Asia, being the world’s largest continent with widely varied climate conditions, has often been the most damaged by disaster. Last year, the region was hit with US$74 billion in losses, making up 47% of the global total, with only 16% insured.
However, governments are trying to counteract this by introducing policies and schemes to grow the catastrophe insurance sector, according to a market briefing report by Fitch.
Frequent weather-related events, combined with rapid urbanisation in the region, continues to drive the growth of economic losses and remains a major concern, said the report.
Fitch cited several countries, namely Japan, China, Indonesia, and Sri Lanka, as examples of governments actively participating in growing the insurance markets and insurance penetration.
As a country prone to seismic activity, Japan’s government initiatives to improve the residential earthquake insurance system has shown results in increasing insurance uptake, said Fitch.
Indonesian domestic reinsurers have grown their capacity beyond regulatory minimums by buying catastrophe retrocession cover in preparation for expansion.
“Indonesia’s domestic cession policy has led to more risks being retained domestically, with most local reinsurers holding catastrophe cover of around 1:400 return periods,” said Fitch in the report. “This is above the 1:250 regulatory requirement, providing reinsurers’ with some ability to absorb catastrophe losses amid industry expansion.”
Sri Lanka, which is facing changing weather patterns leading to increased rainfall and flooding, has purchased its first national disaster insurance policy last year, and further increased its coverage by 30%.
Meanwhile, China Re established a catastrophe research centre in June to support the country’s insurance industry with a platform for information sharing to assist the market’s growth and insurance penetration.
Asian economies are among the fastest growing in the world, but they are also exposed to the threat of catastrophes, with climate change bringing more frequent and more intense weather events.
With governments becoming more aware with the risks, they have improved their efforts to strengthen the insurance sector by creating demand and favourable market conditions, presenting global insurers strong opportunities for growth in the near future.
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