Risks and opportunities in Asia

Nick Garrity joined International General Insurance (IGI) almost three years ago. Founded in Amman, Jordan, in 2001, the company had already expanded beyond the Middle East to write specialist insurance and reinsurance globally. Registered in Bermuda it has operational headquarters in Amman, Jordan, and offices in London, Malta, Dubai, Casablanca and Kuala Lumpur, where Garrity is based.

Appointed chief executive officer of the Labuan branch, he was tasked with developing it from a Malaysian business into a regional hub. As he told the 1.1 Club, Intelligent Insurer’s online platform for one-on-one interviews, discussion and debate with industry leaders, that has largely been achieved.

“Previously, we’d been dealing with clients and brokers in the region from London and Dubai offices,” he explained. “We’ve now established a credible presence in the region.

“We’ve created a balance between local underwriting resource and local representation in the region and using where we can our underwriting in London, Dubai and Oman to give a local service that understands the needs of the people that we’re working with.”

What those needs are is always changing, and with a relatively small team covering a vast region, it must work hard to keep up.

“The size of the region presents a challenge around focus. One of the main issues facing not only IGI but others in the international wholesale and reinsurance market is that as countries in the region develop from middle income to higher-income countries, their insurance, reinsurance and risk management needs become more sophisticated,” Garrity explained.

“Our industry has done a great job in facilitating growth and investment in this region, but as economies grow and become more sophisticated, products that have been developed elsewhere in the world can contribute value.”

The cost of climate change

SIRC 2021 takes place against a backdrop of relatively benign market conditions. Despite some increase in rates in areas such as general property, Asian buyers have mostly been sheltered from steep rises, and that looks likely to persist.

“Overall conditions in Asia had been more favourable to buyers than they have been in other regions of the world,” said Garrity. “While there has been a hardening of the market, it hasn’t been as pronounced as elsewhere, and I don’t think it will be as long-lasting.”

That doesn’t mean there are no challenges, however.

Like elsewhere, re/insurers and buyers are having to grapple with the consequences of climate change. IGI itself reported $17.6 million cat losses for the third quarter in its results published in November—$11.6 million was due to Afghan political unrest and South African riots, with $2.9 million for the summer’s European floods.

The business is heavily involved in the petrochemical sector in the region, is growing its presence in power and has a strong construction class business, Garrity added.

“We’re constantly having to evaluate the consequences of climate change, worsening weather patterns, increased rainfall, and tropical windstorms becoming more frequent and more intense,” he said.

“It permeates every aspect of our business.”

For more content like this visit the Reinsurance Lounge

A constrained environment

There’s the COVID-19 pandemic, too, which has hit many businesses, creating cash flow constraints and putting pressure on insurance and reinsurance budgets.

“As an industry, we have had to accommodate that,” Garrity said.

It has put “immense pressure” on some clients, he added, and the situation requires careful monitoring.

“Where we are in a more constrained environment, there’s not the capital that was meant to be available for things like preventive maintenance, new investments, or upgrading of security or fire protections,” he explained. “That creates an environment where there’s potential for deteriorating risk quality.”

It’s not without its upside, however. Most of IGI’s client base is big companies with strong balance sheets and good access to capital. Consequently, despite the short-term impact on their business, they have continued to buy insurance. Moreover, the delays the pandemic caused to projects have actually bolstered IGI since the duration of cover required has increased.

It’s also created openings for new lines such as event cancellation—a cover that has failed to gain traction in Asia in the past, but which Garrity now expects to take off following the pandemic.

The crisis has put the focus on what Garrity sees as the business’s main competitive advantage.

“The challenging economic conditions put a premium on good quality underwriting and working with clients and brokers who have a more sophisticated view of the risks that they are managing,” he explained.

“We’re looking for where we can derive value for deploying our capital but also where there is real client and cedent need for our expertise and our capital.

“Those tend to be in areas where we have specialist underwriting expertise that isn’t necessarily available in local markets, and that’s where we tend to have the greatest value,” he concluded.

Find the full 1.1 Club video here