The first panel discussion was indeed fruitful with the following points made: the issue on the certificate of tax exemption will be put forward at the national office for discussion and the segmentation of tax on microinsurance will be explored. It was also noted that the clause that repeals the 2% preferential tax rate for microfinance NGOs was removed from the Package 4 of TRAIN Law. The key resource persons in this panel discussion are: Presenter: Undersecretary Dakila Elteen Napao (DoF Revenue Generation and Local Finance Group) Panelists: Dr. Jaime Aristotle Alip (Founder and Chairman Emeritus, CARD MRI), Mr. Rico Bautista (President, PLIA), Mr. Michael Rellosa (Executive Director, PIRA) Moderator: Fr. Jose Victor Lobrigo (Treasurer, MiMAP) #NationalMicroinsuranceForum2023

Torrential rains and flash floods in New Zealand's biggest city, Auckland, have resulted in more than 6,000 insurance claims as of yesterday. AMI, State and NZI Insurance, which trade under IAG, said they had received 3500 claims for property damage for homes and businesses, as well as flooded vehicles, according to a report in stuff.co.nz. AA Insurance was also experiencing a high number of claims, with 2,000 received as of Sunday morning. “The full extent of the damage is expected to become clearer over the coming days,” a spokesperson said in a statement. AA Insurance acting chief executive Simon Hobbs said, “Our assessors continue to survey the worst-hit areas of Auckland and have seen firsthand how significant and widespread the damage is. This event will result in a high volume of claims for the industry – and could be the biggest weather-related claims event in our history.” A spokesperson from the Insurance Council of New Zealand (ICNZ) said many claims were yet to be made, as some people had not yet been able to access their homes or businesses. ICNZ chief executive Tim Grafton said, “This is a very significant event which will result in a lot of claims. As always when such events occur, insurers will be gearing up their call centres and arranging for staff to help customers.” Source: asiainsurancereview.com

By Herminia S. Jacinto I JUST read an article in one of the newspapers where the columnist said, "Six years is too long for a bad president but too short for a good one." This statement has been said many times referring to leadership of a government office or even private companies and can very well be said also about the Insurance commissioner, Dennis V. Funa. The insurance commissioner, who is appointed by the president of the Philippines, has a fixed term of six years without reappointment and shall serve until his successor shall have been appointed or qualified per Section 437 of the Insurance Code of the Philippines. Commissioner Dennis V. Funa's term as insurance commissioner would have ended last Dec. 31, 2022 but since no successor has been appointed, he is in holdover position. He ends his term with flying colors despite the pandemic and the various disastrous events that occurred during those six years. It was during his term that the worst epidemic that can happen in a country, the Covid-19, came and almost caused a standstill in our lives. When the lockdowns were imposed, the government offices like the Insurance Commission, had to immediately find ways to render the much needed public service without causing harm to their employees. Fortunately, the Insurance Commission's operations were already computerized and they could continue with the service to the public. Computerization was started in the term of Commissioner Funa and was well on its way to completion. They hit the ground running, so to speak! Services like renewal of licenses of agents and insurance companies, payment of benefits and claims continued like business as usual. Indeed, this was the time when the presence of the Insurance Commission was reassuring. We looked at some important numbers to find out how the insurance industry performed during the tenure of Commissioner Funa. We have gathered some statistics for the last five years — 2017 to 2021. The 2022 numbers are not yet available. The premium growth was 43.88 percent, with a compound annual growth rate of 9.52 percent. Growth rate in 2021 was the highest since 2017 at 21.01 percent. Benefits payments had a higher growth rate of 51.13 percent or an average of 10.88 percent. This attests to the reliability of the insurance industry amidst the challenges of Covid-19 which trampled people's lives, health and properties. Insurance penetration (premiums as a percentage to GDP) increased from 1.57 percent in 2017 to 1.93 percent in 2021. Total assets amounted to 2.09 trillion, with an unprecedented growth rate of 33.14 percent. Most notable is the 88 percent of these total assets are in invested assets. The public need not worry about the stability of the insurance industry. Commissioner Funa will leave a strong and resilient insurance industry whose performance was happily tested by the challenges during his tenure. We would have wished for him to stay longer and continue with the winning streak, but the law has to be complied with. A lawyer by profession and still young, he will certainly find a place in both public and private sectors. We