Direct insurers’ demand for technical expertise, risk transfer and reinsurance capacity to rise, says Fitch analyst
A senior director at Fitch Ratings’ insurance group, Wan Siew Wai, said research he conducted for a recently released report indicates that insurers must improve their risk-management practices and increase their catastrophe-modelling sophistication to better prepare for future disasters.
“Businesses have to more carefully select which is the most appropriate risk-management protection for them because of increasing costs,” Singapore-based Wan told SR.
The former analyst at Moody’s Asia Pacific said regulators were striving to improve the overall financial health and risk-management capabilities of insurers. “These regulations are likely to propel the demand for technical expertise, risk transfer and reinsurance capacity by direct insurers to meet the higher regulatory requirements,” he said.
The Fitch Ratings report Asian Reinsurance Markets: Fall in Regional Natural Catastrophes; Huge Growth Potential reveals that flood insurance coverage that was previously included in fire and Industrial All Risks insurance in Thailand was now being sold separately with sub-limit coverage.
Wan said that the 2011 Thai floods had forever altered the way companies underwrote business in the Thailand market. “It’s about reassessing risk appetite and is linked to capital management as well,” he said. “They have to properly assess the underlying risk that they are underwriting, and as Thailand is now considered to be a cat-prone market, it really changes the whole approach.
“This means that the reinsurance cost will go up for reinsurance protection operating in [nat-cat prone] countries, and it also means that businesses operating in these countries may have to relocate their reinsurance protection.”