Asia stands out as a vibrant and dynamic market for Property and Casualty insurance (P&C), marked by its expanding economies, rising incomes, and increasing urbanisation. However, recent trends indicate a slowdown in growth and rising challenges for insurers in the region, such as emerging risks like climate change and cyber threats.
Over the past decade, P&C insurance premiums in Asia grew by about 5 percent annually, fuelled by economic expansion and increased awareness of insurance benefits. However, growth slowed in the latter half of the decade, with a compound annual growth rate dropping to 3 percent. This slowdown is in contrast with the Americas, which experienced a 6.5 percent compound annual growth rate during the same period.
Mia Himberg, Head of International Services at If P&C Insurance, highlights that partners in Asia have generally grown in the corporate segment. Multinational Client Companies expect a good local standard to cover their risks locally. New emerging risks, such as vulnerability to the impacts of climate change and rapid electrification, among others, require that local policies address these risks accordingly. At the same time, local insurance legislation must set clear demands for locally compliant coverage.
Despite strong economic growth, P&C insurance remains low in Asia, reaching only an estimated 2 percent in developed markets and 1 percent in emerging markets over the past decade. Factors contributing to this include limited awareness, accessibility, and affordability of insurance, particularly in emerging markets. Additionally, high savings rates among Asian consumers often lead them to prioritise savings over insurance premiums.
“This is mainly due to an unmature private insurance market”, Himberg states. “In our experience, P&C insurance on corporate and SME segments are based on another reality and especially regarding global clients, which If Insurance is focused on, who value the support on multiline coverages. Close discussions with our Insurance Network Partners have also broadened our perspective on how the local players want to provide lifelong support to their clients. In the private segment, this would be built strongly on the health and nursing services, whereas for the commercial side, it is embedded insurance to various services, full policy and claims transparency, and smooth digitalisation for all contact points.”
Insurers in Asia are dealing with increasing combined ratios, particularly in emerging markets. With combined ratios exceeding 100 percent annually from 2017 to 2022, driven primarily by higher expense ratios, insurers face growing pressure on underwriting results. Factors such as high inflation and low interest rate, intensified by the COVID-19 pandemic, have contributed to rising claims costs and operational challenges.
While auto insurance historically constituted a significant portion of P&C premiums in Asia, growth has slowed down in recent years, aligned with disruptions in the automotive sector due to the pandemic. On the contrary, liability insurance has seen significant growth, with a compound annual growth rate of 12 percent from 2017 to 2022. This contrast highlights the changing priorities of consumers and the evolving risk landscapes in the region.
The P&C insurance market in Asia shows different levels of integration between developed and developing markets. In developed markets like Australia and Japan, large domestic players dominate, posing challenges for new entrants. On the other hand, emerging markets like India and Malaysia witness a stronger presence of multinational companies, which hold a substantial market share. Nevertheless, the overall presence of multinational companies in the P&C industry in Asia remains less vigorous compared to the life insurance sector.
Himberg highlights that the presence of Nordic companies is increasing in the South-East Asian market, and we are experiencing more requests for local support in countries such as Malaysia, Vietnam, and Thailand. This is in line with the global trade flows where Asian countries are chosen as favourable greenfield investment territories for EU member states alongside with US and Canada.
At the same, it can be stated that there is a general trend to have investments within the countries which are geopolitically closer to each other. In praxis, the US invests more in Mexico and EU, whereas China invests in Brazil and other developing countries worldwide.
Companies within EU countries have significantly increased investments within the Union member states.
In conclusion, while Asia's P&C insurance industry remains dynamic and promising, it faces significant challenges in sustaining growth, expanding market reach, and navigating evolving risk landscapes. Insurers must adapt to changing consumer trends, technological advancements, and regulatory environments to capitalise on emerging opportunities and drive future success in the region.
“At If Insurance, we offer comprehensive international services to more than 200 countries and territories through 225 fronting partners. As we partner with major local insurance companies, our clients are always locally serviced by large domestic insurers with understanding of the corporate needs. With some 30 000 International claims handled per year, 3 900 local policies as a part of a global programme, and some 400 international risk surveys completed annually, our team is in daily contact with valued partners around the globe”, Himberg summarises.