will miss him and his easy and calm demeanor. He makes time to listen to the problems and issues brought to his office by various people or insurance associations, even claimants. Of course, these cases are promptly delegated for the attention of the appropriate officer in the commission, but it warms a claimant's heart that the commissioner agreed to see him and listened. Part of the responsibility of being an insurance commissioner is to have a very good relationship with the leaders of the insurance industries of other countries, especially the Asean. This is not an easy task because the travels would require several days of continuous meetings not to mention the rigors of travel. I have been fortunate to have joined him and his team in some of these Asean meetings and I can not recall any time where he was not smiling every time we would meet each other in those conference rooms. We will miss you Commissioner Funa, but we hope to see you in future events of the industry. We enjoyed working with you! Salamat po sa six years (nine years for me since he joined the commission as head of legal department) na masayang samahan! Thanks to the January 23 issue of the Philippine Star where I got the statistics. Source: manilatimes.net

Re/insurers can help solve the climate crisis by matching capital to risk where it's needed, such as via clean tech solutions, and by de-risking projects and technology development, which will encourage faster and more meaningful investment, says insurance and reinsurance broker Aon. In the report, “2023 Weather, Climate and Catastrophe Insight” published by Aon, Mr. Richard Dudley, Aon’s global head of Climate Strategy says that there are three primary ways the industry can help accelerate the journey to net zero emissions. Facilitating transition to lower carbon activities First, instead of moving away on arbitrarily short timescales from carbon-intensive and high-emission industries, re/insurers should be enabling and supporting these industries to transition to lower carbon operations. This can be done by both supporting and incentivizing these industries to transition, and by de-risking investments in low-carbon technologies, for example, carbon capture and storage and new types of renewable energy. To fully grasp this opportunity, the re/insurance industry must change some of its mindset to formulate a consistent forward-looking pricing model for new risks. Duration mismatch Second, the industry should consider the need for longer policy terms than the usual annual renewal cycle. New clean tech industries, for example, are often not investable at scale, and re/insurance coverage’s stability and predictability over longer periods could free up capital flows. This “duration mismatch” is impeding financing for green technologies as the long-term insurability of assets comes into question — which in turn increases risk for investors. We’re leveraging the existing longer-term approach in some existing lines of business and working with new and existing capital providers to increase the appetite for longer-term risks. Working with pension and investment markets could also inform longer-term thinking about assets and liabilities — enabling the application of these insights to the general reinsurance world more systematically Collaboration Third, the re/insurance industry must collaborate and innovate with stakeholders, including existing and alternative sources of capital, green technology startups, risk mitigation firms and the public sector, so society can decarbonize at scale. As a recent example, Revalue Nature, which provides nature-based carbon offset projects, collaborated with Aon to insure investments against unforeseen events such as wildfires or bug infestations. Decarbonization is changing the risk landscape and any un-insurability of increasingly volatile weather presents a risk to the economy. But by engaging new talent, partners and stakeholders, the re/insurance industry can play a truly transformational role in the climate transition by enabling better decisions for a more sustainable future. Source: asiainsurancereview.com

Comparing insurers' IFRS 17 results will be difficult initially due to differences between companies' approaches under the accounting standard, Fitch Ratings says in a new report. One aim of IFRS 17, which took effect for most insurers on 1 January 2023, was to improve comparability. But Fitch Ratings’ analysis of 10 major European insurers’ accounting policies and calculations has found major differences that can significantly affect the results. Discount rates are not set consistently The choice of discount rate can significantly affect IFRS 17 metrics, notably, the contractual service margin (CSM), which represents the unearned profit an insurer expects to earn as it provides services. Some companies incorporate an illiquidity premium into their discount rates based on their own asset mix while others are using the illiquidity premium from their Solvency II calculations, which is based on a standard investment portfolio prescribed by the European Insurance and Occupational Pensions Authority. As a result, two companies with similar portfolios could report very different contractual service