Asia is hot, according to Vivek Bajaj, head of the region and continental Europe at RMS.

While the market has long been associated with a significant protection gap, the modeller is seeing rapidly increasing demand of its solutions across its countries.

“We’re seeing hyper growth in the Asia-Pacific region with adoption of our natural catastrophe models and risk modelling capabilities,” Bajaj told the 1.1 Club, Intelligent Insurer’s online, on-demand platform for one-on-one interviews, discussion and debate with key industry players.

“We are seeing an increased frequency of natural catastrophe events taking place in Asia-Pacific,” he added. “That makes the market situation extremely hot at the moment.”

RMS has released several new flood models for key markets in the region across China, New Zealand and South East Asia. It now covers over 20 countries in the Asia-Pacific region and 10 specific perils, including flood, earthquake, marine cargo, tropical cyclone and cyber.

According to Bajaj, the growth is driven not just by increasing demand for classical nat cat modelling but also approaches to combine it with technology to improve underwriting and services.

Earlier in November, New Zealand insurer Tower announced it would be sharing flood risk ratings with all New Zealanders and use its data to match flood premiums to risk better.

Its customers will receive a low, medium or high rating for their home, reflecting the potential risk of a flood and the estimated cost of replacing or repairing damage caused by flooding.

According to Tower, for nearly 90 percent, it will mean a reduction in the flood risk portion of their premium, with modest increases for the remaining 10 percent.

“We see a lot of other organisations growing not only in the core nat cat modelling area but also in combining analytics and other technologies to offer innovative services to their clients,” said Bajaj.

A confidence booster

According to Bajaj, the increased use of such solutions will help the Asian market address a number of challenges.

One is the emerging risks: as elsewhere, the company is seeing significant uptake of its cyber risk model, for example. “We’re already on version five,” Bajaj remarked.

Asia shares the common challenges facing other countries from climate change. The issue is very important to insurers, and RMS tries to offer reassurances as to its existing models as well as responsiveness to new requirements to evaluate the potential impacts of climate change.

“The way our models are developed means that any changes to the climate to date are already being built into the core datasets,” he explained. “We’ve also this year launched three new models specifically focused on climate change.”

These new products, released in March, provide probabilistic modelling to capture events across different climate change scenarios and the ability to adjust time horizons and representative concentration pathways (RCPs)—the greenhouse gas concentration trajectories adopted by the Intergovernmental Panel on Climate Change.

“We’re looking to increase additional releases as well,” added Bajaj.

Increased use of modelling won’t just tackle the new and emerging challenges re/insurers face in the industry. It will also help address long-standing issues such as low market penetration and the protection gap across Asia.

According to Swiss Re, more than 60 percent of the global gap or catastrophic health, mortality and natural catastrophe risks originates from emerging markets and particularly emerging Asia-Pacific.

Increased use of modelling could help address this, said Bajaj.

“What we are seeing in this area is that better insights, and better risk analytics are giving insurers more confidence to write businesses in areas where they might have been overly cautious in the past,” he said.

“When there’s more confidence in a specific view of risk, it then becomes possible to support insurance products and initiatives that you might have shied away from.

“The protection gap continues to exist, but as you begin to leverage additional and advanced insights, you are able to narrow that,” he concluded.

For the full 1.1 Club interview click here

Main image: Shutterstock / DimaMotorin