Life insurers face double-digit premium growth in Asian emerging markets

Digitisation, new technologies and big data are changing the risk landscape and creating new challenges and opportunities for insurers and reinsurers, Dr Tobias Farny, Munich Re’s chief executive Asia-Pacific, responsible for reinsurance non-life in Greater China, Korea and South East Asia, told EAIC Today.

“Customers’ needs and expectations are changing and the industry is also changing to meet those needs,” he said. “But despite this shift in the environment, the main topic remains growth and profitability and how to achieve them.”

In the coming years Farny expects to see substantial profitable growth since most markets in Asia-Pacific still have low insurance penetration.

“Munich Re believes that the emerging markets of Asia in particular will continue to be key drivers of insurance sector growth in the medium term. This year and next, premium volume in life primary insurance in this region is likely to see double-digit growth, with property-casualty insurance only slightly behind.

“Within the context of comparable low investment returns in combination with remarkable fire and nat cat losses in the recent past, we expect a return to more risk commensurate prices in the next year,” he added.

Asia-Pacific is important for Munich Re, says Farny; most markets still have low insurance penetration, including China, South East Asia and India, as well as some areas in mature markets including Japan and earthquake cover.

To Farny, the market is still dominated by three ‘traditional’ areas: first, auto business remains a very important part, with new technologies such as driverless cars or telematics.

“Munich Re is shaping the future jointly with our clients,” he said.

Second, he sees opportunities in nat cat, which is one of Munich Re’s core competencies and where the insurance density is still extremely low in Asia.

“For example, in 2015 Asia accounted for 39 percent of all loss events recorded worldwide, 80 percent of global fatalities and 44 percent of overall losses, but only 12 percent of insured losses. Three out of the five biggest nat cat events in 2015 happened in Asia.”

Regulatory changes in several areas including China, South East Asia and India will increase the need for some insurers to restructure investment portfolios in order to de-risk, added Farny.

“This would be positive for P&C insurance, as it would raise the awareness for property protection to prepare for catastrophes, which eventually shall support insurance penetration and premium growth.”