Reinsurers face a major crossroads, says Taiping Re CEO

The role of reinsurers in East Asia is at a critical juncture, as the industry seeks not just to manage risk but to unlock hidden potential, Xiaodong Yu, chief executive officer, Taiping Reinsurance told delegates at the East Asian Insurance Congress (EAIC) in Hong Kong this week.

Yu said the reinsurance industry is being buffeted by external forces, such as economic downturns, climate change and more stringent regulation.

However, reinsurance demand has been driven by greater appetite for life insurance products such as annuities as well as the increasing severity of natural catastrophes.

For reinsurers, Yu said, one of the burning issues is climate change. Climate-related claims in the first half of this year were 62 percent above the 10-year average, he noted.

He noted that various jurisdictions have imposed tougher solvency requirements for reinsurers as well as a higher standards of risk management, but these vary by jurisdiction. 

China had issued guidelines for the insurance sector, while Hong Kong had focused on inclusivity. Japan’s Financial Supervisory Authority had decided on economic-value-based solvency regulation and South Korea has implemented stricter risk measurements.

“As we move forward, we must address those challenges, while capitalising on the opportunities,” Yu said. Given increasingly interconnected and digitised spaces, advising on related emerging risks can allow reinsurers to “innovate and expand their offerings”, such as in new energy, cybersecurity, travel and the environment.

Yu said the first priority for reinsurers was to narrow the protection gap, especially in regions prone to natural disasters. “East Asia is one of the most disaster-prone regions, with earthquakes, tsunamis and typhoons. He cited data showing that 80 percent of major natural disasters in Asia between 2014 and 2020 were not covered by insurance.

Taiping Re, he added, is partnering with universities to establish a Hong Kong Flood Disaster Model, to better assist clients through these risks and help Hong Kong improve its catastrophe risk management capabilities.

Yu  noted that farmers, the elderly, low-income earners and the disabled were under-covered. Taiping Re, for example, has made breakthroughs in inclusive insurance for the elderly and designed proprietary medical insurance products.

“We can support inclusive insurance products by sharing the risks and costs associated with offering affordable health coverage, enabling primary insurers to extend their reach and provide essential health and life insurance to a broader population,” he said.

Working together

Yu said that reinsurers can do their part to make insurance affordable and sustainable to overcome low penetration rates and address the significant portion of the population without coverage.

The industry is increasingly using non-traditional capital sources such as insurance-linked securities (ILS). “ILS can lower the protection gap but compared with the EU and the US, our use of non-traditional capital is limited. We should work together to unlock these sources.”

“Risk is not to be feared but to be understood. ”

Insurers should pay attention to important regional developments, he said, noting that Taiping Re has established the China Taiping Servicing Captive Insurers Exchange Platform, aiming to serve China’s flagship global infrastructure initiative known as the Belt and Road.

Since 2023, it has assisted captives registered in Hong Kong in their overseas projects and leveraged the functions of Hong Kong as an international risk management centre. It has also developed a disaster and risk platform for countries and regions along the Belt and Road.

Reinsurers should leverage data-driven and technological advancements to achieve precise risk management, Yu said, such as interactive underwriting platforms and creating green insurance products.

He said risk could be better managed by the industry through stronger collaboration. “Risk is not to be feared but to be understood,” he said. “Reinsurers can’t afford to operate in isolation. Challenges are too great for one company to take alone; we need to build relationships.”

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

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