margins. Lack of a standard definition The lack of a standard definition under IFRS 17 for certain key metrics also hinders comparisons. For example, the market has not settled on a clear definition of ‘operating result’ or the 'non-life combined ratio'. Shareholders’ equity is typically slightly lower under IFRS 17 than under IFRS 4, particularly for insurers with life business, where profits previously recognised in shareholders’ equity at contract inception are now partially accounted for in the CSM. But shareholders’ equity plus CSM after tax is typically higher. Shareholders’ equity should become less volatile as liability values and asset values under IFRS 17 move similarly in response to interest rate changes, in contrast to IFRS 4. But net income will be more volatile as more assets are accounted for at fair value. Despite the initial imperfections, IFRS 17 is an improvement on IFRS 4, making financial statements more transparent. Fitch expects IFRS 17 results to become more (but not fully) comparable over the next two years, with insurers, analysts and investors gradually developing enough confidence in the new accounting standard to use it as a basis for decision-making. In the meantime, Fitch does not expect IFRS 17 to significantly affect insurers’ business models – or their credit ratings. Source: asiainsurancereview.com

Supportive government policies are catalyzing the adoption of agriculture insurance in China. Improving agriculture insurance penetration has also helped mitigate the impact of climate change on country’s agriculture sector to some extent. Agriculture insurance, however, is also facing challenges. By Anoop Khanna In May 2021, five government agencies and a communist party unit in China issued a joint document ‘Opinions on Financial Support for the Development of New Agricultural Business Entities’. This document explored the concept of ‘policy-driven basic insurance + commercial insurance + additional insurance’ for agricultural insurance. The opinions document called for: Exploring an agricultural insurance product system consisting of subsidized basic insurance, commercial insurance and additional insurance to meet the multi-level and diversified risk protection needs of new agricultural business entities Accelerating the establishment of a dynamic mechanism for adjusting agricultural insurance protection levels and premiums Strengthening coordination in the use of agricultural insurance compensation funds and government disaster relief funds Giving full play to the role of China Agriculture Reinsurance Corporation (CARC) and improving the agricultural reinsurance system and catastrophe risk transfer mechanism Encouraging insurance institutions to establish and improve the basic agricultural insurance service network Staging more financial inclusion reform trials in rural villages Performance reflects the resolve With favourable government policies, the insurance sector predicts that by 2025, the volume of agriculture insurance premium income would surpass that of liability insurance to become the second-largest non-auto branch of insurance in the P&C insurance market, behind health insurance. CBIRC data shows that from 2008 to 2020, agriculture insurance premium income in China rose more than sevenfold from CNY11.1bn ($1.7bn) to CNY81.5bn. In 2021 China’s agriculture insurance premium income was CNY97.6bn ($14.6bn), a growth of 20% as compared to 2020. Agriculture insurance premiums in China are estimated to exceed CNY160bn ($24bn) by 2025. Subsidies provide a boost Premium subsidies handed out by the government and coverage expanded to include a wider range of crops over the years have encouraged farmers to buy agriculture insurance. The subsidies cover 55%-90% of premiums on agriculture insurance, reducing farmers’ vulnerability to severely adverse conditions. Recently China’s State Council also announced a CNY10bn ($1.45bn) subsidy to support rice farmers experiencing drought conditions which authorities have warned pose a ‘severe threat’ to this year’s autumn harvest. In 2021 the central government allocated CNY33.35bn in premium subsidies, up 16.8% year-on-year. This is in addition to central reserve funds that the government often allocates in response to major natural disasters. Local governments are then responsible for allocating the funds to farmers. The total agriculture insurance financial subsidies handed out by the central and local governments in 2021 stood at CNY74.64bn or 75%, in support of the development of agriculture insurance. CBIRC also encourages Chinese insurers to issue offshore catastrophe bonds, which could help to diversify losses from natural calamities. New kid on the block The establishment of the state-owned reinsurance company, CARC, in 2020 to promote insurance coverage in the agriculture sector has also helped the sector tremendously. In 2021 CARC signed standard reinsurance agreements with 35 agriculture insurance institutions to bear 20% of insured agriculture losses. The premium income from the coverage exceeds CNY19bn ($3bn) for insurance protection of about CNY1tn ($158bn) for 188m farmers. In a report published in August 2021, AM Best said that the new state-backed reinsurer has brought changes