It’s crucial for Asian market to prioritise risk mitigation: Guy Carpenter’s Yeung

Prioritising risk mitigation to combat escalating climate risks is essential for Asian markets, with collaboration between the insurance and reinsurance sectors key to closing the protection gap, Danny Yeung, a managing director at Guy Carpenter, has said.

Speaking to EAIC Today, Yeung highlighted that the insurance sector in the Asia-Pacific region faces a complex and rapidly evolving landscape, with several key trends and challenges set to shape the industry in the next five years.

“Geopolitical volatility and macroeconomic uncertainty pose significant systemic risks that will impact the industry,” said Yeung. “Increased competition, in both insurance and reinsurance, underscores the importance of effective risk selection and risk management.

“The Asia-Pacific region faces a complex and rapidly evolving landscape.”

“Asia is the world’s most disaster-prone region, with various weather, climate, and water-related hazards,” Yeung said, referencing a report from the World Meteorological Organization titled “State of the Climate in Asia 2023”. “Navigating this dynamic environment will require insurers to optimise capital, manage volatility and protect earnings in the face of these emerging risks,” she added.

Yeung, who oversees Guy Carpenter’s Taiwanese operations, noted that Taiwan is particularly vulnerable to natural disasters, including earthquakes and typhoons. The island’s history with catastrophic events such as the Chi-Chi earthquake (1999) and Typhoon Nari (2001) had significant impacts on the insurance industry and spurred the government to strengthen its resilience measures.

“For typhoon and flood mitigation, Taiwan has upgraded flood inundation maps and flood control facilities,” Yeung said. “These measures are meant to provide a protection level up to 200-year return period, aiming to manage risks under changing climate conditions.”

Advances in catastrophe modelling and data analytics are helping insurers and reinsurers better assess and price risks in high-exposure regions such as Taiwan. “The advanced data quality provided by Taiwanese clients, including geocoding, ensures more accurate and reliable risk management and pricing assessment,” Yeung said. 

She noted that Guy Carpenter’s team of specialists examines vendor models, offering alternative views through the validation process as part of its Model Suitability Analysis, enabling Taiwanese re/insurers to make more informed decisions by transforming raw data into actionable insights for catastrophe risk management.

Innovation, diversification

The demand for innovative reinsurance products and the diversification of providers are growing across Asia. According to Yeung, catastrophe bonds are gaining traction, with 2024 seeing a record first half for such instruments. Hong Kong and Singapore have both introduced insurance-linked securities (ILS) grant schemes, which are designed to develop the ILS market and allow re/insurers to diversify their cat risk portfolios with new solutions.

Taiwan’s first cat bond, Formosa Re, was issued by the Taiwan Residential Earthquake Insurance Fund in 2003. Yeung noted that shifts in the landscape have prompted companies to focus more on the development of this sector as a viable alternative for managing evolving catastrophe risk. “We anticipate the catastrophe bond market will continue to thrive in the region,” she remarked.

In addition to catastrophe bonds, cyber insurance has undergone significant developments. “Cyber insurance premium growth decelerated in 2023 following several years of strong double-digit growth. Rates declined due to increased supply, improved cybersecurity practices, and a more favourable loss environment,” Yeung said.

However, Yeung added: “The CrowdStrike outage in July highlighted the global interdependence of outsourced IT/cloud companies, raising awareness of cyber insurance protection globally and in Asia.”

“Strategic relationships remain core to any transaction with cedants.”

As the industry prepares for the January 1, 2025, renewals, Yeung anticipates the demand for property-catastrophe limits will increase as cedants seek to mitigate these risks. “This elevated demand will be met, provided that pricing and capacity remain in balance,” Yeung explained.

“Guy Carpenter expects stakeholders to remain engaged and active with an ongoing gradual shift of renewal discussions to address specific client coverage needs instead of wholesale cycle changes,” she added.

Yeung noted that reinsurance capital has rebounded since 2023, with total dedicated capital estimated at a record $620 billion, a 9 percent increase over 2023 adjusted levels. Reinsurers are now more willing to deploy this capital, aiming to maximise underwriting profit while diversifying their portfolios.

“Strategic relationships remain core to any transaction with cedants, and reinsurers are looking for balanced and sustainable partnerships,” she emphasised.

Looking to the future, Yeung outlined that Guy Carpenter’s strategic priorities in the Asia-Pacific region will include helping clients understand and mitigate the impact of macro and geopolitical risks on their strategy and capitalisation. The broker aims to provide bespoke solutions, including data-driven business insights, capital management tools, and expert-led reinsurance design.

“Effective capital management is a key focus to help our clients navigate market volatility,” Yeung concluded.

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

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