Insurers pledge commitment to Asia despite difficult market conditions

The regional heads of Lloyd’s, Axa and Marsh were speaking to Commercial Risk Asia editorial director Adrian Ladbury at a specially convened panel debate at the Pan-Asia Risk and Insurance Management Association (Parima) conference in Hong Kong.

Longstanding soft market conditions and an increase in both capacity and competition have pushed rates to unsustainable levels. This has led insurers to appeal to risk managers to cooperate in ensuring that coverage is provided at a rate that works for both insurers and insureds, meaning that risk managers get meaningful coverage and insurers are able to underwrite for profit.

“There is too much capacity and competition,” said Kent Chaplin, chief executive, Lloyd’s Asia. “We like competition but we have got to change the way we do business. We are in this together [insurers and risk managers] and we can’t sustain the current rates.”

Yet despite this appeal, Mr Chaplin said Lloyd’s has no intention of leaving any of its Asian markets and he cited the recent award of an insurance license in India as evidence of Lloyd’s’ commitment to the region.

Mr Chaplin also accepted that Lloyds will need to pay more attention to its buyers’ demands. “Lloyd’s is a specialist market with more than 300 years of history but things change. We need to get closer to the buyers. This is just the start. We won’t be done by Christmas. But we are committed to Asia and to Parima.”

In a market of overcapacity, risk managers also have to ensure they get the right insurance rather than the cheapest, added Rob Brown, chief executive of Axa Corporate Solutions. He also warned that insurers can often look to restrict coverage in a soft market, in order to be comfortable giving insureds the low price they are looking for.

Mr Brown also said more consolidation is likely in the insurance market, a view supported by David Jacobs, chief executive of Marsh Asia, who said risk managers should welcome consolidation because at least it means capacity is not leaving the market.

Consolidation may also be a way for insurers to negate the threat of disruption from digital newcomers, said Mr Jacobs. Startups have already made inroads into many incumbent insurers’ markets and acquiring them may be the best strategy.

However, Mr Jacobs also accepted that insurers must do a better job. “We need to get buyers more excited and to know that something is there if a risk hits. But we cannot peddle an insurance product before we understand what risks our clients face.”

Mr Jacobs also suggested brokers should explore a new service model and even consider charging insurers, as long as any charges are fully transparent to clients.