The re/insurance industry is seeing rapid change as it grapples with new risks in a changing world: this was the topic discussed by a panel at the Singapore International Reinsurance Conference on day two of the conference.
The meeting covered the theme of ‘Managing Risks in an Uncertain World’. Session chairman Peter Schmidt, chief executive Asia Pacific, Latin America and global credit & surety at XL Catlin led a six-strong panel.
Ludger Arnoldussen, member of the board of management, Munich Re, started by pointing out that Munich Re’s expectation for economic growth over the long term had not been changed much by the recent economic slowdown in China. He said he expected Asia to continue to outperform other emerging market areas in the world over the next decade.
“We expect the region to continue to grow steadily at 5 to 6 percent over the next two years,” Arnoldussen said.
He added that the main reason for the slowdown was the rebalancing of the Chinese economy with the focus moving from investment to consumption and a slowdown in the amount of growth associated with that.
According to Arnoldussen, the slowdown has been more on the industrial side than the service side. This has impacted China’s ASEAN neighbours, due to the fall in demand for industrial resources.
However, he pointed out, India was seeing accelerated growth, partly triggered by a new government and its new policies.
Looking at the impact that this will have on the insurance sector, Arnoldussen pointed out that when gross domestic product slows so does insurance growth, sometimes disproportionately.
However, he added, many emerging markets in the area were still seeing growth of up to 6 percent. Even if it slows somewhat, this should still mean some insurance growth. He highlighted property insurance and health insurance as being areas of good future potential.
Emmanuel Clarke, the president of PartnerRe, highlighted the fact that there are increasing trade barriers and new forms of protectionism in reinsurance.
“Over the last few years we’ve seen an increasing number of countries introducing trade barriers—I’ve counted 22 of them, without including the 54 states of Africa,” he told delegates.
Looking at why countries would introduce these barriers Clarke pointed out that some countries might want to protect their own insurers from international competitors which operate on a cross-border basis.
He added that there were two other reasons. One is partly prudential, in that countries want to protect their own industries from potential insolvencies through exposure to foreign re/insurers. The second is pure protectionism, he said.
Clarke added that these barriers defeat the purpose of reinsurance, which must be able to tap into a wide base of areas in many markets and assess risks all over the world.
Eric Anderson, chief executive officer of Aon Benfield, concentrated his remarks on the nature of re/insurance hubs, pointing out that these tend to be divided between old hubs such as London, Bermuda, New York and Hong Kong, and new hubs, such as Singapore, Miami and Dubai.
He stressed the need for these hubs to keep attracting new business and new talent, pointing out that just because a city becomes a hub for re/insurance it does not necessarily follow that it will remain one.
Anderson illustrated this with the point that Bermuda is finding it hard to keep attracting talent due to the fact that living there is expensive and that it can be hard to find jobs for family members there.
John Dacey, member of Swiss Re’s group executive committee, group chief strategy officer and chairman Admin Re, stressed that the re/insurance industry needed to continue to look at innovation and new products as it seeks to grow. This was an area that the entire industry needed to work on, he said.
Vincent Vandendael, director, global markets, Lloyd’s, highlighted the low insurance penetration rate in Asia, adding that Asia remains highly vulnerable to natural catastrophes.
Finally, Amer Ahmed, CEO of Allianz, Reinsurance, stressed the need for the industry always to push for good data, adding that good data leads to good underwriting decisions—the virtuous circle that so many companies strive for. Conversely, he pointed out, bad data led to bad underwriting decisions—the vicious circle that companies need to avoid.
SIRC, Peter Schmidt, XL Catlin, Ludger Arnoldussen, Munich Re, Europe, Asia-Pacific