Cyber security attacks over the next 12 months will increasingly target critical and sensitive financial data stored by organizations according to a new report released by Deloitte Center for Controllership. For the new report, Deloitte surveyed more than 1,100 executives from the C-suite and other executives during a webcast in October 2022. The participants were asked about attacks targeting the financial and accounting data of their organizations. Among those surveyed, 34% said that their accounting and financial information was specifically targeted by cyber criminals over the past year. Within that group, 22% said they were hit by one such attack, while 12% said they were victimized more than once. Almost half (49%) of the executives polled expect both the volume and size of cyber attacks targeting this type of data to increase in 2023. Some 22% said they anticipate no change, while only 3% said they expect such attacks to decrease. Since financial and accounting data is such a lucrative and tempting target for cyber criminals, a close relationship between an organization's cyber security group and its financial group seems in order; however, just 20% of the respondents said that the two groups in their business are working together closely and consistently. Some 42% said the groups in their organization are somewhat aligned, working together as needed but more inconsistently and 11% said the two groups in their environment don’t work together at all. Recognizing the importance of a closer relationship between cyber security and finance, 39% of those surveyed said that they expect an increase over the next 12 months in the way the two groups work together. Some 29% said they anticipate no changes, while just 3% said they expect the relationship between the two groups to decrease. A press release by Deloitte said, “While there may not have been much need for accounting, finance and cyber teams to work closely in the past, we strongly recommend that now these teams try to learn each other’s languages and tighten their working relationships across silos.” Source: asiainsurancereview.com

Over 15m people, with more than half of these living in China, India, Pakistan and Peru, are at risk from flooding caused by glacial lakes according to a new international study. The study published in a recent issue of Nature Communications and conducted by an international team of scientists has revealed that the number of glacial lakes has grown rapidly since 1990 as a result of climate change and at the same time, the number of people living in these catchments has also increased significantly. Newcastle University head of physical geography and co-author of the study Rachel Carr said, “Understanding which areas face the greatest danger from glacial flooding will allow for more targeted and effective risk management actions which in turn will help minimize loss of life and damage to infrastructure downstream as a result of this significant natural hazard.” The research team looked at 1,089 glacial lake basins worldwide and the number of people living within 50kms of them, as well as the level of development in those areas and other societal indicators as markers of vulnerability to glacial lake outburst floods (GLOFs). They then used this information to quantify and rank the potential for damage from GLOFs at a global scale and assess communities’ ability to respond effectively to such a flood. The results highlighted that 15m people live within 50km of a glacial lake and that high mountain Asia (which encompasses the Tibetan plateau, from Kyrgyzstan to China), has the highest GLOF danger, with 9.3m people potentially at risk. India and Pakistan have around 5m exposed people – about one third of the global total combined. Newcastle University doctoral researcher and lead author Caroline Taylor said, “This work highlights that it’s not the areas with the largest number or most rapidly growing lakes that are most dangerous. Instead, it is the number of people, their proximity to a glacial lake and importantly, their ability to cope with a flood that determines the potential danger from a GLOF event.” What are GLOFs? As the climate gets warmer, glaciers retreat and meltwater collects at the front of the glacier, forming a lake. These lakes can suddenly burst and create a fast-flowing GLOF that can spread over a large distance from the original site – more than 120km in some cases. GLOFs can be highly destructive and damage property, infrastructure, and agricultural land and can lead to significant loss of life. Source: asiainsurancereview.com

