NARRATOR: Welcome to Global Marketplace Insights by Willis, a WTW business, a podcast series showing the latest trends from the specialty and regional insurance markets.
BEN DUNSTON: Hello, and welcome back to the Marketplace Insights podcast series, where we're discussing the current state of the Asian market for Q4. I'm Ben Dunston. The placement leader for Asia, and I'm delighted to be joined here today by Paul Ward.
PAUL WARD: Good afternoon, Ben. Delighted to join you today.
BEN DUNSTON: Good afternoon. Let's dive into the state of the market through the context of three client questions which we've had come in, Paul. That's all right. The first one coming up is what are the current and forecasted rate trends for Asia?
Well, I'll take this first, then pass it on to you. We can talk immediately about the rate environment for which non-loss impacted and non-NatCat exposed risks. We're seeing a transitioning market with around 7.5% to 15% reductions for a wide range of products property, marine, cargo, casualty, energy, and financial lines risks.
I'd say sometimes larger rate reductions if that risks well managed and in appetite for a large number of insurers, but it's probably important to mention to the listeners, of course, that rate pressures up or down are extremely multifactorial, and they're dependent on profitability, industry, capacity.
And those markets in Asia, for instance, have tariffs. They wouldn't be subject to the same pressures at all. Asia is so diverse as an insurance market, and each market is at a different stage of maturity. They're driven by their own influences surrounding reinsurance, government policy, and the traditional role within the economy. Paul, what have you noticed in the property and casualty segment?
PAUL WARD: What surprised me, Ben, has been the increased pace of softening in Asia as the years progressed. There are geographical variations and other nuances that mean that not all areas are softening at the same rate. For example, where a client has a US casualty exposure, that they're an outlier, and they're likely to still experience some upward pressure on rate.
But for in-scope occupancies and where a client can differentiate themselves through their risk profile, competition can be intense. In both property and casualty, double-digit rate reductions are not uncommon, and where premium volumes are significant.
And the capacity deployed is more limited, reductions can be really substantial. Additionally, if a client's experienced significant increases when the market was harder and they're prepared to entertain substantial remarketing, I think this can bring even further benefits to the table.
BEN DUNSTON: Touching on the subject of natural catastrophe, we know that the new normal is somewhere between $120 and $150 billion worldwide, and that's reported by quite a lot of industry sources. Asia is obviously prone to those events. You have the earthquake in Thailand and Myanmar. We have regular typhoons in Hong Kong and China as well. Do you see any rate pressures or market impact around natural catastrophes in Asia?
PAUL WARD: Asia is very exposed to natural catastrophes, from traditional typhoons, earthquakes, and flooding to increasingly the secondary perils like landslides and storm surges. NatcCat is still one of the main drivers of insurers' reinsurance treaties, their capital allocation and ultimately their pricing.
So in geographies with a heavy nat cat footprint, underwriters are more cautious in the capacity they deploy and on the pricing, although rate reductions are still being achieved. What I would say is, it's a great time for clients to deploy the latest risk modeling techniques to ensure they're taking a data-driven approach to the amount of risk they transfer and maximizing their premium spend.
BEN DUNSTON: The second question: What developments can Asian clients expect in how insurers allocate capacity and coverage offerings on their risks? So I'll take this first part and then pass it to you. What I would say is capacity remains plentiful in the Asian market, and the wholesale Singapore-based markets are trying to hit growth plans in 2025 for almost all lines and in a softening rate environment.
This, coupled with acquisition markets in London plus new MGA capacity will cause softening pressure in Q4 2025. One example on capacity would be coal and thermal power capacity in 2025. This has grown by around 30% in the last 18 months, and insurers have loosened some of the rules around ESG.
But most importantly, there has to be a transition story for that client or that insured. Also around capacity and how that is now being deployed, which I think actually is an industry-wide change such as the use of auto follow facilities. Now, these are expanding presence in the Asian market. In the London market, they are different from traditional facilities in which they cover a wide range of products in both long tail and short tail. Willis launched Gemini, in Q4 this year. That has 12.5% capacity and offers 2.5% off of the lead market pricing.
