NEWS
The peak of the hard market has passed: Tokio Marine Kiln
Maintained discipline will be necessary to avoid the pitfalls experienced last decade, says regional MD Spyropoulos.
“We are past the peak of the hard market. Over the coming quarters it will be important for the industry to maintain discipline and avoid the pitfalls it experienced last decade.” That is according to Pavlos Spyropoulos, Tokio Marine Kiln’s Asia-Pacific regional managing director.
In a world where the landscape of risks is constantly evolving, the importance of setting the right price remains high on the agenda.
“Price adequacy should remain a necessity for reinsurers,” Spyropoulos said, especially as the industry walks a tightrope with the challenges of inflation, geopolitical upheavals, capital constraints, and the looming shadow of climate change.
“In the immediate term, it is vital that the market prioritises underwriting performance, as a dependency on investment returns would be perilous in such a geopolitically volatile environment,” Spyropoulos told SIRC Today.
He emphasised the pivotal role of re/insurance in buttressing economic resilience. “Re/insurance is a vital pillar in providing economic resilience, so our role is more important than ever as the world contends with heightening geopolitical, climate, energy, and sovereign debt risks.”
From a broader perspective, the question arises: how can the industry play a larger role in mitigating rising global risks? Spyropoulos believes that re/insurers should consider forging stronger collaborations with governments and businesses to find strategic solutions.
“We need to continue to engage with governments and businesses to find ways our industry can help address and transfer risk to reduce the economic impact of the challenges we are facing.”
“We need to continue to engage with governments and businesses.”
Pavlos Spyropoulos, Tokio Marine Kiln
Future directions
Spyropoulos said market conditions inevitably influence Tokio Marine Kiln’s long-term growth objectives. Profitability is paramount. “If market conditions soften, we would not chase top line growth at the expense of profitability,” he affirmed.
The focus remains on fostering a growth-driven mindset, especially among underwriters. “Being innovative, agile and sales-focused and having the skillset to find ways to write risks profitably leads to lucrative underwriting through changing market cycles,” he said.
One can’t ignore the spate of natural disasters in the Asia-Pacific during which, Spyropoulos acknowledges, there has been a rise in both frequency and severity. This, coupled with increasing cyber threats in a region that experiences more cyber attacks than any other, presents unique challenges.
Despite the challenges, he remains optimistic about the future, particularly in Asia. “The Asia-Pacific region has benefited from the correction in pricing that we experienced over the past four years in the global insurance market,” he observed.
“The improvements in Asia have not been as pronounced as we have seen in other regions, however,” he added. “In recent months price increases have moderated and in certain classes we are seeing reductions.
“Asia-Pacific remains poised for growth given the macro-economic forces at play and the degree of underinsurance in the region, but underwriting discipline needs to continue improving and become better embedded in domestic markets.”
“As a leading aviation underwriter we see this region as central to our growth.”
Growth areas
Spyropoulos mentioned the promising trajectory of sectors such as aviation and cyber insurance, driven by robust gross domestic product growth in South East Asia and India, and the increased appetite for specialist products in advanced economies in the region.
“We see opportunities for growth across all our business lines in Asia,” he said. “Boeing projects that in 20 years Asia-Pacific will represent more than 40 percent of global demand for commercial airplanes and services, with India growing at the world’s fastest rate. As a leading aviation underwriter we see this region as central to our growth.”
The ever-evolving cyber landscape also offers expansive opportunities. He believes that with Asia’s increasing integration into the global fabric, the appetite for specialist insurance products such as political risk insurance is on an upward trend.
“Demand for cyber insurance in Asia today is primarily for first party risk, but as countries in the region introduce legislation that increases data breach notification requirements, in line with what we have seen in North American and European markets, demand for third party risk cyber insurance market will expand too,” he noted.
Tokio Marine Kiln (TMK) has been underwriting cyber since 2006 and recently established a standalone cyber and enterprise risk division. Earlier this year, the company launched a life sciences product to combine cyber and intellectual property cover under one policy.
It appointed Sam Bye as its first head of cyber for Asia-Pacific, focusing on the development on its cyber book across Asia, the Middle East, Australia and New Zealand, in response to growing client demand.
“TMK has ambitious growth plans for Asia-Pacific and we have focused on ensuring we are resourced effectively to deliver on them, through recruitment and investing in the development of our talent,” he concluded.
Main image: Shutterstock / NH