Closing the protection gap across APAC

19 September 2018

Stephen Punch, Deputy CEO, APAC, JLT Re

When evaluating the opportunities and challenges of the region, it is important to understand that APAC is a diverse region comprising many different markets, at different stages of development. 
However, a common theme across many APAC countries is closing the protection gap. 

Low take-up rates of property insurance across the region, but in China and Southeast Asia in particular, continue to be a problem leading to inadequate natural catastrophe cover in some of the most disaster-prone economies such as Indonesia and the Philippines. 

This issue extends to health and life insurance as well. One of the challenges is therefore about being able to use the excess capital in the global (re)insurance market to provide adequately priced products to close that gap.

A further example and one with significant potential growth in the region is agricultural reinsurance in India, with the Modi government providing subsidies to farmers to buy agricultural insurance. 

While the market penetration is currently low, there are positive signs that this is growing and will continue to grow as a class of business.

Growing market share vs technical pricing
One of the problems in the region is that there continues to be more focus on growing market share rather than considering the technical pricing required and the impact on the bottom line. 

This is changing rapidly in Australia and New Zealand, largely due to pressure on publicly listed companies from analysts. 

However, in Southeast Asia and China, where you have many insurers with government shareholdings, or smaller family-owned insurers, there simply isn’t the same pressure with the outcome that they often continue to under-price and to under-reinsure the risk.

One development that may help drive change is that our understanding of the underlying risk continues to improve, particularly in relation to natural hazards. 

Model vendors continue to expand country and peril coverage, making any decision to under-price more open to challenge and scrutiny over time.  

The global losses in 2017 have had very little impact in APAC markets. 

At 1 January in the treaty reinsurance renewal market, the losses may have halted the downward spiral of price reductions, but there was little evidence of price increases in Asia. 

Part of the problem is that in many APAC countries, there are still far too many insurance licences. 

Increasing regulation and the adoption of more risk-based approaches to capital in these economies, combined with some European and US (re)insurers actively looking at Asian expansion, mean there is likely to be consolidation and a reduction in the number licences, but the timeframe for such changes remains uncertain.

Please contact Stephen Punch on (+612) 9290 6716 or