Slowing economies could weigh on Asia Pacific insurers' growth, says S&P Global Ratings in a new report. However, rising risk awareness and low insurance penetration underpin demand for protection. The report, titled “Asia-Pacific Insurance Midyear Outlook 2023 — Higher Rates And Reinsurance Test Ratings Boundaries”, adds that stable credit trends prevail across the sector. Of the Asia-Pacific insurers that S&P rates, 90% have a ’Stable’ outlook. Other key takeaways from the midyear outlook are: • High-for-longer interest rates (except in China) could further dent asset valuations and cause unrealised losses. • Forex risks could mount for insurers with significant overseas investments (e.g., in Taiwan and Japan). High hedging costs to erode insurers’ earnings. • IFRS 17 and new regulatory frameworks could see changes to strategies and key performance indicators. Insurers also face higher operational costs. Key risks The report outlines as well several insurance key risks: Source: asiainsurancereview.com

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The Financial Services Agency (FSA) of Japan is investigating an insurance fraud at the used-car and vehicle-repair chain Bigmotor. The dealership and car repair company is alleged to have deliberately damaged customers' vehicles and then received higher-than-actual repair costs from insurance companies. The Jiji Press has reported that the FSA plans to order seven non-life insurers under the insurance business law to report on their ties with Bigmotor. The seven are four major insurers—Tokio Marine & Nichido Fire Insurance, Sompo Japan Insurance , Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance—and three medium-sized insurers, including Kyoei Fire & Marine Insurance. Based on their reports, the FSA will investigate whether there have been problems in protecting policyholders. Major non-life insurance companies introduced Bigmotor repair shops to policyholders who had been involved in motor accidents or other vehicle issues. The insurers seconded dozens of employees to Bigmotor also sold motor insurance policies to customers who purchased used cars at the dealership. The company allocated motor liability insurance deals to partner insurers based on the number of vehicles they referred to Bigmotor for repairs. Furthermore, Bigmotor is suspected of having concluded fictitious automobile insurance contracts. According to people familiar with the matter, a Bigmotor outlet in Fukui Prefecture, central Japan, was found to have fabricated insurance contracts for vehicles including one scheduled to be scrapped. The FSA is also investigating whether there were any problems with Bigmotor's operations as an insurance agent and is expected to order the company to submit a report on the matter shortly. Source: asiainsurancereview.com

The Insurance Development Forum an industry-led public-private partnership supporting the growth and development of insurance-related resources and capabilities to help achieve the collaboration with the Micro-insurance Network and the Philippine Insurers and Reinsurers Association as well as the Insurance Institute for Asia and the Pacific, Inc.is staging a two-day inception workshop. The Objective of the workshop is to convene relevant national and international stakeholders that are committed to developing the inclusive insurance market in the Philippines. It will provide the opportunity to identify projects already underway as well as barriers to reaching scale. Hopefully this workshop can also kick-off the development of a country-gap analysis and a roadmap of activities in order to reach a target level of scale per risk type by 2025. Finally, it aims to identify a core set of individuals from relevant organizations who would be willing to invest the time needed to drive a Country Task Force to support the design and implementation of the Strategy. The Workshop will be held on 03 & 04 August 2023 at Insurance Institute for Asia and the Pacific (IIAP), 26th Floor BPI-Philam Life Makati, 6811 Ayala Avenue, Makati City, Metro Manila, morning and afternoon coffee and light snacks will be served as well as lunch on both days. For additional information kindly visit: https://www.insdevforum.org/working-groups/inclusive-insurance/

In the Asia-Pacific region, natural disasters in the first six months of this year resulted in overall losses of approximately $7bn, of which roughly $3bn was insured, says Munich Re. In a report on natural disaster figures for the first half of 2023, Munich Re says that in New Zealand, high losses were caused by flooding following heavy rainfall, as well as Cyclone Gabrielle making landfall. Assets worth some $4.3bn were destroyed, of which around $2.9bn was insured. Large areas of China and Southeast Asia suffered recurrent heat waves between March and June, breaking many local and seasonal records. Tianjin, a city with over 10 million inhabitants, measured a record high of 41.4ºC. For Asia as a whole, the months of February to June were the fourth warmest on record, as was June alone. Globally, insurers bore around 35% of worldwide losses in terms of the average half-year losses in the period 2013–2022. The first half of 2023 was a continuation of the recent run of years with high losses. While the overall losses of $110bn were lower than those in the first half of 2022 ($120bn), they were still well above the average for the last 10 years ($98bn, inflation-adjusted). The same is true for the insured losses of $43bn (previous year: $47bn; 10-year average for half-year losses: $34bn). Less than 40% of overall losses in the first half of the year were insured – evidence of the large insurance gap that persists in many countries for multiple natural hazards. Costliest natural disaster in 1H The earthquake in Turkey and Syria was by far the most devastating natural disaster in the six months of the year. On 6 February, a series of tremors struck southeastern Turkey close to the border with Syria. They were the strongest earthquakes in Turkey in decades. A very large number of buildings, roads and bridges were destroyed. Around 58,000 people lost their lives. As a result, the global number of victims of natural disasters in the first half of the year (some 62,000) was higher than it had been since 2010. Overall losses from the earthquakes in both countries are estimated at around $40bn, with Syria accounting for roughly $5bn. Climate change and El Niño – 2023 could be the warmest year ever “The effects of climate change are having a stronger and stronger impact on our lives. The first half of 2023 was characterized by record temperatures in many regions of the world, very high water temperatures in various ocean basins, droughts in parts of Europe, and severe wildfires in northeastern Canada,” said Ernst Rauch, chief climate and geoscientist at Munich Re. The global average temperature for June was the warmest ever recorded, up by more than 1.2°C compared to pre-industrial times. “As in 2016, the natural climate phenomenon El Niño is playing a role in 2023. It is characterized by a temperature swing in the Pacific that influences extreme weather in many regions of the world and causes temperatures to temporarily rise further. All the same, research on global temperature trends is unequivocal: rising water and air temperatures worldwide are mainly driven by climate change, in turn causing more weather-related natural disasters and financial losses,” Mr. Rauch added. Source: asiainsurancereview.com

