Asia sees modest price increases amid growing demand for ART

Demand for alternative risk transfer solutions has increased in Asia according to Aon, which said it has seen a growing number of feasibility studies in relation to captives, parametric insurance and discretionary mutual funds, as organisations seek solutions to help smooth pricing and coverage volatility. In its Q3 2023 Global Insurance Market Insights, Aon notes that premiums increased modestly due to opposing market forces in Asia. On the one hand, increased competition and a focus on profitable growth tempered rate increases, while on the other, rising inflation and valuation scrutiny increased exposures. But while ongoing inflation and rising loss costs pressured pricing upward across property, auto and casualty, other lines such as cyber and directors and officers experienced a softening market. “The bifurcation across product lines and different countries further increased – where pricing and capacity, in particular, experienced a softening trend in one market but a hardening trend in another,” states the report. Paul Young, head of commercial risk, Asia, said: “In Asia, we observe markets and products where softening conditions are apparent, while in other markets, rates and capacity continue to harden, particularly as increased costs on natural catastrophe exposed risks flows from reinsurers to direct insurers.” The report notes that capacity was sufficient for most risk types and coverage lines, although some challenges were experienced by casualty and nat cat-exposed property placements as insurers reduced limits, particularly for US-related exposures. Property market conditions remained challenged for high hazard, catastrophe exposed, claims impacted and poorly risk-managed placements, says Aon. The report says casualty emerged as the most challenged line of insurance relative to other classes, and insurers continued to push rate increases to remediate against several years of poor performance. Rate increases were prevalent across the portfolio and insurers remained focused on limit management and increased scrutiny in relation to ‘non-traditional’. According to Aon, problem areas continued to include sexual misconduct, bushfire liability, frequency-exposed business, large worker-to-worker risk, and mining, especially thermal coal and tailings dam exposures. Insurers also looked carefully at contractual liability and asked questions around indemnities and hold harmless clauses. Market conditions for cyber shifted favourably for insureds despite a number of high-profile cyber incidents impacting organisations in the region, says Aon. “Cyber market conditions are significantly more moderate, with increasing options for lead insurers for primary programs for insureds with good cybersecurity maturity,” said Young. The report notes that market conditions for D&O remained favourable for buyers, with new capacity and growth aspirations of incumbent insurers improving competition and choice for listed companies in most sectors. “Amidst a backdrop of ongoing uncertainty and volatility, buyers are wanting to partner with insurers who can demonstrate pricing and coverage consistency year on year,” said Tracy Riddell, head of placement, property and casualty, Australia. “Large clients, in particular, have grown wary of fluctuating insurer appetite and are driving demand for alternative risk transfer solutions and long-term insurance arrangements – to insulate against market cycles and to achieve greater stability and certainty over the long term.”

Asia sees modest price increases amid growing demand for ART

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