to the agriculture reinsurance dynamics in the local market. Direct insurers are required to make a 20% quota-share cession to the reinsurer for policy-based subsidized agriculture products. Policy-based agriculture insurance products include central government subsidized crops (e.g., rice, wheat, cotton, potato); forests; livestock (e.g., pig, dairy cattle, breeding sow) and local specialized produce. AM Best said the premium income of $3bn under the 20% compulsory quota share cession scheme exceeds the combined agriculture reinsurance premium revenue of all onshore reinsurers in China before China Agriculture Re’s establishment. Commercial reinsurers have had to swiftly adjust their strategies to compete in the much narrower competitive segment of additional proportional and excess-of-loss agriculture treaties, as well as retrocession programmes of the new reinsurer. The broad prospects of the agriculture insurance market have attracted more and more insurers. Furthermore, affected by motor insurance pricing reform, many insurance companies regard agriculture insurance as an important branch into which to diversify as they shift their focus from relying on motor insurance business to non-auto insurance business. Supportive government Fitch Ratings, in an analysis released in October 2022, said supportive government measures, including government-subsidized reinsurance coverage, will mitigate the exposure to higher environmental risk for China’s rated insurers. A report published by Moody’s Investors Service in August 2022 said the government has extended strategic mandates to several state-owned agriculture companies. For instance, state-owned agriculture-related companies Syngenta Group and COFCO (Hong Kong) have strategic mandates to advance agrochemical technologies and manage major reserves and grain imports. The broad prospects of the agriculture insurance market have attracted more and more insurers. The number of insurers offering agriculture coverage has increased from single digits to nearly 40 at present, including five standalone agriculture insurance companies and more than 30 general insurers. National food security also helps According to the Moody’s report China’s agriculture-related companies, including insurers, are set to get a boost as the government pursues national food security. The government has also raised its focus on food security, motivated by factors like pandemic disruptions, the Russia president Vladimir Putin’s invasion of Ukraine and climate change. The insurance sector is one of the most exposed to the rising frequency of extreme events and insurance is expected to cover an increasing portion of economic losses from natural disasters in the country. The increasing use of agriculture insurance, aided by supportive policies and government subsidies, has also mitigated to some extent the impact of climate change on agriculture sector. According to Swiss Re, insured catastrophe losses totalled around 10% of economic losses from natural disasters in China, a proportion that is much higher than in developed western markets such as North America. Challenges also persist While the agriculture insurance business has grown, it is also facing challenges in terms of achieving underwriting profits. With fierce competition raging in the market as more insurers enter the segment, underwriting gains turned negative in 2019. A small underwriting profit of CNY277m was reported in 2021, representing an underwriting profit margin of 0.40% (2020: Underwriting profit of CNY101m; underwriting profit margin of 0.17%), according to an analytical white paper Technology-assisted High-quality Development of Agriculture Insurance (2022) produced by government, insurance industry and academic institutions. Many insurers operating in the segment have a combined ratio of more than 100%. The loss ratio of agriculture insurance business in the past two years averaged 75% nationwide. Furthermore, the agriculture insurance market is much concentrated for comfort. In terms of agriculture insurance market share, the top 20 companies account for 93% and over 78% of the market share in 2021 rested with the top five agriculture insurers. Technology can be an enabler Technology is expected to be the ‘golden factor’ to catalyze the development and growth of agriculture insurance. Traditional agriculture insurance underwriting and loss assessments are mostly carried out by manual on-site sampling. The workload is huge and cumbersome, requiring a lot of time and labour costs, and the claim settlement cycle is too long. Technology like mobile internet, 3S (including remote sensing RS, geographic information system GIS, global positioning system GPS), AI, big data, cloud computing, IoT and other applications can help to enhance agriculture insurance service capabilities, improve agriculture insurance precision and supervision efficiency, and promote agriculture insurance innovation and development. Agricultural insurance is likely to become the new growth point for P&C sector in China and it is expected to become an important business focus for non-life insurers in general in the future. Source: asiainsurancereview.com

