The Asia Pacific (APAC) reinsurance market is projected to maintain stable pricing in 2024, contrasting sharply with the hard market conditions observed in 2023, driven by rising interest rates and stricter renewal terms, as reported by Fitch Ratings.
This stability is underpinned by adequate market capacity; however, a growing appetite for catastrophe risks, coupled with a well-functioning retrocession market, could increase reinsurers’ exposure to potential losses. Despite these risks, industry players are expected to sustain profitability through selective risk management and disciplined pricing strategies amid heightened competition, regulatory shifts, climate challenges, and broader economic uncertainties.
The APAC region remains particularly susceptible to natural disasters, and the escalating frequency and intensity of extreme weather events linked to climate change may lead to increased reinsurance claims. Fitch predicts that this trend could disrupt the current pricing equilibrium, prompting reinsurers to adopt a more cautious approach, including stricter limits and robust underwriting practices to mitigate natural catastrophe risks.
Reinsurers in major markets such as Japan, South Korea, China, and Hong Kong continue to align capital effectively with their business profiles, benefiting from enhanced shareholders’ equity through retained earnings. The implementation of IFRS 17 has also contributed to stable or improved returns on equity, supported by superior underwriting performance and investment gains.
Additionally, Fitch highlights a growing interest in insurance-linked securities (ILS) within Asia, with Hong Kong emerging as a significant hub. While this development is expected to bolster market growth and stability, further advancements and increased participation from Asian investors will be vital for the ILS market to realize its full potential.
Related topics:
