Dermot Dick, Head of Treaty Production, gives his feedback on the recent SIRC conference
So, what did we make of SIRC 2019 and the “Winds of Change” themed conference?
On the plane back to UK, most people’s thoughts were predominantly positive, despite the obvious challenges facing the market in Asia and its worldwide support network of reinsurers and brokers.
Some these are global. Climate change threatens all of the major conurbations in Asia and brings particular risks to new industrial developments on vulnerable land in Vietnam, Cambodia, Laos (as well as other countries in the region). Similarly, global trade tensions, allied to the likely impact of Brexit remain a significant generator of concern in this region, as elsewhere.
Cyber is another common thread, although the scale of loss highlighted this week in Asia was in the marine market. Lloyd’s identified a cyber loss scenario of US $110bn if there were to be a simultaneous attack on a number of major Asian ports – well above the normal maximum total catastrophe annual loss in Asia. With that said, the amazing speed of the growth of the cyber insurance industry and reinsurance industry gives hope that we may be able to meet it with market innovation, as we have done many times before with new and emerging threats.
Reinsurance is also facing some turmoil. After years of a soft-market pricing cycle most reinsurers’ profitability is low or non-existent and, given the worldwide scenario, has led to significant repositioning /re-underwriting of reinsurers portfolios – a project that is currently live as we speak.
Meanwhile, it was clear at SIRC that retro shortages continued as the mismatch between direct reinsurance pricing and retro highlighted during the last renewal season looks to continue and worsen this year. ILS funds remain trapped by this pricing issue. Without relief, they cannot effectively reload but the traditional markets are still absorbing loss-creep from previous losses, with the cost of Super Tyhoon Hagibis (potentially US $15bn ) to be reserved in Q4.
On the positive side, it was great to see Trust Re looking confident at SIRC under new CEO Talal Al Zain. They seem to be gaining momentum and it would be great for the MENA and Asian market to see them succeed.
The real buzz word of the conference was resilience. The lack of it, in even the most developed Asian countries is alarming, and this was clearly highlighted. The Asian insurance gap remains very big, even though Asian economies continue to grow at double-digit pace.
However, the first ever ILS transactions and cat bonds in Singapore are a highly positive step towards the region beginning to plug its insurance provision gaps and improve resilience to major loss events. Here Singapore has taken the lead, and in fact continues to lead the whole region in insurance innovation and provision.
Insurtech was as ever, an eye-opener. The huge innovation spurt in Asian insurtech is impressive and again Singapore is very active in this area. It is frankly amazing to see these ideas being turned into functioning reality so fast – the London market could learn from some of the rapid-fire activity taking place in this region.
So, that was SIRC 2019. The meetings and discussions were great, as always, and show the intense competition and innovation in the market, which is good news for our clients and customers. Times are hard but there are reasons to be hopeful as we travel into 2020!
Dermot Dick, Head of Treaty Production, New Dawn Risk