(The following statement was released by the rating agency) Link to Fitch Ratings' Report(s): https://www.fitchratings.com/site/re/10082141 Fitch Ratings-Jakarta/Singapore-August 01: Asian reinsurers are being challenged amid intense competition to negotiate better underwriting terms and conditions with ceding companies, Fitch Ratings says in a new report. Reinsurers are also exploring alternative strategies and opportunities to sustain profitability, including alternative capital markets, M&A, enhanced catastrophe risk models and cyber-security insurance.
Reinsurance pricing was largely stable in Asia, except for areas where severe catastrophes occurred in 2018. The stability was due mainly to adequate capacity from traditional reinsurers and some access to alternative capital markets, such as insurance-linked securities (ILS). The concept of ILS is not new to the European and North American markets, although there have been limited launches in the Asia Pacific. There are signs of renewed interest by reinsurers, as we saw some pockets of activity in 2018-2019 out of the Singapore market. Fitch expects a gradual pick-up of ILS transactions to be issued in Asia, if they continue to be supported by strong, sustainable interest from investors. ILS deals provide diversification to investors.
Fitch expects the non-life reinsurance sector to benefit from China's nonlife insurance sector's continued expansion in 2019, after rising by more than 11% in the first four months of the year. The growth came despite trade tensions between China and the US continuing to pose uncertainty on the (re)insurance industry. China has long been the biggest contributor to the total reinsurance premiums in the region. Countries across the Asia-Pacific region are also likely to gradually follow Singapore's lead on cyber-security insurance, eventually resulting in an increasing proportion of cyber insurance being ceded to reinsurers. Reinsurers are also placing more emphasis on utilising statistically reliable catastrophe models, particularly in less developed Asian markets, which are prone to catastrophes - the catastrophe data available in these markets has been scarce. Such models could also be useful tools to aid premium pricing and retrocession arrangements by the reinsurers themselves, amid climate changes. Asian reinsurers continue to seek M&A opportunities - M&A has been one of the attractive options to reinsurers due to a competitive market in which cedants are more demanding than ever. Nowadays, the cedants not only demand a capacity provider, but also risk-evaluation assistance, broad product offering and customised solutions. Limited organic development opportunities have led some reinsurers in Asia to enhance their business profile through M&A. Our report "Asian Reinsurance Markets: Seeking Alternative Strategies amid Shifts in Operating Environment" is available at www.fitchratings.com or by clicking the link above. Contact: Jessica Pratiwi Analyst +62 21 2988 6816 PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor Suite 2403 Jl. 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