Are non-peak perils the next big risk?

As risks mount in the Asia-Pacific region, the focus is expanding beyond traditional catastrophic perils, shifting towards smaller but increasingly consequential “non-peak perils”. Darryl Pidcock, head of PERILS Asia-Pacific, spoke to SIRC Today to discuss these pressing trends, and the major concerns they present for re/insurers.

Pidcock highlighted a central trend in the region: a notable rise in non-peak risks, such as floods and hailstorms. “It’s not the typical typhoon or earthquake we’re accustomed to seeing in Asia,” he said. Instead, the growing prevalence of non-peak perils, including floods and hail, is shaping the risk landscape.

Non-peak perils, by their very nature, often produce lower individual losses but are concerning because they accumulate over time. “You might not have major single-event losses like in Japan or Australia, but the accumulation of losses—think $100 million or $200 million—across many events adds up,” Pidcock noted.

These accumulated losses, although less dramatic, are growing in frequency and impact, compelling insurers to rethink their strategies.

“In parts of Southeast Asia, India, and beyond, you’re seeing heightened exposure due to rapid development and foreign investments, especially in manufacturing,” he added. As businesses and industries expand, insurance penetration remains relatively low, concerns are amplifying over loss accumulation.

Big risks

“There’s now more focus on understanding exposures on the ground.”

Flooding and hail, in particular, are a “major concern”, according to Pidcock. The frequency and severity of floods are rising, attributed to both climate change and urbanisation. “Flood risk cuts across South Asia, Southeast Asia, and even parts of China and Japan,” he noted. Japan, often associated with typhoons, is now grappling with significant hailstorm exposure as well, he pointed out. “We’re seeing the Japanese market turn attention towards these risks.”

Pidcock highlighted the evolving role of catastrophe risk modelling in Asia-Pacific. Historically, modelling efforts faced challenges, often due to reliance on data and methods adapted from other global regions. But that’s changing.

“There’s now more focus on understanding exposures on the ground,” Pidcock said, adding that advancements in technology, such as satellite imagery, are aiding the industry in mapping exposures in finer detail. However, he cautioned, progress is slow. “It’s a large region, and servicing every market requires significant investment,” he noted.

Innovation in data-gathering and processing, including artificial intelligence (AI) and open-source modelling, is helping to build a more comprehensive picture of these growing risks. “AI is promising, but it’s still in pilot stages,” Pidcock admitted. He pointed out that AI can aid in integrating diverse data sources yet remains cautious about over-reliance. “It’s the inputs that matter; put rubbish in, and rubbish will come out,” he quipped.

The industry is seeing a positive trend towards collaboration, which Pidcock views as essential. “There’s a gradual shift towards open-source models and data-sharing,” he explained, with universities and climate scientists now joining forces to tackle the complexity of regional climate risks. For insurers and reinsurers, this collaborative effort signifies an understanding that no single entity can tackle these challenges alone.

Reflecting on industry practices, Pidcock pointed to the Southeast Asia Initiative, a collaborative effort to capture more granular exposure data. “We’re focusing on what’s on the ground, such as flood-prone properties,” he said, noting that urbanisation is rapidly reshaping regions such as India and Thailand. This data, he suggests, is essential for mitigating risk effectively, particularly when governments and insurers must weigh the merits of rebuilding in exposed areas.

Pidcock sees the increasing appeal of parametric in Asia-Pacific, especially in areas with limited access to traditional indemnity coverage, but as a complement to other solutions.

There’s also a focus on cyber risk, especially as digital exposures grow in Asia. “Cyber may be low penetration here now, but that’s expected to change rapidly,” he concluded.

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