The impact of Nat CAT in Asia is mounting with unprecedented floods, heatwaves and weather-related disasters in the region. Insurers must keep up with new technologies to understand the volatile nature of climate risks. Speakers at the Asia Nat CAT and Climate Change Conference shared their insights on the impact of climate change. By Nadhir Mokhtar Temperatures are rising twice as fast as the global average in Asia Pacific, risking frequent and severe weather-related disasters. About half of global emissions comes from the region and it is home to five of the world’s largest greenhouse gas emitters. Yet, the region remains severely underinsured from Nat CAT. “The public sector assumes an increasing share of climate costs around the world, particularly in developing Asia, where private insurance for businesses and individuals is less prevalent and covers about 9% of the economic losses compared to 38% globally. The insurance protection gap is estimated at about 90% and varies significantly among Asia’s high, medium and low-income countries,” said Asian Development Bank principal financial sector specialist Arup Chatterjee speaking at the Asia Nat CAT and Climate Change Conference. He said such financing gaps, if not rectified, may lead to long-term fiscal instability for governments, businesses and households. Insurers, as both investors and risk carriers, must understand the challenges of prevailing gaps in the region and innovate solutions to address them. This also includes aligning operations with the Paris Agreement goals. “You could shy away from increasing risks, which are hard to understand, or you can expand your understanding and capture society’s increased need for risk management while being vocal and assertive about adaptation. Insurance leaders who pursue active climate-related initiatives and establish themselves as part of the solution will stand out in the market,” he said. Understanding changes in Nat CAT Global economic losses caused by climate change have spiked in the past three decades, putting pressure on the insurance and reinsurance industry. The global protection gap is forecast to be between $1.8tn to $1.9tn by 2025 with Asia Pacific accounting for almost 50% of all uninsured risk according to a study by PwC. “Understanding the impacts of climate change has become a top priority and future-focused insurers and reinsurers will need to embed climate risk mitigation strategies into their operating and business models,” said Guy Carpenter Singapore head of treaty Justin Ward. Perils in Asia are an ever-present risk and some factors such as the impact of climate change on weather patterns need to be observed. Unpredictable weather patterns could make traditional reliance on existing historical data increasingly irrelevant. “We have to recognize that events are going to look very different in the future. Secondary peril losses are outpacing losses from primary perils and weather-related events are growing headwinds for the reinsurance and insurance industry in Asia,” said Guy Carpenter Asia Pacific chairman and head of Japan Jeremy Fox. “Insurance isn’t necessarily the problem or the solution. Sometimes if the risk is changing, we need to do something about the risks rather than just insure it away. For example, building flood defenses - with models in the insurance industry we can work out where to put those steps to make a difference to the actual loss,” said Guy Carpenter Asia Pacific head of CAT advisory group Jeremy Waite. Increasing support for green solutions The majority of the world’s energy is still dominated by non-renewable sources such as coal, oil and gas. While some insurers have stopped covering unsustainable energy projects, the dependence on traditional energy sources ultimately requires coverage. “The way forward for all insurance companies is that there’s no option other than to stop insuring situations that are heading for trouble. By 2050, we will have nearly half of the world’s energy requirement coming from renewable sources. If that is so and today, we stop insuring the thermal based or geo-based power plants, what happens to these 25 years that we have in-between? “We need to have some sort of a stopgap arrangement - a slow process that gives time particularly to developing nations that they should be able to switch over from a traditional mode of power generation to a renewable source,” said Risk Management Association of India associate professor Pratik Priyadarshi. He said efforts have been made to develop parametric insurance solutions which are catering to some of the requirements to address climate change. However, he said more ‘green insurance’ policies which give back to nature are needed. “The biggest challenge is that we have not been able to support such green policies being issued across the globe. We need to give more right now before it’s too late,” he said. “The role of insurance markets is critical to mobilizing and efficiently allocating resources while putting a price on climate risks. Contractual savings institutions are incorporating their exposure to climate risks in their investment, lending and underwriting decisions and integrated them into their broader risk management processes,” said Mr. Chatterjee. He said insurers can help bring industry