Higher insurance claims lead to underwriting pressure for APAC reinsurers

S&P said APAC reinsurers showed slower growth and subdued underwriting margins.

Asia-Pacific reinsurance sector faces increasing downside risks amid global headwinds, a report by S&P Global revealed.

Based on its analysis of 15 Asia-Pacific reinsurers, slower growth and subdued underwriting margins is signalling increasing downside risks for the sector. 

S&P said that reinsurers’ earnings face pressure from subdued underwriting results and declining investment margins. This is due to ongoing market volatility, rising inflationary pressures, and ever-rising natural disaster claims that will dent earnings potential over the next two years.

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“We forecast premium growth for rated Asia-Pacific reinsurers to be in mid-single digits as they benefit from underinsurance within the region and hardening of global rates amidst macroeconomic headwinds,” Trupti Kulkarni, an insurance analyst at S&P Global Ratings said.

Asia-Pacific reinsurers also have weaker underwriting performance than the top 21 global reinsurers.

“APAC reinsurers are highly dependent on investment returns to cushion underwriting shortfalls compared with top 21 global reinsurers. Global headwinds should reduce investment returns over the next 12–24 months,” Kulkarni said.