Asia offers “immense
growth opportunities” for insurers, but providers should also
consider challenges including catastrophe risk, longevity risk and
retirement security risk, says a senior figure at the Monetary
Authority of Singapore (MAS).
Speaking at a conference
on 25 June 2012, Ng Nam Sin, assistant managing director of the
development group at Monetary Authority of Singapore explained that
although gross premiums in Asia ex-Japan have increased by about
16% per annum from 2005-2010, Asia remains
under-insured.
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He also stressed the
importance of a keen understanding of the risks facing
Asia.
Ng said: “The very
first one is catastrophe risk. 2011 was the costliest year for the
insurance industry in terms of catastrophe-related losses, which
totalled an estimated US$110bn. The events in 2011 clearly
highlighted the vulnerability of Asia to natural
catastrophes.
“Of the string of
natural catastrophes that wrecked the world, the three costliest
events took place in Asia Pacific – the earthquake and tsunami in
Japan, with insured losses estimated at US$35bn, the floods in
Thailand, with insured losses estimated at between US$15-20bn, and
the earthquakes in New Zealand with insured losses estimated at
US$14bn.”
Ng said these recent
events have also called in question previously held assumptions on
catastrophe risk in Asia. For example, Thailand had previously not
been viewed as a catastrophe-risk zone.
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By GlobalDataLongevity
challenge
Longevity risk is
another issue facing insurers in Asia, said Ng.
“People in Asia are
living longer. United Nations statistics show that the average life
expectancy in Asia Pacific countries has increased by about 14-16
years over the last 3 decades. In more developed Asian economies,
the population is also ageing.
For example, in
Singapore, the elderly currently makes up 10 per cent of the
population but the rate of ageing is expected to rise six per cent
each year from 2012 to 2020.”
He added that there is a
growing retirement security risk in Asia arguing that most state
and corporate pension systems in Asia remain insufficiently
developed or inadequate.
Ng said the insurance
sector has responded to the demand of individuals by offering
innovative retirement products such as variable annuities, asset
preservation products, reverse mortgages and inflation-linked
bonds.
“While doing so, there
is also a greater need to manage the new risks that they are taking
on, which include some harder-to-manage and unpredictable risks
such as volatile market risks and longevity risks.
“In addition, individual
awareness and responsibility for retirement security remain low,
and not all of these retirement risks can be transferred through
the use of financial products.”
Ng concluded by saying
that as insurers position themselves to tap Asian growth, a sound
understanding of the evolving risk landscape in the region must be
developed.
He said: “To this end,
research has an important role to play in providing thought
leadership on Asian risk and risk management. Singapore, as a
leading insurance centre, is well-placed to support these
efforts.”
