MANILA, Philippines — Reinsurance demand in Asia-Pacific has increased amid rising natural calamities that affect economies in the region.
GlobalData, a leading data and analytics company in the UK, said domestic insurers seek financial resources to cover massive risks as the frequency of catastrophes in the region has been on the rise.
Reinsurance is defined as the practice where insurers transfer portions of their risk portfolios to other parties by some form of agreement to reduce the likelihood of paying a large obligation resulting from an insurance claim.
Asia-Pacific is not new to calamities amid strong typhoons, earthquakes, and volcanic eruptions that are happening in the region.
The Philippines, for one, did not only bear the brunt of the COVID-19 pandemic last year, but also suffered from the Taal Volcano eruption and the consecutive typhoons at the tailend of 2020.
GlobalData said Asia-Pacific headquartered 24 of the top 100 global reinsurance groups, with a reinsurance premium share of 17.3 percent.
Of this, five Asia-Pacific reinsurers were among the top 20, with a consolidated reinsurance premium of $37.7 billion, growing annually by an average of 13 percent.
“Growing insurance markets, mandatory cession requirements in most countries and exposure to natural hazards such as earthquake, flood, wildfires and cyclones, supported the growth of reinsurance in the region,” GlobalData insurance analyst Manisha Varma said.
The whole of Asia accounts for nearly 17 percent of the global general insurance market and 33.4 percent of life insurance.
This is expected to grow to by 17.8 percent and 34.2 percent, respectively, by 2025, providing high growth opportunities for reinsurers in the region.
China and India are among the fastest growing markets for both life and general insurance while Singapore and Hong Kong have asserted their position as global reinsurance hubs.
GlobalData said climate volatilities, which have exacerbated risks from natural hazards, is another focus area for reinsurers.
Last year, losses due to natural catastrophes in the region was $67 billion; of which only 4.5 percent was insured, indicating a huge gap and growth opportunity for both insurance and reinsurance companies.
To provide optimal reinsurance coverage at an affordable price, reinsurers are adopting catastrophe modelling technologies such as satellite images and real-time hazard maps.
These technologies help in accurate risk assessment based on historical and near real-term weather data, thereby helping both insurers and reinsurers develop suitable cover.
“Post-pandemic economic recovery supported by resumption of infrastructure developments and growing insurance industry will support demand for reinsurance in the region over the next five years,” Varma said.