February 13th, 2012

January 2012 Reinsurance Renewal: Asia Pacific Casualty

Posted at 1:00 AM ET

The general casualty business in the Asia Pacific region continues to develop in a highly competitive environment. The significant competition among local, regional and global players in the primary market led to insurance rate declines between 5 percent and 10 percent in 2011. The region is expected to remain competitive in 2012.

For directors and officers (D&O) insurance, all major Asia Pacific markets reported declining rates at the renewal, with the exception of China and Taiwan. Chinese companies with US exposures experienced rate increases of 10 percent to 50 percent due to a spate of US class action lawsuits against China-based companies that were taken public in the US through reverse mergers. Much of the litigation centers on allegations of misleading information or fraud in financial statements. In Taiwan, D&O rates rose by 20 percent to 40 percent due to underwriters reducing capacity and requiring higher deductibles after continued deterioration in underwriting results. Professional indemnity premium levels remained stable.

Catastrophe excess of loss reinsurance rates were generally flat to up 10 percent for loss-free programs at the January 1, 2012, renewal. For loss-affected programs, rates increased 20 percent.

M&A activity in the Asia Pacific region is driven by consolidation of local markets (for example, the Japanese market), as well as by international insurers making acquisitions in Asian emerging markets to offset stalling growth in their home markets.

In response to regulatory measures in the region, insurers are increasingly considering their exposures to specific man-made catastrophe scenarios and developing and demonstrating suitable risk mitigation strategies.

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