Commercial insurance rates in Asia are expected to reach historic lows this year, according to the 2014 Asia Insurance Market Report, published by Marsh. The report cites fierce competition among carriers for market share, the entrance of new insurers, and an abundance of insurance capacity as the main reasons for the soft market conditions.
Despite an active typhoon season during 2013 – including Typhoon Haiyan, the strongest typhoon ever to make landfall, in November – the insured losses from natural catastrophes last year were minimal due to low insurance penetration rates in affected areas. As a result, reducing reinsurance rates will drive the primary insurance markets even lower.
The report also notes that the rapidly changing landscape for employee health and benefits, especially medical insurance, as some countries in Asia experience ageing rates more than double than that of western countries. Governments across Asia are beginning to experiment and test different models, from privately or company-run schemes to socialised schemes.
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 national health insurance programs in a phased manner. Companies are caught in a balancing act of trying to contain rising medical insurance costs while still providing attractive benefit programs to attract and retain talent.
“Unless there is a calamitous series of events this year, the perpetual soft market in Asia will continue,” says Martin South, Marsh’s CEO for Asia-Pacific. “Capacity and underwriting expertise continues to flow into the region, creating attractive buying conditions for companies, especially those that have robust risk management programs and a good claims history.”
“Aside from pockets of increases in particular sectors within specific countries, such as product liability for manufacturers exporting to the US, rate reductions will be widespread across most classes of insurance in 2014. Employee health and benefits insurance remains an area that warrants close scrutiny due to the rapidly shifting regulatory and medical inflation environment.”
The report also highlights that financial lines, such as directors and officers liability insurance (D&O) and professional indemnity, remain competitive reflecting the benign litigation culture across Asia.
Cyber liability insurance continues to gain traction as governments strengthen data privacy laws in many countries and reports of cyber-attacks become more frequent.
Specialty lines of insurance, such as marine, aviation, and energy, generally will remain stable to soft this year driven by competition and capacity.