So we're going to see more facilities in 2025. And the direction of travel definitely points towards portfolio underwriting, which is good for clients. It allocates them a slug of capacity on their risks. However, often these facilities would contain what I would call to be unengaged capacity, which for major clients, means they're not actively looking to support you in risk transfer or partnership type areas. So there's a decision to be made there.
The coverage question is interesting. Do you think the coverage position has moved much in 2025? Do you see anything notable in property and casualty?
PAUL WARD: Well, clearly, the first reaction in the challenging economic environment is that the soft market is a phenomenal opportunity for clients to save money, especially for those who experienced increases in the last few years. But it's also a great opportunity to look at limits purchased and coverage.
Now's a good time to assess if both of those areas are fit for purpose and these could mean revisiting sublimits of coverage. Often, those have been inflated downwards in recent years, and perhaps it's a good time to bring them up to date.
You could also look at redeploying some of the savings by increasing cat limits or maybe even on different coverages where you've got exclusions on your property and casualty programs. That could include cyber, terrorism, political violence, for example.
The standard exclusions remain, such as the typical cyber, communicable disease, the focus on non-damaged BI, the territorial exclusions in respect of Russia, Ukraine, and Belarus. And on casualty, course, we're seeing the introduction of PFAs exclusions pretty widely.
BEN DUNSTON: The third question is: What strategic advice should Asian clients consider for upcoming placements? Paul, have you got any thoughts on that?
PAUL WARD: First of all, I always think it's best to start early. Engage the insurance markets at least 90 days if possible before renewals to secure capacity and ensure you have time to move through your internal stakeholder processes, especially if you've got a complex multi-territory program, and you've got territories that are cash before cover, such as Japan and India in your asset base.
Secondly, tell your story. In that 90-days period, it's a great opportunity to highlight risk improvements, get your risk management measures down and communicated to the market what you're doing about loss prevention and your future plans. And any future capital expenditure (CapEx) will also be of interest to the market.
Everybody will like to hear about your potential future growth, and this will help your broker to represent you in the market and set you apart from other peer group clients who are also looking for capacity.
BEN DUNSTON: To add some extra dimensions and in addition to what you've suggested: my first point would be to explore different capacity bases. We talked about earlier about how the market is very dynamic and it moves at different speeds around the world. So you should consider regional and specialty markets to check what's available in today's conditions. Your broker should be able to advise you of this capacity availability in, say, a hub such as London that can be more competitive.
The fourth thing, and adding on to what you've said is use risk and analytics to quantify and qualify what your limit strategy should be. Leveraging those to support the underwriting submissions is critical in setting you apart. Really, having a rationale and a strategy is important and not simply peer benchmarking.
The last question is an interesting one. And as we get this quite a lot. So I'll just pass that to you, Paul. Strategically, is there any time of year that is better than another to enter the market for your renewal?
PAUL WARD: that's Across the region as a whole, renewal dates tend to be pretty widely spread these days, although there are clusters of renewals in certain territories around timings like 1/4 or 1/7. I don't really see a dramatic difference in terms of client outcomes.
My personal opinion is that there could be something to be said for not renewing at the same time as other clients, in order to bring more focus from underwriters on your business. For clients with a heavy typhoon exposure, they may give some thought to the timing of the renewal outside of the peak typhoon season. That just helps them avoid potential loss impact while they're in the middle of a renewal.
BEN DUNSTON: Thanks, Paul. Appreciate it. And that is the end of the questions. So just a brief recap of what we've covered off here today. In the first question: we discussed what the current and forecasted rate trends were for Asia. The second question: what developments can clients expect in how insurers allocate capacity and coverage? And then lastly, what the advice really was for clients to enter the market, including, the timing as well. So that wraps up for Q3.
Thank you, Paul, for your contribution to this episode of The Marketplace Insights podcast. And to all the listeners, we'll see or hear you in the next one.
PAUL WARD: Well, thanks for inviting me today. It was a pleasure to join you, Ben. Thank you.
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