COVID-19: Asia-Pacific reinsurers should revisit strategic approach - AM Best

 KUALA LUMPUR, Sept 15 -- The challenges from COVID-19 continue to evolve for the Asia-Pacific reinsurance sector, with the related macroeconomic and investment impacts pressuring profitability, according to AM Best.

In its new Best’s Market Segment Report, ‘Global Reinsurers Maintain Equilibrium Through COVID-19 Turbulence,’ the global credit rating agency headquartered in the United States notes the Asia-Pacific region remains an important growth and diversification play for international reinsurers.

The entrance of new domestic participants and increased capacity of international reinsurance players are among key factors which led to prolonged weak pricing trends, according to a statement.

In the report, AM Best notes the operating performances of Asia-Pacific non-life professional reinsurers have deteriorated over the last few years due to increasing underwriting losses, with this trend of declining technical results having accelerated in 2019 and 2020.

“With falling interest rates in many economies, reinsurers will need to refocus on underwriting discipline in order to meet their cost of capital,” said senior director, analytics, Christie Lee.

“We believe that reinsurers in the Asia-Pacific region will likely have to accept lower and more volatile investment yields, or take on higher asset risks, at least over the near term.”

Based on AM Best’s research, only a few non-life reinsurance companies in Asia-Pacific managed to achieve a combined ratio below 100 per cent in fiscal-year 2019.

Come Sept 22, AM Best will hold a market briefing to discuss the global reinsurance sector and its outlook.

-- BERNAMA