It is still too early to estimate the total economic and insurance impact of this significant event. However, based on the widespread scope of extreme damage on property and infrastructure, it was initially anticipated that total economic losses will reach into the billions of US dollars, says global reinsurance giant Munich Re. In its initial assessment of the Turkey-Syria earthquakes, Munich Re says that a relatively high portion is going to be covered by insurance. As the Natural Catastrophe Insurance Institution (DASK) noted, the take-up rate of the compulsory earthquake insurance scheme is approximately 52% in Malatya, 45% in Adiyaman and 65% in Gaziantep. These are three of the 10 southern provinces in Turkiye hit by the quakes. The series of severe earthquakes struck southeastern Turkey close to the border with Syria on 6 and 7 February. The two most severe shocks reached magnitudes of 7.8 and 7.5 according to the United States Geological Survey (USGS). They were the most severe earthquakes to hit Turkey in decades. Many thousands of people died, and an enormous number of buildings were destroyed completely. Northern Syria was also very badly affected. Turkey and neighbouring countries are highly exposed to earthquake hazards due to two active plate boundaries, the East Anatolian and the North Anatolian Fault Zones. The recent quakes occurred on the East Anatolian Fault, where the Anatolian block is pushed westward by the collision of the Eurasian and Arabian plates. Furthermore, the current events again showed the high vulnerability of the Turkish building stock. In Turkey, after the 1999 earthquakes in Izmit and Düzce with more than 17,000 fatalities, an insurance pool was established by law in 2000 to mandatorily cover residential buildings against earthquake damage – the Turkish Catastrophe Insurance Pool (TCIP). As a result, the insurance density to cover homeowners against earthquake damage has increased to more than 50% countrywide. The sum insured is currently limited to TRY640,000 ($34,000) per dwelling. International insurers and reinsurers are covering the lion’s share of the pool. Munich Re has been a long-standing partner of the TCIP and is also currently participating in the reinsurance programme. Reliable estimates of the overall losses from the devastating earthquakes are not yet possible, nor for the insured losses. It is also still unclear which of the destroyed buildings are actually insured under the TCIP. Munich Re also said, “Catastrophe pools like the one in Turkey are a useful way for many countries highly exposed to natural disasters to provide affordable insurance protection against the financial losses from a disaster. In addition, the construction of buildings in high-risk areas needs to become resilient enough to better protect people during disasters.” The Natural Catastrophe Insurance Institution (in Turkish, Dogal Afet Sigortalari Kurumu [DASK]) is called Turkish Catastrophe Insurance Pool (TCIP) in English. Source: meinsurancereview.com

Swiss Re hosted a market event for its key clients last 7 Feb 2023 at The Peninsula Manila focusing on the topic "Closing the Nat Cat protection gap through quality data and robust modelling." Industry heads were invited as panelists for the discussion portion that followed, among them, Allan Santos, President and CEO National Re; Eden Tesoro, PIRA Chairperson; Erickson Balmes, IC Deputy Commissioner; Michael Rellosa, PIRA Executive Director

Insurable losses from the 6 February earthquakes that hit Turkiye and Syria are hard to estimate as the situation is evolving, but they appear likely to exceed $2bn and could reach $4bn or more, says Fitch Ratings. However, insured losses could be much lower, perhaps around $1bn, due to low insurance coverage in the affected regions, Fitch adds. The earthquake and a series of aftershocks struck southern and central Turkiye and western Syria on 6 February. It had a maximum magnitude of at least 7.8 and was the most severe earthquake in the region since 1999. This has led to several thousand fatalities and left hundreds of thousands of people homeless. Fitch says that the vast majority of insured losses will be covered by reinsurance, but the amount ceded is likely to be insignificant in the context of the global reinsurance market, with no implications for reinsurers’ ratings. Insurance coverage Insurance coverage is likely to be low in most of the affected parts of Turkiye and Syria. The Turkish Catastrophe Insurance Pool (TCIP) was created after the Izmit earthquake of 1999 to cover earthquake damage to residential buildings in urban areas. However, it does not cover human losses, liability claims or indirect losses, such as business interruption. Moreover, earthquake insurance cover is technically mandatory in Turkiye but is very often not enforced in practice. As a result, many residential properties are not insured, particularly in many of the affected areas, where low household incomes constrain affordability. Insurance coverage in the affected parts of Syria is likely to be similarly low, particularly given the economic effects of the country’s civil war. Fitch said, “The TCIP is heavily reinsured. We estimate that the reinsurance tower provides protection of just over $2bn, following the January 2023 reinsurance renewals, with an attachment point of around $300m.” Local and international commercial insurers that provide property and business interruption policies to industrial clients in the region will face claims as factories and infrastructure, including airports and ports, have been severely damaged. Fitch assumes that these covers are also heavily reinsured. Fitch does not expect catastrophe bonds to be significantly affected as the earthquake risk they cover in the region is mostly limited to the Istanbul area. Source: meinsurancereview.com

