There’s a very real and vast opportunity for sustained insurance sector growth across emerging Asia over the next decade, and insurance-linked securities (ILS) capacity will be required, according to executives at Hong Kong domiciled reinsurance company Peak Re.
When compared to the rest of the world, property and casualty (P&C) insurance penetration rates in much of emerging Asia, including the India subcontinent and China, are much lower. And, at the same time, Asia and the India subcontinent experience a far higher frequency of natural catastrophe events than any other continent in the world.
As a result, the region is viewed as one of the greatest growth opportunities for global P&C insurance and reinsurance players.
However, the exposures are huge and growing and as such, the ILS community will undoubtedly be needed to support the expansion of the traditional markets as they look to grow alongside the rising wealth of the middle class society.
This was the message from executives at reinsurance firm Peak Re, who delivered an insightful keynote and participated in a Q&A with Artemis at the virtually held ILS Asia 2020 conference.
“Due to the low penetration, historically the nat cat events have led to a higher economic but very, very low insurance losses. The growth potential therefore is very large and opens opportunities to the insurance sector. And, this opportunity will last for a very long period of time. Two to three decades and beyond. The middle class society is growing very fast in those areas,” explained Franz Josef Hahn, Chief Executive Officer (CEO) of Peak Re.
When compared to a global average of around 2%, P&C insurance penetration in 2019 in India and China stood at approximately 1% and 1.3%, respectively. According to Hahn, one of the main reasons for this lack of growth concerns the fact that year-on-year, the emerging middle class society is expanding by roughly 150 million people.
“150 million is as much as the total population of Russia, and is as much as the total population of France and Germany together. So, with this situation, we can see that today the insurance penetration is still very low and it will grow overtime,” said Hahn.
Adding, “With this, and with this huge opportunity of growth, and sustained growth over the next decade, we can see a strong entering of natural catastrophe protection covers into the insurance system. And, that’s why it doesn’t take me any wonder why Singapore and Hong Kong are preparing their capabilities for housing ILS structures.”
As noted by Hahn, both Hong Kong and Singapore are looking to become regional hubs for ILS business and continue to adopt measures to enable the development of a sustainable model.
“And, we have seen the first arrival of funds who are also specialising on the ILS both in Hong Kong and Singapore, and it will not take a long-time before that capital, specifically from the Northern, very capital rich area of Asia – Japan, Korea, South Korea, and China, will enter existing funds, or will start new startup funds which will also manage ILS risk,” said Hahn.
We’re archiving every session from our online and virtual ILS Asia 2020 conference over on our YouTube Channel.
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