Malaysian Reinsurance Berhad (Malaysian Re) has launched the seventh edition of its annual regional thought leadership publication, ASEAN Insurance Pulse, with a special focus on the impact of inflation on ASEAN insurers.
Highlighting the novelty of the situation, Ahmad Noor Azhari Abdul Manaf, President and Chief Executive Officer of Malaysian Re, said, “The complexity, speed and heights to which inflation has soared in just a few months is a novelty for most of us in the industry”.
Key findings from the ASEAN Insurance Pulse 2023 show that the spike in inflation throughout 2022 led to monetary policy tightening, resulting in capital market volatility and currency depreciation in some emerging markets.
Insurers faced challenges on both the underwriting and investment fronts, which impacted operations and contributed to a reduction in reinsurance capacity.
The report highlights that the impact of inflation was not uniform across ASEAN insurers, but varied significantly depending on their business model.
Insurers specialising in personal lines such as motor, property and health were more affected than those focused on commercial lines or reinsurance.
The CEO of Malaysian Re highlighted the anticipated impact of inflation on claims, citing lessons learned from the large losses from the eastern Australian floods in 2021.
The impact on claims payments, the cost of replacement materials and a shortage of construction labour underscored the need for insurers to adapt to inflation-related challenges.
While insurers had implemented risk management measures to stress test the impact of inflation on their books and reserves, a major concern highlighted in the report was the risk of underinsurance among policyholders.
Consumers often underestimated the potential risks, making it difficult for insurers to adequately meet their needs.
The report’s findings are based on 24 structured interviews with senior executives from regional and international (re)insurance companies, intermediaries, policymakers and trade associations.
Mr Ahmad Noor Azhari expressed the hope that the report would serve as a valuable reference for industry stakeholders, shedding light on how ASEAN insurers are addressing the challenges posed by inflation, identifying key issues and assessing their level of preparedness.
