EAIC panel: Asian insurers grapple with volatility

The insurance industry must become better at navigating a changing global environment—whether through geopolitical shifts or economic volatility—according to the first panel discussion at the East Asian Insurance Congress (EAIC) in Hong Kong this week.

Neal Baumann, global financial services industry leader at Deloitte, called for a re-evaluation of strategic planning. “Given the operating environment, how can we do better?” he asked.

“We plan around balance sheets, capital deployment, revenues, margins, product portfolios, but rarely do we build scenario planning around demographics, sociopolitical issues, or climate change. This is the stuff that catches us off guard.”

Kai-Uwe Schanz, deputy managing director and head of research and foresight at The Geneva Association, said the industry has been challenged by a dilution and retraction of globalisation. “It’s a shifting paradigm,” he said, citing three major factors.

“The erosion of multilateralism has made it more difficult to take collective action against existential threats.” Kai-Uwe Schanz

First, he said, the idea that globalisation was a good thing had started to weaken. Second, the US–China trade dispute expanded to export restrictions. Last, the COVID-19 pandemic had exposed the vulnerability of global supply chains. “These things have not helped the cause of globalisation,” Schanz noted.

These factors have challenged the resilience of companies which, Schanz said, from an insurance point of view is the “ability of corporations to withstand shocks and recover from them”.

At the global level, he said, the “erosion of multilateralism has made it more difficult to take collective action against existential threats” such as climate change, cybersecurity and pandemic threats. 

“At the national level, the reconfiguring of supply chains through ‘nearshoring’ and ‘friendshoring’ has created new counterparty risks,” he added.

At a corporate level, Schanz said, companies face increased exposure to what he called the “weaponisation of globalised commerce” by taking action against companies as a proxy for their home governments. He cited China’s Huawei (which has been branded by the US Federal Communications Commission as a threat to national security) and western companies operating in Russia as examples of this trend.

“Asian companies are more efficient now.” Clarence Wong 

Clarence Wong, chief economist at Peak Re, emphasised that not all developments have been negative, even as the economic landscape has rapidly changed. He said Emerging Asia has much better resilience against external shocks than previously, citing the economic contraction of just 0.5 percent following the COVID-19 pandemic, followed by 7.5 percent growth.

“Financial markets are less volatile,” Wong noted. “Emerging Asia is not only trying to survive but taking active steps to take advantage of dislocation. For example, delivery times of products from Asia to Europe and the US have been shortened in the post-pandemic period. 

“Asian companies are more efficient now.”

“The two new licences will bring new services.” Paul Li

Industry must embrace tech

In terms of individual Asian insurance markets, Macau was highlighted due to the recent passage of a new insurance business law which will come into force in August 2025. Under the new regulations, an agent’s licence will be valid for two years instead of one and Macau insurance agents are legally allowed to operate in Guangdong.

“The two new licences—one for life insurance and one for non-life—will bring new services,” said panellist Paul Li, head of the Macau branch of QBE General Insurance. “This will create more job opportunities, but it all depends on the regulations established by the government.”

“We have to get better as organisations in terms of mindsets, culture and dynamics.” Neal Baumann

Overall, however, growth in the insurance business has become “more complicated”, according to Baumann. “There’s a lot of nuance,” he said. “Clients demand more, whether they’re consumers or corporates. Our regulators and our communities expect more. We have real issues around inflation and supply chains increasing the cost of claims.”

He emphasised that growth is difficult even in Emerging Asia countries with a “broad and deep” underinsured population. “You used to look through a lens and see a point-to-point view. Now when we look it’s more of a prism and there’s a lot of uncertainty.”

Technology has potential but the future of its application remains unclear, Baumann said. “Tech invested appropriately and successfully could help us build some different capabilities,” he acknowledged. “But many of us would have invested money and in hindsight wondered whether we got the return. 

“We can’t solve complexity without investing in technology, but we have to get better as organisations in terms of mindsets, culture and dynamics.”    

Baumann welcomed emergent tech such as generative artificial intelligence (AI) but remained cautious about deployment. “On the surface AI is able to potentially change the yield curve or productivity curve if you can master it,” he said. “If you can work within your organisation and deliver that promise to agents, brokers and clients, that starts to build competitive advantage and a higher enterprise capability to deal with change.”

So far, he had seen AI make only incremental changes—“there’s not a killer app”—and he added that while there was “no shortage of investments in empirical experiments, the challenge is scaling them to make a difference at the enterprise level”.

“It is essential for the insurance industry to embrace tech, given its ability to reduce costs. Our value chain is characterised by significant transaction costs, with 70 cents on the premium dollar paid out in claims,” he concluded.

For more news from the East Asian Insurance Congress conference (EAIC) click here.

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