[ET Net News Agency, 11 December 2018] Moody's Investors Service said that the
outlook for the life and property and casualty (P&C) insurance industry in Asia Pacific is
stable, supported by solid capital levels and improving product mixes, despite the
emergence of rising asset risks.
"Economic growth among APAC economies will moderate but continue. This plus their ageing
populations will support growing demand for long-term investment, health and retirement
coverage," said Frank Yuen, a Moody's Assistant Vice President/Analyst.
"At the same time, premium growth is moderating, as insurers shift to protection and
investment policies, with profit-sharing features, and away from short-term
interest-sensitive products," said Yuen.
Moody's conclusions are contained in its just-released report, "Insurance --
Asia-Pacific: 2019 Outlook".
Life premium growth will slow as insurers actively adjust their product mixes; however,
long-term demand for life insurance remains strong, underpinned by a growing middle class
and significant protection gap.
Premium growth in the sector will also moderate as insurers actively adjust their
product mixes in response to tighter capital and regulatory requirements.
With the property and casualty (P&C) sector, premium growth in Asia Pacific is robust
and continues to exceed that of other regions on the back of the region's economic growth,
increasing wealth, and the need to build infrastructure.
P&C insurers are also searching new growth drivers from non-motor lines, and pricing
discipline is becoming increasingly important for defending underwriting margins amid
intense competition.
For the insurance industry more generally -- both life and P&C -- asset risk is rising
due to increasing allocations to higher-yielding non-traditional assets and widening
currency mismatches. Given the likelihood of more volatile economic and capital markets
developments in 2019, the investment performance of Asia Pacific insurers will experience
pressure.
In the area of regulation, tightening requirements for capital and asset liability
management will strengthen the industry's capacity to absorb shocks.
Across the region, regulatory changes are raising the bar on capital and internal risk
management. Regulators are gradually pushing for more sophisticated capital standards with
the implementation of IFRS 17 being a key focus for insurers.
While the changes are expected to be gradual, insurers are stepping up their efforts to
(1) improve asset-liability management and internal risk management, and (2) embed capital
analysis in their daily product offerings and asset allocation decisions.
Finally, deeper technology adoption will gradually reshape the industry' business
models. Early investment by large players will help offset the competitive threat posed by
new entrants. (KL)