Global professional services firm Aon has published its Q4 2022 Global Market Insight Report, revealing some trends within the Asia Pacific region in terms of the insuring business. The report provides various insights on risk and insurance market trends around the world.
A main trend revealed within the report reveals that APAC-based insurers are continuing to focus on profitable growth and retention. While increasing claims pressured premium pricing, the increasing investment income served to ease said pressure on underwriting profit.
International insurance program demands also grew as businesses continued to expand beyond local geographic borders, even as insurers were selective of underwriting policies in addition to valuations remaining under scrutiny.
The report further stated that climate risk continued to play a significant role in underwriting and insurance within the region. Parts of APAC that are susceptible to natural catastrophes – such as heavy rainfall, typhoons, and droughts – experienced challenging market conditions. The largest losses within the industry continue to be driven by these natural catastrophe events, further pressuring market conditions for property insurance.
Driven by these trends, changes to the reinsurance market, including higher costs and retentions as well as some coverage restrictions, are expected to drive rate increases for both local and international insurers. Underwriters also sought to impose sub-limits and increase deductibles for insuring property against catastrophe risks.
“Traditional and newer forms of volatility are exposing organisations to risks that impact their employees, clients and businesses,” Aon Asia chief executive officer Owen Belman said. “We must therefore prepare for the risks of tomorrow, equipped with tools to measure both near- and long-term risks. While businesses commit to building resilience and maintain a strategic approach to risk, the need for insurance industry to invest in data-driven insights, real-time catastrophe monitoring and risk modeling to identify alternative risk management solutions that are cost-effective is vital.”
The report also touches on the effects of supply chain efficiencies. While these have historically helped companies to optimize short-term financial performance, over time they have led to accelerated risk and reduced resilience. Due to this, many companies are now willing to balance a proportion of their supply chain efficiency to allow for greater certainty.
This trend, according to Aon, is expected to continue well into the year, with companies deploying strategies such as dual sourcing, contracts with improved upper supplier terms, supply chain financing or holding increased quantities of inventory. Strategic suppliers will be under continued scrutiny to build assurance on their ability to supply goods and services.
Remaining challenged but showing signs of stabilizing in the last quarter of 2022 is the cyber insurance market. With companies enhancing security and risk management, the claims experience improved, and retentions reached levels deemed sustainable by insurers. Despite the continued rate increases, they varied widely based on risk management maturity and the level of adjustment made in prior years.
Environmental, social, and governance (ESG) issues continue to pose a broad and complex set of risks and opportunities to companies and investors. For instance, insurance underwriting is becoming increasingly focused on understanding and assessing ESG-related risks, a growing area of notice for those very concerned about greenwashing.
“Persistently high inflation combined with supply chain challenges, talent shortages and climate change concerns highlight the ongoing uncertainty in the market as volatility continues as a key theme for companies to manage,” said Paul Young, Aon Asia commercial risk solutions head. “Businesses must engage with insurers across the portfolio, rather than narrowly for a single product. This will help deepen the relationship and encourage insurers to look beyond only in-appetite products and risks, to help inform better decisions for the business.”
Former Gallagher executive Stephen Rudman joined Aon Asia earlier this month as the new head of marine.
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