‘Secondary’ no more: unmodelled perils a major concern in Asia: Mapfre Re

“So-called ‘secondary’ perils are no longer secondary, but a primary concern in Asia,” according to Javier Sánchez Cea, chief regional officer for Asia-Pacific at Mapfre Re.

The rising frequency and severity of natural catastrophes such as floods, storms, and wildfires, typically unmodelled by the industry, are reshaping risk management and challenging reinsurers to adapt their strategies, he said. “They are no longer truly secondary perils,” Sánchez Cea told SIRC Today.

“This is a significant concern, not only for Asia-Pacific but worldwide. We’ve seen this shift taking place globally, with events impacting markets from Europe to the US, and it’s happening here too.”

The pressure on reinsurers has intensified following recent natural disasters in Asia, which have significantly affected profit and loss accounts across the industry. With increasing demand for catastrophe protection, there is a pressing need to reassess risk management and pricing strategies.

“Most markets are facing similar challenges with secondary perils,” Sánchez Cea noted. “We have to ensure we’re responding effectively to this new reality. That means finding the right balance of deductibles and retentions for companies and adopting sustainable approaches to pricing these evolving risks.”

Mapfre Re is leveraging its global experience to adapt to the evolving risk landscape in Asia Pacific, taking lessons from other regions facing similar challenges. “We are learning a lot from what is happening in Europe and the US, and we’re applying that knowledge here to provide the right solutions,” Sánchez Cea explained.

The challenge lies in striking a balance between maintaining capacity and ensuring profitability, despite the increased strain from these frequent and severe natural events. “We have to help clients understand the new realities and price these risks at the right level,” he added.

This need to adjust pricing and terms for reinsurance contracts stems from the recognition that traditional approaches may no longer suffice in this changing environment. “We are seeing a trend where excess-of-loss demand is higher than proportional,” Sánchez Cea said. “This reflects the changing risk appetite and the desire for more targeted protection. As a reinsurer, our role is to work closely with clients to ensure the right coverage is in place, even in a volatile market.”

“Having fresh blood coming into the region is good, as long as the discipline is followed.”

Upholding discipline

The Asia-Pacific reinsurance market is undergoing transformation with the entry of new players, which Sánchez Cea views as a positive development, if they maintain disciplined underwriting practices. “Having fresh blood coming into the region is good, as long as the discipline is followed, and they provide a technical view,” he said.

“It will help diversify the risk and increase market dynamics. But for the established players like us, the key is to maintain our discipline and not feel pressured by the new entrants.

“We expect more new players will come, especially in countries like India, but what we need to ensure is that we, as an industry, have solid growth in terms of profitability. The capacity is adequate, but it needs to be managed wisely,” Sánchez Cea noted.

Maintaining consistent standards will be crucial for established reinsurers despite market pressures. “We have to maintain our support, providing capacity at the right price with the most technical view possible,” he emphasised. “New players are welcome, but we have to make sure the discipline is sustained, as this is a volatile industry where managing risk is key.”

“Casualty will be one of the most developing lines of business in Asia.”

Casualty is a big opportunity

Beyond catastrophe risks, Sánchez Cea sees casualty as one of the most promising lines of business for growth in the region. With economic development continuing across Asia-Pacific and insurance culture deepening, the demand for casualty coverage is only going to increase.

“Casualty will be one of the most developing lines of business in Asia,” he stated. “As long as the economy keeps growing, casualty will be right there, driven by the need for liability coverage, for companies and individuals.”

However, he warned, entering the casualty market should be approached with “extreme caution”.

“We will pursue the market trend, in a conservative way, but we have to be extremely cautious because this is a long-tail business,” Sánchez Cea said of Mapfre Re’s approach to casualty. “It’s important that we follow a long-term strategy. Once we enter a line of business, we want to be able to sustain it over the years, ensuring the data supports our decisions.”

He highlighted the need to adapt products to the specific needs of the region. “We need to adapt casualty products to the Asian reality,” he said. “The opportunities are there, but we have to approach them with caution to ensure profitability and sustainability.”

While casualty insurance presents significant growth potential, Sánchez Cea underscored that life insurance would be a primary area of focus for Mapfre Re in the coming years. The Asia-Pacific region is experiencing substantial growth in life and health insurance demand, driven by demographic changes and economic expansion.

“Asia-Pacific is the fastest-growing market worldwide for life and health insurance,” he noted. “There is a lot of opportunity here, and we want to develop this line of business.”

Mapfre Re’s approach to expansion in life insurance mirrors its strategy for casualty: methodical and disciplined. “We are not an aggressive company; we will grow step by step,” Sánchez Cea explained. “We won’t pursue growth at any price. Our focus is on bringing the technical expertise we have from other regions to Asia-Pacific while ensuring that our expansion is sustainable.”

He stressed that the goal is not just to build a larger life insurance portfolio but to enhance the quality of the business. “We want to improve the quality of the portfolio rather than merely increase market share,” Sánchez Cea said. “By concentrating on margins and sustainability, we will be better positioned to deploy more capacity in the future.”

Stability amid volatility

Sánchez Cea expressed optimism about the upcoming renewal season, expecting stability with a continued emphasis on disciplined underwriting and pricing.

“We expect a stable renewal season with a focus on maintaining discipline and price efficiency,” he said. “There won’t be any drastic changes, but we need to ensure that terms and conditions reflect the risks involved.”

The diverse nature of the Asia-Pacific region means different markets will require tailored approaches. “Each market has its own experiences and levels of losses, so we can’t treat them all the same way,” he explained. “For instance, typhoon activity in China and Vietnam calls for a different strategy than for markets such as India, where we are more concerned about rate adequacy. It’s about understanding each market’s specific risks and adjusting our approach accordingly.”

He noted that the appreciation for consistent and loyal partnerships is growing in the Asia-Pacific region. “Having a stable panel of reinsurers who provide consistency and loyalty is very important, especially as the market continues to mature,” Sánchez Cea said. “It’s not just about having capacity; it’s about being a reliable partner who is there in good times and bad.”

Sánchez Cea calls Asia-Pacific a “land of opportunities” and expects its rapid growth to continue well into the future. As part of its growth strategy, Mapfre Re has opened a new branch in China. “We will celebrate our 40th anniversary in Asia-Pacific in 2026,” Sánchez Cea shared. “Opening a branch in China is a huge milestone for us. While we don’t anticipate significant growth solely because of the new branch, it’s about getting closer to our clients, improving margins, and providing better services.

“We will continue to grow in Asia-Pacific, but we will do so with discipline,” Sánchez Cea concluded. “It’s not just adding more offices; it’s about ensuring that our growth is aligned with the market’s needs and maintaining the quality of our underwriting.”