and financiers together to reduce carbon footprints. This can be done by pursuing investments such as solar, energy storage, green buildings and climate-smart agriculture. Such investments can provide clean and affordable energy and promote efficient resource utilization. Solutions such as parametric insurance, pooling mechanisms and alternative risk transfer using capital markets for specific risks are some examples insurers can follow to collaborate with governments and provide affordable coverage. Mr. Chatterjee said this could include pooling a large set of projects in many jurisdictions backed by guarantee schemes or other de-risking solutions. He added blended finance structures can also unlock private sector financing to aid the transition to a low-carbon economy. “Mangroves and coral reefs can be used cost-effectively to reduce coastal flooding, but these ‘blue’ natural resources are increasingly in danger. The insurance industry is therefore starting to use innovative risk transfer schemes to conserve and restore natural ecosystems. Insurers and reinsurers are already transferring the risk of this type of insurance to capital markets by selling securities that mirror the underwritten insurance obligations,” he said. Climate crisis in sight Prof Priyadarshi said agriculture is one of the areas which is deeply affected by the climate change and it has been being affected by new strains of such viruses and bacteria that are coming across through migration and travel. “Groundwater levels are depleting. It’s drying up and one of the most common ailments across the globe, malaria, is going to spread. It could be one of the worst killers that we are aware of. Livestock and crops are becoming more susceptible to disease and climate change and movement of population due to scarcity. “The time has gone when we refer to this as climate change. Now we are in a situation where it is more of a crisis that is happening at hand,” he said. The Asia Nat CAT and Climate Change Conference, ran from 26 to 27 September, was sponsored by Guy Carpenter and organized by Asia Insurance Review. The two-day event returned to a live setting in Singapore with the theme: ‘Unmask the Possibility’. Source: asiainsurancereview.com

The East Asian Insurance Congress celebrated its diamond jubilee this year amidst radical changes that have affected the industry since the onset of the pandemic. By Jimmy John The East Asian Insurance Congress (EAIC) 2022, a two-day event with the theme of ‘Cutting a multifaceted, clear vision for the industry’, was designed to address the qualities of a diamond – cut, colour, carat and clarity, representing the various aspects that the industry must consider. In his welcome address, EAIC president Allan Santos reiterated the aim of the congress as one of furthering and developing international collaboration amongst insurance practitioners in the region. “We continue to experience transformations and disruptions as they affect us and the insurance public,” he said. “Our industry has survived countless challenges over the years. I am certain we will continue to weather the difficulties of the day with resilience and unity,” Mr. Santos said. Mindful of the legacy of cooperation that the congress started when it was founded in 1962, Mr. Santos said that EAIC must continue to play a role in providing a forum for industry players, for constructive exchanges and dialogue, to understand the challenges that confront the industry and discuss solutions to surpass them. Making the future sustainable Mitsui Sumitomo Insurance honorary adviser Takeo Inokuchi, the conference’s keynote speaker, noted that the number of countries or territories participating in the EAIC has expanded to 23, highlighting the increasing value and scale of the congress, and how it contributes to the spread of insurance in the region. “The sound development of insurance is essential to achieving the United Nations Sustainable Development Goals, which have become global goals geared toward a sustainable society,” he said, during his keynote address. “In particular, I am referring to goal one – no poverty, goal three – good health and wellbeing, goal nine – industry, innovation and infrastructure, and goal 11 – sustainable cities and communities.” Russia president Vladimir Putin’s invasion of Ukraine Moody’s Analytics chief APAC economist Steve Cochrane, speaking of the impact of Russia president Vladimir Putin’s invasion of Ukraine on Asia, said that compared to Europe, North America and Latin America, the Asian region is a mixed bag with a lot of strength. He said, “Our forecast for 2023 is that many of the fast-growing economies in the region will likely see a slowdown in GDP.” Commenting on the lingering effects of COVID-19, Peak Re chief economist Clarence Wong said that there are major changes around the world, including the supply chain, government policies and digitalization. The future, he said, will not be influenced by these changes alone, as there are other multiple factors affecting consumer behaviour as well as economic performance and these include military conflicts, geopolitical tensions and other socio-economic events. “We have to consider all of these to see what the future will