Amid the climate crisis, continuously rising catastrophe claims in the Asia-Pacific region are a major point of concern for both reinsurers and buyers of protection, such as governments.
In response, policymakers in the region are expected to collaborate more closely with reinsurers in order to obtain more cost-efficient protection and spread awareness of risks, according to a report by S&P Global Ratings. A popular form of collaboration will be catastrophe insurance/reinsurance pools.
The report, titled Asia-Pacific Reinsurers and Governments Fortify Natural Disaster Defenses, said that reinsurance will be especially important for agriculture coverage in emerging Asian markets, which are especially vulnerable to natural catastrophes, such as typhoons, floods, and drought. Governments of Southeast Asian countries, such as Thailand, Indonesia and the Philippines, have set up insurance schemes to help build farmers' awareness and support them in case of catastrophe-inflicted losses.
In order to facilitate profitable underwriting, S&P expects reinsurers to beef up their risk management, with most revisiting their appetites for catastrophe exposures and testing the efficacy of their retrocession programs.
“We see reinsurance demand as accelerating in emerging Asia, supported by factors such as more natural catastrophes and growth prospects in agriculture insurance,” said WenWen Chen, credit analyst at S&P Global Ratings. “For reinsurers, we expect enhanced collaboration with primary insurers to share and increase knowledge systems.”
In order to more sustainably deal with rising natural catastrophe losses, increased risk awareness and pre-emptive risk management for weather events is needed across the chain – from households and businesses to insurers, reinsurers and government planners, S&P said.
