Asia Pacific insurers enjoy rebound but face pressures

Insurers in Asia Pacific are enjoying an improved operating environment in the most recent fiscal period given the notable recovery in asset prices. But they face strains in that financial results may not be as strong as last year and the region’s stock markets have been volatile, with insurers investing new cash flows at very low interest rates, says an AM Best report released this week.

The report says that insurers in the region benefited from higher investment income and realised and unrealised capital gains that led to improvements in their capitalisation. “However, financial results may not be as strong as in 2009, as asset prices rebounded from such a low point in 2008.”

In terms of premium, growth in most life and non-life markets remained strong, though Japan’s non-life market and Australia’s life market each saw contractions in premiums. “Prudent insurers have adjusted to low interest rates. Life companies have tweaked product designs, while non-life insurers have raised premium rates and improved underwriting standards,” says the report.

Likewise, major insurers continue to deal to competitive forces brought about by the emergence of direct sales and distribution through banks.

In China, the pace of growth in the life and non-life markets has led the regulators to focus on improving market discipline. Japanese insurers are also facing a revised regulation for calculating solvency.

Larger players, led by Japanese insurers, who are faced with limited opportunities for growth in their home markets continue on their expansion plans to meet their need to grow their business.