Page 40 - WTW Asia Insurance Market Report
P. 40

Financial Solutions                                             gain traction in the coming year. Many of the countries
                                                                which form these economic corridors will pose a challenge
In 2016, a slowdown in overall trade and investment was         to financiers and contractors and the insurance market
witnessed, resulting in a reduction in transactional volume.    expects to see interest in the coming year.
The current geopolitical environment is an uncertain one
at best: continuing tensions within the South China Sea,          Credit Insurance
the rise of anti-establishment feelings in Europe and the
credibility that has given to non- mainstream Political            There is little doubt across the board that 2016 was
movements, and continued conflict in the Middle East are           an especially difficult year for the credit market. The
just some examples of socio-political unrest the world is          global collapse of commodities prices, a slowdown
facing today. As expected, all leading insurers have taken a       in economic growth in emerging markets and volatile
far more cautious approach to risk and have adjusted their         financial markets has negatively affected the volume
underwriting appetites accordingly.                                of deals done (and credit insurance purchased) by
                                                                   banks and financial institutions this year.
The appetite for the shipping sector and oil and gas
industry remains limited, with an increasing number                WTW estimates that financial institutions represent
of insurers announcing they will not take on any new               70% of all transactional credit insurance policies
exposure to these sectors. Significant growth is expected          purchased in the private market. The most common
out of India, China and the ASEAN region in the coming             type of credit insurance cover is Comprehensive Non
year, and whilst losses have hit Insurers hard in 2016, the        Payment Insurance, which covers the insured from
general feeling is that the insurance market will continue to      loss as a result of the other party failing to meet their
deepen, with more entrants and more capacity expected.             contractual obligations irrespective of the default
                                                                   being caused by insolvency or protracted default.
Aspen Insurance is the newest entrant into the Asia                Credit insurers continue to be exposed to increased
Pacific Insurance market. While the syndicate has been             levels of risk, arising from large single events such
operating in Singapore for the past year, they will begin to       as the bankruptcy of Hanjin Shipping, or from macro
write Political Risk and Credit business from December             events such as the government in India pushing banks
2016 onwards. This is a hugely positive development for            to recognize non-performing assets, which has led to
the Asia Pacific market, as it not only gives this part of         a spike in corporate defaults.
the world access to additional capacity, but also enforces
Singapore’s reputation as Asia’s insurance hub.                   Political Risk

            Shock Elections of 2016                                A substantial amount of interest in Political Risk
                                                                   Insurance was generated in 2016, particularly in
Credit and Political Risk Insurance is about managing              Myanmar, which investors have dubbed ‘Asia’s final
uncertainty, and nowhere is this more evident following            frontier’. For multinational corporations that have
the shock elections of 2016. The world will be watching            international expansion at the forefront of their
President Elect Trump’s first 100 days in office with great        strategies, this is a highly valuable product that
interest as it is likely to dictate capital flows and trade        mitigates political uncertainties that investors face
agreements for a long time to come. In a similar way, a            when carrying out business in a foreign country and
‘hard’ or ‘soft’ Brexit will have varying consequences for the     ensures coverage against an ever-expanding array of
global economy.                                                    global political risks.

China’s One Belt, One Road Project                                 An influx of recent capacity has put pressure on
                                                                   insurers to maintain softer pricing, despite geopolitical
Arguably one of the most ambitious economic and                    volatility and uncertainty. Insurers are also becoming
diplomatic programs that any country in Asia has ever              increasingly selective about the countries they choose
embarked on, this initiative is set to increase annual trade       to increase their exposure in, and a number of insurers
volume by USD 2.5 trillion by 2025, and will continue to           have begun to implement a blanket ban on enquiries
                                                                   from regions that are particularly volatile, such as
                                                                   Pakistan and Ukraine.

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