The PCIF presents a timely and convenient option for local insurers as the appetite of foreign reinsurers shifts from property CAT risks to other more stable and manageable lines as discussed at length in the two related articles. The shrinking cat treaty market may just be the final driver to convince more companies to participate in the PCIF. It is also worth taking another hard look at the benefits of the PCIF. Apart from providing an automatic proportional capacity, the facility presents the opportunity to leverage on the retentions of the Philippine companies and on global reinsurance costs due to economies of scale and better data. From the perspective of sustainability, the facility aims to Increase the catastrophe resilience of the Philippine insurance industry and provide the public with more inclusive access to catastrophe insurance protection. 1. Reinsurers see more stable and improved results in shift away from property CAT risks Many global reinsurance companies have shifted their business mix into casualty and specialty primary lines where pricing movement is still positive, according to a new AM Best report. The shift was prompted by increased losses from not only natural catastrophe events, but also by so-called secondary perils, along with the COVID-19 pandemic impact and economic uncertainty. The Best’s Market Segment Report, “Global Reinsurance: More Stable and Improved Results Following Shift from Property Catastrophe Risks”, released ahead of the Rendez-Vous de Septembre in Monte Carlo, says that a higher frequency of catastrophe events in the last five years is exerting significant pressure on the level of confidence users put in modelling tools, a key component in the pricing process. In addition, reinsurers are finding that not only the underwriting environment has become less predictable, but government action also has had a huge impact on market conditions. “One of the reasons behind the abundance of capital was the low interest-rate environment,” said Mr. Carlos Wong-Fupuy, senior director, AM Best. “Now that central banks are trying to control inflation, capital is becoming tighter, recession fears loom and asset valuation declines are hurting balance sheets in a way that catastrophe losses thus far have not been able to.” Pricing Even with rate increases, most reinsurers view current pricing on property catastrophe risks as still not high enough to compensate for the ongoing level of uncertainty, whereas casualty and specialty primary lines are more attractive as comparatively, they have more stable, predictable patterns. Social and economic inflation remains an issue, but current margins embedded in the pricing reward reinsurers adequately for the risk taken. Risks The AM Best report also notes that the long-term nature of casualty lines provides the opportunity to generate investment returns and dramatically reduce liquidity risk. “Although casualty and specialty lines are not immune from accumulation risk, as seen in major events such as the pandemic or the Ukraine invasion, they are considered to be more manageable and less frequent compared with a natural catastrophe on the property side,” said Mr. Wong-Fupuy. “Secondary perils also have become more prominent than ever.” AM Best still views the global reinsurance segment as very well-capitalized and disciplined. A number of re-alignment initiatives have been taking place for at least the last three years, and although the pandemic slowed the results of those efforts, the global reinsurance segment generated a combined ratio in 2021 that was below 100% for the first time in five years, at 96.4%, with a return on equity of 9.2%, compared with 2.3% in 2020. Carriers continue to invest significant resources to address the rapidly evolving risks that they face, and most highly rated companies have demonstrated the ability to adapt their business plans to changing market conditions and generate sustained profits. Reinsurers remain innovative due to their level of sophistication in risk selection, pricing, product development and capital management. Segment outlook For these reasons, AM Best is maintaining its 'Stable' market segment outlook for the global reinsurance industry. At the same time, AM Best recognizes that the strength and relevance of each driver underpinning the outlook remains in flux, with business profiles shifting to reflect the growing complexity of the risk environment at a global level. Mr. Wong-Fupuy said, “The balance between the volatility of recent experience and perceived margins embedded in current rates is what determines risk appetite. For certain types of risks, such as natural catastrophes, that recent volatility has become either too onerous, or for some reinsurers, unacceptable.” Source: asiainsurancereview.com 2. TMK exits treaty reinsurance following strategic review Tokio Marine Kiln (TMK) is to cease underwriting all treaty reinsurance business from 1 September due to poor performance of the portfolio and “challenging market conditions”, Insurance Insider can reveal. In an internal memo seen by this publication, the company said it is “in discussions” with its treaty reinsurance teams in London and Singapore about their future with TMK, including potential employment elsewhere in the firm. The traditional Kiln business was previously known for being a reinsurance and binders-focused leader in the market, but this position has been scaled back significantly. TMK was still known as a leader in the US cat treaty market, but CEO Brad Irick outlined in a January interview that the overall reinsurance book accounted for less than 10% of the carrier’s portfolio. The move comes amid widespread industry concern about the profitability of property reinsurance, particularly cat business, due to which a number of reinsurers have reduced their appetite. In June, Axis Re shocked the market when it announced it would discontinue its $700mn property reinsurance book, comprising both its cat and non-cat portfolio. A number of other carriers have cut their exposure to cat business specifically in recent months, including Scor and Everest Re. This publication revealed in late March that TMK launched a strategic review of its reinsurance business, at which point reinsurance head Will Curran stood down from this role. TMK’s memo to staff today said its review of the reinsurance business was prompted by “persistent performance issues and increasingly challenging market conditions”. In a statement to Insurance Insider, TMK said: “Following a recent and widely-reported strategic review, TMK confirms that it will cease underwriting treaty reinsurance business with effect from 1 September. “TMK’s treaty reinsurance teams are based in London and Singapore but the decision has no impact on any other TMK lines of business, including reinsurance written through other underwriting teams, which are unaffected.” The treaty team includes London underwriters Jeremy Walker, Lloyd Holmes, Paul Evans and Thomas Smart, as well as Singapore underwriters Boon Chuan Tay and Sok Cheng Moi, according to its website. It is understood that TMK is committed to its operations in Asia and is still investing in developing its presence in the region. The move also comes after a reduction across Tokio Marine Holdings in reinsurance exposure. The group sold its reinsurance platform Tokio Millennium Re to RenaissanceRe for $1.5bn in 2018. Kiln, which Tokio Marine bought in 2008, was historically a leader in reinsurance in the market, but it has scaled back this position significantly in the intervening years. Source: insuranceinsider.com

