Asia Pacific
In this chapter of our Annual Insurance Review 2023, we look at the main developments in 2022 and expected issues in 2023 for Asia Pacific.
Key developments in 2022
Overall, insurance premium rates have continued to increase in Asia in 2022 across many lines of business, however at significantly lower levels than seen in late 2020 and 2021. Asia insurance premium rate rises were again much lower than the global average (with the exception of India, which saw a double digit rise in gross direct premiums underwritten across the non-life insurance sectors). Rate rises in the financial lines and cyber space remained among the strongest, though still at a slower pace to 2021.
Most jurisdictions in Asia (with the exception of China and Hong Kong) saw the significant easing or removal of COVID-19 measures in 2022, which in turn eased supply chain issues in the construction sector, and (together with the adoption of infectious disease exclusions) meant that insurers received fewer COVID-19 closure related business interruption and event cancellation claims. However, the war in the Ukraine has affected the already stuttering global economy bruised by the effects of the pandemic and added to supply-chain disruptions, increased energy prices (both feeding into claims inflation) and increased geopolitical risk.
In China, the zero COVID-19 policy saw continued restrictions and lockdowns across the country, which slowed economic growth and affected foreign trade. In an effort to counter the slowdown in foreign trade, the Chinese government in early 2022 stepped up support for export credit insurance. The real estate crisis in China has continued, with the Evergrande property development group still in the process of restructuring following its 2021 default on a US$ 83.5 million interest repayment. While the Chinese government is overseeing its rescue and seeking to quell fears of a disorderly collapse, the top 100 Chinese property developers still saw sales plunge by 40% in 2022. Significant losses in the Chinese property market therefore continued to affect insurers invested in the Asian real estate market.
The Insurance Authority in Hong Kong again amplified enforcement actions against rule-breaking insurers issuing a reprimand and fine of HK$7 million to Metlife and an affiliate in January 2022 for several violations of Hong Kong's anti-money laundering laws. A potent reminder to all insurers to ensure that have in place effective anti-money laundering and counter-terrorist financing controls and procedures.
Asian organisations experienced the most cyberattacks in the world in the third quarter of 2022, with an average of 1,778 weekly attacks per organisation. The prevalence of cyberattacks continues to focus attention on the need for adequate cyber insurance and cyber security, causing continued growth in the sector. As do changes in legislation with Thailand and Indonesia recently having introduced new data privacy laws, and the Singaporean High Court recently clarifying that the right to private action exists under the Singapore data protection legislation.
While insolvencies in 2022 have not materialised to the levels which many had anticipated, economic uncertainty has meant that the demand for trade credit insurance in Asia has on average continued to increase. In response, insurers are increasing their capacity for trade credit insurance and creating greater competition in the market.
What to look out for in 2023
Across most product lines, inflation, supply-chain disruptions, and geopolitical risk (together with the increasing cost of outwards reinsurance protection) are expected to keep pushing insured losses and premium rates higher in 2023.
Continued growth in the cyber sector is expected in 2023, with estimates that a significant majority of all cyber risks still remain uninsured (some reports say as high as 90%). The pressure on corporates to adequately protect data is also expected to increase with the effect of new or bolstered data protection laws in a number of countries expected to take effect.
While trade credit insurance demand and capacity increased in 2022, underwriters may see increased claims in 2023 with reports by Singaporean businesses of a 50% increase in bad debts that must be written off in 2022 as compared to 2021.
In the D&O space in particular, high levels of inflation, insolvencies (which are expected to rise by 19% globally), slow economic growth, cyber risks and ESG concerns top the list of key risk trends for 2023.
While the political violence market showed signs of contraction in 2022, with insurers carefully reviewing their aggregate exposures, terms and pricing adequacy, current global political/economic conditions and conflicts are likely to lead to increased pricing for political violence and terrorism insurance globally.
The war in the Ukraine, the associated energy crisis and the increasing number of global catastrophes linked to climate change has accelerated the growth in demand for renewable energy and 2023 will see more renewable energy projects coming online (and more funding for the construction of wind and solar projects), particularly in the solar and onshore/offshore wind spheres.
Finally, with the announcement of the launch of the market's first cyber catastrophe bond, backed by Insurance-linked securities ("ILS") investors, we expect to see further growth in the catastrophe bond market in 2023 and beyond.
Written by Alex Derham.
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