Specialty insurance the key to weathering unforeseen economic storms, says Asia-Pacific president

Juan Luis Ortega succeeded Damien Sullivan as regional president of ACE Insurance’s Asia-Pacific franchise at the start of the month. The move means Sullivan is now chairman of the company’s Asia-Pacific division and can focus on governance, strategic planning and senior customer relationships across the region.

But what are Ortega’s plans now that he has responsibility for the commercial and personal property, as well as casualty and personal accident, insurance operations in 12 countries and territories?

After three years as ACE’s head of accident and health business in Asia, Singapore-based Ortega says that he sees examples of and opportunities for growth in every country in which the company operates.

“We have grown significantly in Thailand, expanded through acquisitions in Malaysia and Indonesia, and strengthened our capabilities in Mobilassurance, surety and auto insurance,” Ortega says. “In north Asia, our travel-insurance business is one of the drivers of our expansion, while we continue to be a market leader in financial lines products. Our operations in Australia and New Zealand continue to see expansion even as we face a more challenging rate environment.”

Ortega says that innovation in client solutions is an important driver of this growth. “For example … we are introducing, in due course, a new product which is tailored to protect privacy,” he says. “In the face of growing regulation in more and more Asian jurisdictions to protect personal information/data, we feel that clients want more certainty about how their personal information may be protected rather than full cyber-liability coverage, which they may not necessarily need nor understand.”

Ortega concedes that cyber risk is a rapidly evolving space in the face of cloud computing and increasing e-commerce activity. “A robust program that includes protection for replacement of loss data is emerging as organisations realise the importance of safeguarding themselves in this e-driven era,” he says.

Rich risk landscape

Legal, regulatory and compliance risks are often top of the agenda when ACE talks to its clients and brokers, according to Ortega. “When you ask for more details, you see risks like natural disasters, supply-chain management, brand reputation, cyber risk and human-resources-related risks,” he says. “The catastrophic events in Thailand and New Zealand in recent years have increased the awareness and the impact on business-interruption protection and supply-chain management.

“In addition, the financial crisis and the sharp economic gyrations pose significant risks to corporates that have significant investments in Asia. Hence, specialty insurance coverage such as D&O, trade credit and perhaps surety bonds, where appropriate, help organisations mitigate against sudden and unforeseen economic downturns.”

The other areas of concern that Ortega believe are “looming” are political, civil unrest and terrorism risks, which he says become increasingly relevant in societies undergoing significant social change. “Specifically for the multinational client segment, they are seeing continual and varied challenges around regulation and compliance,” he says. “As a provider to this segment, we have invested heavily in our service and delivery capability, not only in Asia but globally to minimise the compliance and regulatory exposures for our multinational clients.”

D&O demand

Ortega says that three key factors have been working in tandem to create an uptick in demand for D&O insurance. There’s the increasing frequency of high-profile corporate scandals and D&O claim activities from regulators, shareholders and employees. Then there are regulatory changes that highlight the benefit of D&O coverage. Lastly, Ortega believes there is an increasing understanding of the availability of D&O insurance.

Risk managers need to find insurers with the right product coverage, breadth of network and good claims reputation, Ortega says. “[The insurer must also be] financially strong given that D&O claims are always very complex and long-tailed,” he adds. Risk professionals need to communicate with their insurers as early as possible when there is any potential claim, he advises. “Err on the side of prevention by encouraging good corporate governance as part of the company’s culture and strive to improve the standard for corporate governance.”

As for the future, Ortega says Asia’s growing middle class with its increasing personal assets will continue to generate greater protection needs. “[The region also has] a growing corporate space with small companies becoming medium sized and medium sized companies becoming large with global growth ambitions,” he adds.

In other words, ACE will be watching this space.