look like and we need to take a see-through approach in order to understand the impact on consumers and societies in order to realise opportunities,” he said. Longevity and the health platform economy Lapetus Solutions chief scientist and co-founder S Jay Olshansky said that the age trajectory of mortality has never changed. He highlighted the sticky variables that offer higher predictivity values and these include education, physical activity and marital status. He advised insurers to keep their products simple. “Don’t make the process of applying for life insurance or planning for retirement more complicated than it needs to be,” he said. dacadoo president, CEO and chairman Peter Ohnemus said that hyper personalisation will create a large opportunity for insurers. “Insurance operators need to become hyper relevant and prepare for an integrated digital life and health platform economy,” he said. Reinsurers and disaster risk finance Munich Re regional head of property treaty underwriting Joachim Zagrosek, speaking on the role of insurers and reinsurers in overcoming climate change challenges, said that global warming is changing probability distributions, with a small increase in average temperatures resulting in a large increase in probability of extremes. World Bank senior financial sector specialist Hang Thu Vu spoke on the five areas where the reinsurance industry can play a critical role in terms of private public partnerships, and these are: Traditional risk transfer; provide capital for investments; provide technical expertise; help governments and individuals in financial resilience and in data analytics. World Bank lead financial sector specialist Serap Oguz Gonulal said that integrating climate risk into insurance products is the need of the hour. “We are seeing increasing concentrated risks in cities and so the impact of climate change is increasing,” she said. ESG, ERM and systemic risks Zurich Resilience Solutions, Asia head of distribution, customers and growth Audrey Walls said that only 7% of flood losses in Asia were insured and, in this scenario, ESG cannot be overlooked by insurers and brokers and it needs to be increasingly addressed by them. “ESG and sustainability should be part of the insurers DNA and can be set to meet net zero goals,” she said. Redefining and rebalancing insurance relationships A panel discussion moderated by Fairfax Asia consultant Sanjeev Jha on the future of insurance relationships saw some lively interaction between panelists. Milliman managing director, Southeast Asia and India Richard Holloway said that actuarial talent is in demand today and companies are using outsourcing as a strategic move. “The underlying driver is that companies are becoming larger and bigger and so have outsourced some of their routine tasks,” he said. SCOR senior treaty and APAC underwriter Jisun Park said that outsourcing is a good initiative but should not be seen as the fundamental solution. “The uncertainties of risk are case sensitive and so we need to first understand the risk,” he said. McKinsey & Company partner Violet Chung said that the past decade has been about scale but is now about quality. “Product innovation has become very prevalent especially in products and services,” she said. S&P Global Ratings head of credit research, Asia Pacific Eunice Tan said that choice of partners will be critical for insurers and reputation costs are also to be considered. Turning challenges into value levers McKinsey & Company partner Alex Kimura highlighted the five-impact challenges facing the insurance industry over the next 10-15 years. These he said were: Value creation, unlocking latent demand, overcoming stagnant productivity, tackling rising inflation and framing a wider purpose and role in society. McKinsey & Company senior partner Bernhard Kotanko advised the industry to use the winds of change post-COVID for big moves and for this they must become customer centric to deliver real impact. “Companies must increasingly recognise the value of business building and when done right it is lucrative,” he said. For whom stagflation tolls Swiss Re Asia chief economist John Zhu said that we are now in a different regime and are seeing higher interest rates today as high inflation persists. “Inflation and growth mix in Asia is better than in the US and Europe. Inflation in East Asia has so far only reached historical averages,” he said. HSBC Asset Management (Singapore) CEO and head, Southeast Asia Patrice Conxicoeur said that Asia faces a number of macro-economic challenges, but the economic and policy mix in China looks very different. “Life insurers often have AUM gaps, especially in Asia, creating theoretically a benefit as liabilities depreciate more than assets,” he said. Philippines insurance commissioner Dennis Funa, in a special closing address, said that digitalization has been a game changer and technology allowed the industry to be productive during the pandemic. “We need to be united to deal with other risks like climate change and cyber risks,” he said. The two-day event was sponsored by Fubon Life, Insurance Institute for Asia and the Pacific, Inc, Korean Re, Moody’s Analytics, Peak Re and Swiss Re. Asia Insurance Review served as event manager and official media partner of the conference. The next edition of the EAIC will be held in Hong Kong in 2024. Source: asiainsurancereview.com