The best strategy to bridge the insurance protection gap in Asia depends on many factors, but it is crucial to understand it with a customer's lens on according to EY Asia-Pacific insurance sector leader Anita Sun-Young Bong. Speaking with Asia Insurance Review, Ms. Bong said, “When we talk about the protection gap, it’s typically from the insurer’s perspective, trying to convey a message to customers about what they lack or should have and prompt them to purchase insurance policies.” She said, “What is really needed is for insurers to adopt a different line, putting customers at the center of their transformation strategy.” Swiss Re has estimated this enormous protection gap at $83tn in Asia alone, providing a big growth opportunity for insurers that can establish meaningful relationships with new customers and increase their value over time. This is a huge untapped market of individuals and small businesses that have no insurance or insufficient coverage. Ms. Bong said, “During the last several years, the urgency around customer centricity has intensified as leaders outside the insurance industry put customers at the heart of rich, personalized experiences. “Insurers are making progress too, with more leaders recognizing how customer insights drive improvements in products, services and experiences. In that sense, changing consumer needs and expectations are both an invitation for insurers to innovate and a blueprint for their transformation programmes.” She said, “Specifically, customers are looking for more flexible, personalized and accessible protections for how they live and work today. They want to be confident that they are sufficiently protected, their premiums are fair and reasonable, and their insurers share their values, particularly as people put more and more emphasis on ESG principles, for example.” InsurTechs and other financial services startups have gained traction with on-demand and niche coverage, proving that consumers are willing to buy new and non-traditional insurance that more closely meet their needs. Ms. Bong said, “To satisfy new demand, engage new customers and retain existing ones, insurers will have to overcome their reputation for delivering sub-par experiences and emphasizing standardized policies and traditional channels over customer needs and preferences. That requires fully operationalizing customer centricity, embedding it deeply in every function and promoting teaming across the organization, as leaders in other sectors have done. She said, “Insurers that take an open-minded, proactive approach to change and remain agile in their innovation efforts will enjoy sustainable growth and secure market leadership in the decade to come, despite challenging economic conditions.” Source: asiainsurancereview.com

