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Canopius’ CEO: West’s Reaction To Asia’s Rise Uncertain
Asian governments show a general commitment to building a regional economic powerhouse.
- Best’s Review Staff
- February 2019
From an industry perspective, Asia Pacific is the place today and very much for the future.
The governments in Asia have built an economic powerhouse and the region is set to be an increasingly important focus for the future. Mark Newman, CEO of MENA &APAC, Canopius, spoke with AMBestTV about the outlook at the Singapore International Reinsurance Conference.
What are you most concerned about in terms of the markets in Asia Pacific, the current political, economic conditions, and increasing intensity of catastrophes throughout the region?
At a macro level, I think the regional and government tensions that exist are something which are temporary and will subside. The governments in Asia worked incredibly hard over the last one, two, three, four decades to build this economic powerhouse which is Asia.
They will do everything they absolutely can to avoid political or economic trade wars, and certainly physical wars. The challenge from a macro perspective is as the economic balance shifts, perhaps, from West to East, I don't think anybody can argue it's moving in that direction. How the European and North American communities react to that shift economically is what's key. I'm sure, through diplomacy and elections nationally, etc., that will dissipate and nonissue.
From an industry perspective, Asia Pacific is the place today and very much for the future. What we are seeing is definitely increased natural catastrophe activity. It's a clear challenge for the industry. We heard this morning from one of the key brokers, estimated $25 billion of natural catastrophe loss already [in 2018] in the region. It's a combination of increased frequency, severity. When you combine that with increased accumulation of assets, megacities, concentration of people, increased and often silent accumulation of assets in these areas, that's a fairly toxic cocktail for the industry, for both insurance and reinsurance. When you combine that potential in threat and reality of natural catastrophes with increased attritional loss ratios, which we have seen globally, and in particular in this region, too, as a combination of softer pricing, increased commissions, some poor underwriting, and general broadening of terms and conditions. That's a fairly explosive mix when natural catastrophes and poor underwriting come together.
What concerns me is when those collide, you are likely to see a knee jerk reaction from a pricing perspective in the region. I don't think that's valuable to anybody, to consumers, to policy holders, brokers, insurers, and reinsurers. It doesn't tend to last. Nobody budgets for it. Nobody prices appropriately for it. It comes and it goes just as quickly. That, to me, is one of the things that I worry about.