Parima members focus on maximising value with insurers and brokers

The Pan Asia Risk & Insurance Management Association (Parima) met for its first event of the year at the Shangri-La hotel, Manila, Philippines on 29 May for a busy schedule of sessions covering the key topics at the top of the risk and insurance management agenda. Perhaps not surprisingly, the opening ‘behind closed doors’ session for members only focused on how Parima members can maximise value in insurer and broker relationships. Raymond Martin Aguilar, vice-president – enterprise risk and corporate property management, Globe Group and Kelvin Wu, head of insurance, Weybourne Holdings, treasurer, Parima, were the speakers as members discussed this key topic. Risk and insurance managers across Asia have faced the same rising costs and reducing capacity in key lines in recent years as their colleagues in Europe and North America. Recent reports from leading brokers do suggest, however, that the peak of the hard market has been reached and terms and conditions are beginning to ease. Aon reported that the moderating insurance market conditions that emerged for most lines of property and casualty insurance across Asia during 2023 continued into the first quarter of 2024. Pricing and capacity in the property market showed “material improvement”, said the broker in its latest Global Insurance Market Overview. The D&O market remained soft, as it is also in Europe and North America, but the broker added that underwriting caution became more evident. Aon’s report concluded that insurer growth focus sharpened as year-end targets approached, but underwriting remained “disciplined” and risk differentiation gained further importance. Aon stressed that across the region, market conditions were mixed, with renewal outcomes varying by line of business. Natural catastrophe property risks remained challenged while financial lines saw a general softening. “The diversity inherent in the region continued to be exposed, with insurers struggling to provide consistency across either the different geographies or products. Market conditions remained challenging for natural catastrophe-exposed property risks, where insurers continued to seek rate increases, as they are not positioned to absorb higher treaty reinsurance costs. The market for property risks that are not natural catastrophe exposed, and much of the balance of the market in general, has moderated or softened,” said Paul Young, head of Aon’s Commercial Risk Solutions, Asia. Marsh reported that insurance rates in Asia fell by 2% in the first quarter of 2024 after being flat for the three prior quarters, according to its latest Global Insurance Market Index report. The broker reported that property insurance rates declined 1% overall. “Property insurance rates declined in a number of countries and industries, with the exception of those in catastrophe (CAT) exposed geographies and in select industries, such as technology, with significant business interruption (BI) exposure,” it said. The broker said that highly CAT-exposed geographies, including Japan, Taiwan and the Philippines, and industries with significant business interruption exposure remained exceptions to the downward rate trend. “Clients in these segments typically retained more risk through increased deductibles, assuming capacity within their insurance program, or adopting alternative risk transfer methods such as captives, parametric, or structured solutions,” said Marsh. Inflation generally has not been such a problem in Asia as elsewhere, but insurers continued to seek validation of values and a deeper understanding of clients’ BI calculations, it added. Thus, while the picture for Parima members may be more positive than this time last year, they still have a lot of work to do to secure adequate capacity and a decent deal in the more challenging lines. Commercial Risk Asia interviewed Kelvin Wu in the lead up to the Manila conference and, while he sees an improving outlook overall, he stressed that fellow Parima members do need to work hard to secure the best terms and conditions and need to seriously look at alternatives such as captives and parametric solutions. “The market appears to be finally stabilising and softening in parts, with variation across regions and product types. I feel that the market is finally more open to being more commercially supportive and open to bespoke policy design that better supports the business,” said Wu. But Parima members should not be fooled into thinking this is an overall softening in all lines and territories as in the past. “In certain lines of the market, the availability of capital and the subsequent lack of discipline in underwriting is a concern. Some of the underlying reasons or parameters that were used to justify the hardening market over the last few years still persist; however, prices and capacity have come back strongly (e.g. cyber). This volatility in pricing and capacity does nobody any favours as it puts risk managers in a difficult position to explain, particularly if the cycle moves dramatically at the new renewal!” explained Wu, one of the founding team of Parima. Weybourne Holdings does use a captive, and Wu advises fellow Parima members to look at the alternatives to strengthen their position in such challenging market conditions. “I see alternative risk transfer and captives as a key tool in the risk manager’s arsenal. It allows risk managers to respond better to the unpredictability in pricing and capacity, but as I mentioned above, more importantly, the speed and ability of using a captive and ART to create bespoke solutions cannot be matched by the commercial insurance market,” he said. “And it is this speed of responsiveness that is driving risk managers to look to using their captives more. The importance of captives is also why Parima supported the formation of the Captive Insurance Association, based in Singapore, focusing on Singapore-domiciled captives for a start, but with plans to expand that across the region subsequently. Annacel Natividad, president of Parima and chief finance officer of Pilmico Foods Corporation, concurrently the chief risk officer of the food and agri business of the Aboitiz Group, told Commercial Risk Asia that Parima members certainly have to work harder to secure the best possible terms and conditions in today’s market. “Insurance market conditions are now more challenging for insurance buyers. It is not only that the premium costs make it to the organisation’s top five Opex spend, but the terms and conditions are more limited. The value of insurance needs to be rationalised to make sure we are able to optimise every peso or dollar we spend,” she said in the lead up to the Manila event. “It is important for a client like us to assess our risk exposures and align insurance coverage based on identified risk treatment plans. Based on my experience, the challenging part is really having a global or international insurance program,” continued Natividad. “In terms of insurance market conditions, for our risk, I feel like some markets are simply using a tick-box mentality. If it is too hard to underwrite, i.e. not a standard risk, then I would say they should tell it upfront. It is too hard to understand why so many international markets seem unable to provide terms,” added the Parima president. Clearly, the availability of adequate capacity for critical risks and options on offer will be an ongoing topic of debate during this event in Manila and no doubt again at the association’s next event in Mumbai, India, 14 June. As the level of competition for Asian commercial and large corporate business begins to rise again among the leading insurers and increasingly reinsurers, it will be fascinating to see how this pans out over coming renewals.

Parima members focus on maximising value with insurers and brokers

Want to read this article?

Read Next

IQUW launches active assailant cover

Talanx results boosted by HDI Global’s 43% jump in net income

VIG Re confirms Faucret as head of Western Europe

Spike in cloud service outages driven by Google Cloud downtimes

Canopius Group appoints group risk director

IQUW launches active assailant cover

Talanx results boosted by HDI Global’s 43% jump in net income

VIG Re confirms Faucret as head of Western Europe

Spike in cloud service outages driven by Google Cloud downtimes

Canopius Group appoints group risk director

Keep yourself informed

Sign up for Commercial Risk’s newsletters

Want to read this article?

Read Next

IQUW launches active assailant cover

Talanx results boosted by HDI Global’s 43% jump in net income

VIG Re confirms Faucret as head of Western Europe

Spike in cloud service outages driven by Google Cloud downtimes

Canopius Group appoints group risk director

Related Articles

Keep yourself informed

Sign up for Commercial Risk’s newsletters