The current life reinsurance model has at best been managed passively; and at worst, has been a “set-and-forget” exercise. Notably, neither approach will fully satisfy risk management, capital management and relationship management objectives. Operationally, this approach limits insurers’ ability to manage risks from a top down perspective and actively adjust the underlying portfolio (and associated economic capital) from a strategic and tactical perspective that is reflective of a contemporary view of the risk.
Fueled by strong economic growth and increasing urbanization, life insurers in Asia-Pacific (APAC) have experienced strong growth in the past decade, according to Oliver Wyman colleagues, Angat Sandhu, Partner and Head of Insurance for Asia Pacific, Heiko Faust, Partner, Insurance, Steven Chen, Principal, Insurance and Ketat Sarakune, Engagement Manager, Financial Services. Oliver Wyman is an affiliate of Guy Carpenter.
With low interest rates here to stay, increasing volatility in investment markets and risk-based capital regimes becoming prominent in most markets, insurers need to re-examine how they can create value for their customers while delivering attractive returns for shareholders.
The inforce book contributes a relatively large share of the profit, revenue and operating cost but in the race for new business, has not received adequate scrutiny. There are three broad categories of actions that APAC insurers can take to maximize value of their inforce portfolios: customer, cost, and capital. All of them should be explored in a coordinated effort as part of the broader inforce management program.
Guy Carpenter is working to help reinsurers and the life reinsurance market better serve the needs of clients by curating partnerships with capital and service providers that highlight the advantages that each party brings.