Domestic non-life insurers are facing increased negative pressure on the balance sheet strength and operating performance amid rising challenges in accessing reinsurance capacity, says AM Best. The global credit rating agency is revising its outlook on the Philippine non-life insurance market to ‘Negative’ from ‘Stable”, citing the challenges the sector faces. In a new Best’s Market Segment Report, titled “Market Segment Outlook: Philippines Non-Life Insurance”, AM Best notes that the market historically has relied on reinsurance to mitigate underwriting volatility and exposure to catastrophe accumulations, and to subsidize acquisition costs. Hardening reinsurance market With hardening reinsurance market conditions globally and a reduced appetite for property catastrophe risks in the Philippines, carriers struggled to place proportional reinsurance programmes in the most recent 1 January and 1 April reinsurance renewals. This inevitably led to changes in the reinsurance programmes for many non-life insurance companies in the Philippines. “Property insurance is the largest line of business in the Philippines and has represented 30% to 40% of gross premiums in recent years,” said Chris Lim, associate director, AM Best. “Faced with shrinking proportional reinsurance capacity and a reluctance to lose market share, domestic non-life insurers may have limited alternatives but to increase their premium retention and assume higher net retained liabilities.” Underwriting performance According to the report, AM Best expects that underwriting performance would be subject to greater volatility, driven by increased retained exposure to natural catastrophe risks. With higher retention, non-life insurers bear a heightened sensitivity to climate risks and modelling inaccuracies. Underwriting performance for motor insurance also is likely to be pressured given various headwinds over the near term, including a post-COVID claims frequency normalization. Silver lining Mitigating factors to the negative outlook include insurers’ strengthened capitalization in recent years, supported by a phased increase in the minimum capital requirement. “This enhanced capital position may provide some Philippine non-life companies better opportunities to support portfolio diversification via expansion into non-property lines; for example, travel and personal accident insurance,” said Michael Dunckley, director, analytics, AM Best. “Greater demand for motor insurance given a higher number of vehicle sales projected for 2023 is likely, while growth of the domestic InsurTech space, as well as an increasing use of e-commerce apps, also present opportunities for insurers.” Source: asiainsurancereview.com

