritas Life Insurance Corp.—are in trouble and the IC has placed them under conservatorship in an effort to keep them afloat. Caritas Manila, the social arm of the Roman Catholic Church in the Philippines, has clarified that it is not related to these groups. In a public advisory, Insurance Commissioner Reynaldo Regalado said CSHI was placed under receivership effective Aug. 1 and assigned lawyer Jay Ramirez of the IC’s conservatorship, receivership and liquidation division as interim ex officio receiver of the HMO. From that date, CSHI “may still submit a proposal for rehabilitation within 90 days, otherwise [the company] will be placed under liquidation,” Regalado said. The IC also issued an order suspending all payment by CSHI of claims, until further notice. CSHI is further barred from selling, transferring or disposing of any asset without the approval of the IC. CSHI also may not pay any liabilities nor collect premiums from members. According to CSHI records from the annual stockholders’ meeting held last March 1, the company’s liabilities from its products sold from 1998 to 2017 ate up 90 percent of its reserves. Also, CSHI incurred a net worth deficiency due to the strict application of both accounting and actuarial standards imposed since 2015. This was when the HMO business sector was placed under the regulatory authority of the IC. Source: inqm.news