No cliff edge but rates are under pressure: Tokio Marine MD

As the market cycle turns in Asia, with rates coming under pressure and competition intensifying, re/insurers must fine-tune their strategies while keeping profitability in sight, Pavlos Spyropoulos, regional managing director, Asia-Pacific of Tokio Marine Kiln, told EAIC Today. 

Spyropoulos was discussing the ongoing softening of the market and the company’s strategy, while reflecting on comments he made a year ago. “Unfortunately, I was right,” he said, on his prediction. “We are seeing a moderation from the peak of the hard market.” 

But it is a nuanced picture. Spyropoulos noted that while rates are decreasing across several lines, such as marine cargo and property insurance, price adequacy is largely intact.

“There is still discipline in the market. We’re seeing price adequacy in most lines—it hasn’t fallen off a cliff—but we are seeing a softening of the market compared to what we saw in previous quarters,” he said.

“There’s definitely a lot more competition coming from regional hubs such as Australia and other parts of Asia, which is making it harder to retain shares on risks and leading to rates coming down in the number of lines that we’re focusing on,” Spyropoulos explained.

Maintaining discipline through this market cycle is crucial for long-term stability, he stressed. “As we go through this softer phase, it’s important we remember the lessons from previous cycles. Back in 2015 and 2016, insufficient pricing led to unsustainable underwriting practices, which caused a lot of turmoil,” he recalled. “Hopefully, people will have long enough memories to make sure it’s sustainable this time around.

“If I had a message for the industry, it would be that we need to remain competitive and innovative while keeping a hard focus on underwriters’ profitability,” he said.

Team expansion

Despite these challenges, Tokio Marine Kiln remains committed to its ambitious growth plans in Asia, aiming to double its premiums by 2027. This growth, Spyropoulos says, will be driven by strategic team expansions and new lines of business. 

“We’ve been deepening our teams across key areas,” he said, highlighting marine cargo as a significant growth area. Over the past year, Tokio Marine Kiln has expanded its property, cyber, and marine cargo teams, and is growing focus on political risk, credit, political violence, and terrorism lines.

Much of this growth will be talent-driven, he added, underscoring the importance of building strong, capable teams across various specialties.

Spyropoulos highlighted the challenges of talent acquisition, particularly in specialty lines. “Post-COVID-19, Singapore found it harder to attract key workers from overseas due to mobility challenges, although that’s improved. Still, we need to grow the depth of the talent pool in the global market, and especially in centres such as Singapore, to make it a success,” he said.

To address this, Tokio Marine Kiln is heavily investing in graduate programmes, internships, and supporting local initiatives such as Lloyd’s young talent development group. “We’re working to create our own talent pipeline, ensuring we have solutions ready when key team members move or leave,” he added.

Cyber insurance has become a focus for Tokio Marine Kiln. “We’ve added more depth to our property team, which is our leading line of business, but last year we started writing cyber in the region,” Spyropoulos explained. While cyber insurance has been around for some time, he noted that boardrooms across Asia are now taking cyber risks more seriously. 

“Every board is talking about cyber risk now. It’s becoming a priority, and that’s reflected in the increasing demand for cyber insurance.

“Cyber remains a complex risk, however, and it can sometimes be difficult to quantify and understand, and it’s rapidly evolving,” he said, taking the example of the CrowdStrike incident in July which, despite not being the biggest insured loss event, caused significant disruption for businesses.

“We’re seeing better risk management, which is positive for us as insurers.”

More awareness

Spyropoulos anticipates further growth in cyber coverage as governments in Asia introduce third-party cyber regulations, similar to those in Europe and North America. “The rigorous requirements and legislation you have in the EU or in the US don’t exist across the board in Asia yet. They’re in Australia, and Singapore has introduced measures, but we expect these legislations to spur rapid growth of the cyber market across the region,” he said.

In addition to cyber, climate risk and natural catastrophes are front of mind, driving a greater awareness around risk management practices in the region. “We’re seeing better risk management, which is positive for us as insurers. It allows us to continue adding value and making a bigger impact,” he added.

Beyond emerging risks, macroeconomic factors such as fluctuating interest rates, and geopolitical impacts are shaping the region. With Asia’s sustained economic growth and high interest rates helping to stabilise the insurance market, Spyropoulos believes that lower interest rates will further boost economic expansion in the region. “That should lead to more growth opportunities for us,” he said.

The regulatory environment in Asia is evolving as well, with increasing capital requirements for domestic insurers. “Regulators are raising capital requirements, and that’s leading to consolidation in some markets, but it’s also encouraging companies to retain more risk,” Spyropoulos explained. 

“It’s going to raise standards in the local market, and promote more underwriting discipline in local markets.”

He noted that the regulatory developments will likely be a key focus across Asia-Pacific markets, as they present “a big opportunity as well as a big disruption”.

He expects that consolidation may lead to more mergers and acquisitions in some markets. For Tokio Marine Kiln, this presents new opportunities in facultative reinsurance, as local companies seek partnerships with experienced reinsurers to manage expanded risk portfolios.

“We’re in a transition period, and I think a key talking point at the EAIC conference will be how we maintain underwriting discipline in this softer market,” he said. 

Regulatory changes and geopolitical dynamics will also be hot topics, particularly given the impact they have on growth prospects in the region, he added.

“It’s an exciting time for the industry. We need to stay competitive, keep innovating for our clients, and most importantly, maintain a focus on profitability,” he concluded.

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

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