The inaugural Insurance Trust Indicator Study (ITIS) shows that consumers and businesses have good levels of trust in the insurance industry in Singapore, with all the trust scores in the moderate to strong range. This study is commissioned by the Insurance Culture and Conduct Steering Committee (ICCSC) and will be conducted annually by Forrester over three years. It is part of the ICCSC and the industry’s effort to assess the levels of trust in the insurance industry and identify areas where the trust of consumers and businesses in life insurers, general insurers, and insurance intermediaries (e.g. insurance agents, brokers, financial advisers) in Singapore can be improved. The ITIS involved surveying more than 2,000 consumers and over 500 business employees (managerial-level and above) in Singapore between February to March 2023. The following are the key findings from the ITIS: Consumers and businesses view insurers to be trustworthy, with trust levels among businesses averaging higher than consumers. Life insurers achieved strong trust levels among businesses, and slightly lower trust levels among consumers. For general insurers, trust levels were strong across both consumers and businesses. Overall, insurers achieved a trust indicator score between 68 to 80. Consumers and businesses view insurance intermediaries to be at moderate trust levels. Overall, insurance intermediaries achieved a trust indicator score between 68 to 74. Higher trust leads to an increased willingness to maintain and deepen relationships with brands. Consumers and businesses that have higher trust in their insurers and intermediaries are more likely to recommend, stay with and purchase additional products and services from them. The study also established linkages between higher trust and positive outcomes around branding, engagement and forgiveness. Breaches of trust carry reputational and financial risks for the insurance industry that extend beyond the individual firm. The study tested nine scenarios of trust breaches to explore both the triggers and relative breaking points of consumers' and businesses' trust. Examples of trust breaches include legal, regulatory, and data breaches that expose customers' confidential information. Such breaches may result in consumers and businesses’ decisions to reduce their current product holdings, limit additional purchases or seek alternative providers. Dr Khoo Kah Siang, ICCSC chairperson, said, “Results of the inaugural Insurance Trust Indicator Study show that the industry can certainly do more to bolster trust among consumers and businesses alike. The best practice papers rolled out by the ICCSC will be a good starting point for insurance companies to adopt and act upon. It is our collective responsibility to strengthen relationships with the public by elevating culture and conduct standards in Singapore.” Mr. Marcus Lim, assistant managing director (Banking and Insurance), Monetary Authority of Singapore, said, "Trust is at the heart of a well-functioning financial sector. The value of trust is far from illusive, and the ITIS demonstrates that trust has a tangible quality that is measurable. We commend the ICCSC’s sustained efforts to foster strong, long-term relationships between insurers, insurance intermediaries and customers.” Following the release of the first three best practice papers in 2022, ICCSC will be releasing its fourth paper “General Insurance Intermediary Best Practices — Promoting Ethical Culture and Conduct in Insurance Intermediaries (General)” within the year as part of the committee’s ongoing efforts to elevate standards in the nation’s insurance industry. Going forward The ICCSC will study the findings of the ITIS and work closely with stakeholders to strengthen trust levels in the insurance sector. The ITIS will also be conducted in 2024 and 2025 to monitor shifts in consumer and business sentiments, benchmark year-on-year performance, and identify key improvement areas to continuously build trust in Singapore’s insurance industry. This is in keeping with the ICCSC’s broader goal to elevate culture and conduct standards in the industry. The full Insurance Trust Indicator Study (ITIS) report can be found here. The ICCSC, consisting of senior leaders in the industry, was established in December 2019 to foster sound culture and strengthen standards of conduct among insurers in Singapore. The committee is supported by the General Insurance Association of Singapore, the Life Insurance Association and the Singapore Reinsurers’ Association. Source: asiainsurancereview.com

A risky trade in sanctioned crude oil is taking place off the coast of Johor. “An accident waiting to happen,” tweeted a senior analyst at Lloyd’s List Intelligence. Michelle Wiese Bockmann had spotted a cluster of 43 oil tankers jostling in international waters off the coast of Malaysia last November. The advanced age of the vessels (20 years on average), as well as their amorphous owners and unknown insurance status, were all cause for concern. The tanker traffic jam, she concluded, was a maritime safety hazard in one of the busiest international shipping lanes. The proliferation of VLCCs (Very Large Crude Carriers) near Johor was an early indicator of a major shift in global oil flows. In December 2022, Europe stopped importing Russian oil and petroleum products. Crude prices were capped at $60 a barrel as part of the sanctions package. Two months later, G-7 nations imposed another price cap on premium products like diesel. With Europe officially off-limits, Russian oil flooded into the Asian market. Energy industry experts were bracing for impact. “If the price cap is imposed, economic theory will collide with the messy reality of the market,” predicted Ben Cahill, a senior fellow at the Center for Strategic and International Studies in Washington, D.C. The price cap led to a noticeable uptick in activity by the “dark fleet,” industry shorthand for oil carriers that use deceptive shipping practices such as hiding their location, frequently changing flags, or obscuring their ownership structure. These vessels risk losing insurance coverage if their sanctions evasion activities come to light. According to Windward, Singapore is among the top three ports of origin for dark fleet ships. The international waters off the coast of Malaysia have been a hub of dark fleet activity for more than a decade. Tankers ferrying oil from sanctioned nations like Iran and Venezuela have routinely converged in the area to carry out ship-to-ship transfers of crude. The cargo is stored in VLCCs for blending and is sold under brand names like Mal Blend or Singma, masking the product’s country of origin. Small, independent refiners in China, known as “teapots,” are the primary market for the low-cost blends. Source: thediplomat.com

IC Commissioner Regalado, clearly relaxed and in high spirits, engaged non-life industry leaders in a friendly exchange during the PIC general membership meeting held at the Makati Sports Club this afternoon. Delivering a spontaneous but meaningful speech, the Commissioner shared the vision and future priorities of his office, citing digitalization and service to the public foremost in his agenda. He pitched and reaffirmed his intention to work together with all industry groups and associations to advance the Commission’s and the Industry’s commitment to better protect and serve the general public. PIRA officers, led by Vice-Chairman Arturo Reyes, Executive Director Michael Rellosa and General Manager Rogelio Concepcion joined the roster of industry leaders, both past and present, in honoring and providing their unwavering support to the Commissioner.

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