Ransomware will remain public enemy number one in terms of cyber security according to new security predictions for 2023 from cyber security company Red Access. According to the predictions by Red Access, as of 2022 roughly 68% of all global organizations have fallen victim to at least one ransomware infection. Sadly, that figure will continue to rise in 2023, as ransomware grows even more widespread. Red Access co-founder and CTO Tal Dery said, "The commodification of offensive hacking tools (sold primarily on the dark web) has dramatically reduced the barriers to entry into the ransomware business and the promise of million-dollar paydays has encouraged new entrants in droves. He said, “In 2023, watch out for the continued growth of double-extortion tactics, in which threat actors both encrypt and exfiltrate sensitive data, which they then sell for a second payday." The predictions said deepfakes will grow more sophisticated and widespread in 2023. Deepfake technology has made significant ripples in the cultural consciousness over the past year or two and they will continue to blur our perception of reality in 2023, as AI and machine learning tools make them both easier to develop and more difficult to detect. Mr. Dery said, "Cyber attacks that target identity will become much more powerful as deepfake video impersonations of targets are used to gain trust and access to sensitive accounts. We can also expect to see them used in cases of economic and political sabotage, in which videos depicting prominent business and political figures saying or doing harmful things are disseminated – presumably simply to watch the world burn. He said, "For the average enterprise employee today, the web browser functions more like a central operating system than just another application serving as their primary gateway to the digital world of work. "As such, organizations are beginning to recognize the urgent need to secure and manage this layer in a more comprehensive fashion. "In 2023, we will see browsing security and management go from a secondary consideration to a central concern and point of security for organizations both large and small." Source: asiainsurancereview.com

Global professional services firm, Aon, has announced the launch of its latest "Reinsurance Market Dynamics" report, which reviews the challenging 1 January reinsurance renewal period and evolving market dynamics. In the renewal season, the most difficult conditions were experienced in the property segment, driven by an evident mismatch in demand and supply. Insurers’ desire to buy more limit collided with reinsurers’ need to reduce volatility and improve profitability, after a string of poor results since 2017. Aon’s Reinsurance Aggregate has posted an average combined ratio of 101% during this period and an average return on equity of 5%. Adding to the challenges, the renewals took place against a backdrop of high levels of inflation, significant erosion of reinsurer equity driven by a precipitous rise in interest rates and limited availability of retrocession capacity following Hurricane Ian in late September 2022. Aon estimates that global reinsurance capital fell by 17% to $560bn over the nine months through 30 September 2022. The outcome was a significant shift in pricing for property catastrophe and retrocession coverage on a global basis, with retentions increasing as reinsurers sought to move further away from frequency layers and terms and conditions also being tightened. The materiality of these changes was challenging, particularly for insurers that have not ceded losses and were not in peak zones. Casualty reinsurance In contrast to property, capacity in the casualty reinsurance market remained plentiful during the renewals period, as reinsurers demonstrated an increased appetite for the class. This led a number of cedents to explore options to build cross-programme support for casualty portfolios to build property catastrophe capacity, taking advantage of certain reinsurers’ desire to identify diversified growth opportunities. Mr. Joe Monaghan, global growth leader for Aon’s Reinsurance Solutions, said, “The latest reinsurance renewal period was characterized by fundamental shifts in market dynamics as reinsurers reset pricing, attachment points and return expectations, especially for property risk. It also created stress in many long-term client/reinsurer relationships and the emergence of new relationships as many reinsurers saw the dislocation at 1 January as an opportunity to expand their client portfolio.” The “Reinsurance Market Dynamics” report highlights that well-informed insurers commenced the renewal process early, taking a pragmatic approach and exploring a wide range of programme options and structures, as well as protection solutions and capacity providers. Despite the challenging conditions, cedents that were earlier to market and more advanced in attaining firm orders were better placed to address gaps in capacity. To view Aon’s "Reinsurance Market Dynamics" report, please click here. Source: asiainsurancereview.com