As the global economy continues to slide towards recession and cyber risks continue to escalate, the trends about how cyber security budgets for 2023 are evolving are a major cause of concern according to a new survey. The survey conducted in December 2022 by the Neustar International Security Council (NISC) has revealed that across the board budget cuts have become a normal state of affairs as nobody is sure when the economy will rebound. The NISC survey focused on how the present economic climate is affecting cyber security budgets. It found that 51% of the companies responding did not have sufficient funds in their budget to cover their complete cyber security needs and 11% only had enough budget to cover their most critical assets. This is troubling because attackers have not seemed to suffer at all from the flagging economy and attacks continue to provide an ever-present threat to companies. The survey found that less than one-third of IT and security professionals said their cyber security budgets would remain the same this year, while 6% expect them to fall. Of those, 44% said the budget stagnation or cuts will expose their businesses to more cyber risk. NISC senior vice president solutions Carlos Morales said, “Macroeconomic issues are driving down spending across all sectors, and the way a lot of leaders are handling it is by cutting across all programmes without careful consideration for where they’re making their cuts.” The NISC report is based on the responses of 304 senior-level professionals across the US, Europe, the Middle East and Africa. It found that four in five executives believe the C-suite and board of directors at their organizations understand the existing threat levels. But more than two-thirds of respondents agreed that constraints on their budgets would limit their ability to respond to these threats. The majority of respondents, 60%, said the most current risk is the rising sophistication of attacks, but more than half are also wary of the rising number of attacks. Source: asiainsurancereview.com

A new report by Beazley predicts 13% year-over-year growth in 'fraudulent instruction' as a cause of loss and says that from tactics to implications, cyber security will see a subtle but important evolution in 2023. The specialist insurer’s new cyber services snapshot report reveals that the cyber threat landscape will be influenced by greater incident complexity, the way threat actors use stolen data, and a rise in the US class actions in 2023. The report presents global data on incidents handled by Beazley cyber services including cause of loss by industry, ransomware vectors, business email compromise, and data exfiltration. These data points provide a real-time view into incidents reported to Beazley, revealing an ongoing picture of emerging cyber risk. As a category, fraudulent instruction experienced big growth as a cause of loss in 2022, up 13% year-over-year. This trend continues to be quite high, especially when it comes to small organizations. The report predicts organizations must get smarter about educating employees to spot fraudulent tactics. To combat this vulnerability organizations must get smarter about educating employees to spot fraudulent instruction tactics like spoofed emails or domain names. Organizations are cautioned to watch for social engineering and spear phishing, bypassing of multi-factor authentication, targeting of managed service providers, and compromising of cloud environments as areas of vulnerability. Beazley head of US cyber services Russ Cohen said, “At first glance, things hardly seem particularly new as we enter 2023: Threat actors are still using the same kinds of ransomware vectors to attack, and we’re still talking about the same need for education and controls. Mr. Cohen said, “But look beneath the surface, and it quickly becomes evident that targeted organizations are facing greater incident complexity than ever before. As threat actors bring new sophistication to their techniques and adapt to improved cyber security efforts, more and more companies will realize they can no longer count on the default configuration of off-the-shelf IT solutions and tools.” Source: asiainsurancereview.com

The International Union of Marine Insurance (IUMI) has said that it would play an important role this year as the shipping industry faces difficult conditions and fundamental challenges. Speaking at the IUMI’s first meeting of the year in London on 7 February, Mr. Frédéric Denèfle, president of the trade body, said, "IUMI has a responsibility to navigate and support the marine insurance industry. A downturn in trade, geopolitical tensions, inflation, Environmental, Social and Governance (ESG) factors — as well as onboard safety — are all creating complexity. "We remain fully committed to assisting our members and providing comprehensive guidelines to the larger marine insurance market." Challenges One of the many challenges that marine insurers are facing is the reluctance of the reinsurance market to provide cover for risks involved in insuring maritime vessels in war-related regions. The question insurance companies face: How would they find their way around the risks without the support of reinsurers? Marine insurers are also currently confronted with geopolitical challenges amid ongoing sanctions, the war in Ukraine and increasing tensions in Southeast Asia. Also, there has been a significant recent reduction in demand, resulting in slower vessel turnarounds in ports due to low cargo volumes. This, together with declining freight rates, shows that the market is decreasing. In turn, it impacts marine insurance as there is far less value to insure. Mr. Denèfle told delegates that digitalization must remain at the forefront of developments in the industry. "Keeping up to date with data-led innovations and digitalization is essential for marine insurers. This includes the technical development of vessels and the ongoing challenges regarding fires on container and RoRo vessels. IUMI must advocate for proper regulations to address these challenges.” IUMI currently represents 42 national and marine market insurance and reinsurance associations. Source: asiainsurancereview.com