Page 44 - WTW Asia Insurance Market Report
P. 44

Property and Casualty                                         Taiwanese business that were affected by the earthquake
                                                              of magnitude 6.4 that struck in February, following which
2016 seems likely to end as another year of below             some premium increases were evidenced. In addition to
average losses in the Asia region, characterised by           the multitude of negative factors bombarding insurers, the
natural catastrophe losses which continue to be lower         market was also impacted by considerable over-capacity
than projected averages, incidents generally occurring in     coupled with below-average global losses.
areas of low insurance penetration, such as the flooding
in Myanmar, and large individual man-made losses which        The treaty market continued to drift downwards for the 5th
have had no impact on overall market for industrial accounts  consecutive year; however, the rate of reductions slowed
, but impact specific niche areas such as power generation.   slightly from the previous year with individual examples of
                                                              hardening generally driven by specific local market events.
The pricing environment for Property & Casualty risks in      Natural catastrophe cover was abundant and the pricing
Asia remained soft in 2016, and the market witnessed          continues to reduce, while broadening of terms continues
rates fall between 10% and 25%. Stressed accounts             to be the trend. Changes in legislation are beginning
compromised by poor risk management and adverse               to impact client retention policies but the competitive
claims experiences were awarded different outcomes.           market is encouraging more interest in additional
Reductions were higher for some businesses where there        earnings volatility protections, providing a much needed
was tougher competition and/or limited capacity required,     uptick in demand. Reinsurers have tended to be highly
particularly where the risk was ‘in scope’ for underwriters.  segmented in their pricing approach leading to substantial
The only exception was the lower layers of some               inconsistencies in individual markets between one client
                                                              segment and another.

Downward                   Neutral             Upward            “The demand for P&C
 Pressure                                     Pressure           insurance in emerging
 on Rates                                     on Rates           Asian countries is
                                                                 expected to grow in
Competition for            Liquidity/recapit  Underwriter’s      the coming years,
market share               alisation          aspirations        largely driven by rising
                           Macroeconomic      M&A Activity       prosperity, the growth
Surplus capacity           factors            Low inflation       in infrastructure and
                           Climate change     Reduced client     the rising frequency of
Insurer financial           Compliance/co      business activity  natural catastrophes ”
results                    ntract certainty   (static
                           Solvency II        premiums)
Global claims                                 Investment
activity                                      returns

Cost of

                                                              Consolidation continues amongst insurers. Some examples
                                                              of this would be the acquisition of Endurance Insurance
                                                              by Sompo Holdings, and Liberty Mutual’s acquisition of
                                                              Ironshore Insurance Limited from China’s Fosun International
                                                              Limited, although this has yet to significantly reduce market
                                                              capacity for good quality risks. With significant domestic
                                                              capacity in many territories across Asia, many regional
                                                              underwriters remain hungry for income and are often still
                                                              keen to grow top line revenues.

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