Most Asia Pacific insurance regulators’ prompt response to the coronavirus crisis will help insurers to weather key business risks, says Fitch Ratings.
Regulators have introduced measures to safeguard policyholder interests while ensuring the industry’s resiliency. These relate to policyholder protection, capital preservation and business continuity, supervisory relief to reduce insurers’ administrative burden and improvements to risk management, among other areas.
Fitch expects the capital-management measures introduced by some APAC regulators and the increasing commitment by insurers and regulators to strengthen risk-management practices will position insurers favourably to counter the evolving risks posed by the pandemic.
Insurers in most APAC countries have expanded their risk-management efforts following the pandemic by strengthening risk-management committees and conducting frequent stress tests on capital, liquidity and other key areas, which the agency views as credit positives in the long run.
Fitch believes safeguarding policyholder interests will remain the ultimate objective of most regulators. Almost all regulators have directed insurers to provide relief to policyholders such as premium deferrals, policy extensions, flexible interpretation of policy conditions, concessions on policy loans and mandatory product introduction.
The agency expects these measures to soften a potential rise in policy lapses from the economic fallout, though a near-term slowdown in premium inflow and the introduction of untested products may expose insurers to added risks.
Some of these risks may be balanced by the moderation of claim frequencies experienced in some business lines. The report “APAC Insurance Regulators’ Response During Coronavirus Crisis” is available at www.fitchratings.com.