Annual report finds risk managers and insurance buyers in Asia are benefitting from fierce competition among insurers and historically low rates. By Martin South, CEO, Asia-Pacific, Marsh

Asia continues to be a region of contradictions and opposing dynamics, with markets that are extremely developed, markets that are truly emerging, and natural catastrophes among the most devastating anywhere on earth. Yet the insurance industry seems to be in a perpetual soft market, driven by new capital, new capacity, and fierce competition.

Active Typhoon Season
2013 was an active typhoon season for the region, with Typhoon Haiyan/Yolanda breaking records in November as the strongest typhoon ever to make landfall, with winds exceeding 300 kph. The economic losses are expected to be more than US$10 billion, but the insured losses will total only US$700 million, according to Munich Re.

In September, Typhoon Usagi made landfall just north of Hong Kong in China’s Guangzhou province, largely sparing the densely populated financial hub, but still causing markets to close and leaving substantial damage in its path.

In October, Typhoon Phailin made landfall on India’s east coast, causing significant damage. Although tragically some lives were lost in this catastrophic event, countless others were saved because of the government’s evacuation and disaster preparation measures in advance of the storm.

Despite the economic losses from the typhoon season, insurance penetration rates across the region — especially in countries like the Philippines and India — are well below those of developed markets. This creates a contradictory landscape, where the headlines and video footage of devastation does not match in terms of insurance payouts and contribution to rebuilding.

In addition, the insurance industry’s commitment to helping companies in times of need will be tested, following a claim in the semiconductor industry that is likely to be one of Asia’s largest losses on record. This is a landmark opportunity for the industry to delight or disappoint, and will set a precedent going forward.

Developed Asia Continues to Advance
In Asia’s developed markets, such as Japan, Korea, Singapore, and Hong Kong, the industry continues to advance and evolve in terms of their approach to risk management and insurance. Singapore has further established itself as the principal insurance and reinsurance hub for the region, with more and more players starting operations there to capitalize on Asia’s growth story. Insurers are also making Singapore their regional headquarters not just for Asia, but increasingly for Asia-Pacific.

New entrants into the property insurance arena and interest from the north Asian marketplace toward US property insurance have increased capacity in an already expanding market. The flow of capital and capacity into the Asian markets is set to continue, as governments across the region implement strategies to create a global insurance market based in key hubs such as Singapore. According to the Monetary Authority of Singapore, Asia will likely account for 40% of the global insurance market in 2020.

Employee Health and Benefits Rapidly Changing
Asia is a unique region when it comes to the diverse models for health care and medical insurance. Unlike Europe or Australasia, which predominantly have state-run medical insurance programs, many countries in Asia are beginning to experiment and test different models, from privately or company-run schemes to socialized schemes. Asia is facing a rapidly ageing population, with many countries reaching ageing populations in less than half the time it took for other developed countries. This means country health care systems are becoming overloaded, causing populations to demand greater access and availability from their governments.

Established economies, such as Japan and Korea, continue to look for ways to provide affordable care to their rapidly ageing populations. The role of government in health care and medical insurance will be a major theme for 2014 and beyond, with countries such as Indonesia implementing mandatory programs in a phased manner.

Opportunities Abound
Asia will continue to be the most dynamic region for the insurance industry, with opportunities coming in all shapes and sizes. From tackling natural-catastrophe risk at a government and capital markets level, to educating emerging markets on the value of insuring their assets, Asia presents growth opportunities for industry players across the board.

It also remains an extremely attractive region for insurance buyers. We expect insurance rates to continue to be soft in general, as capital, capacity, and competition continue to be the primary theme for 2014 and beyond.

Price remains king in Asia; however, there is a growing awareness of the long-term sustainability and price benefits of good risk management.