With its surging economies, Asia presents a great opportunity for the international insurance industry As Lloyd’s research shows.
Asia continues to outstrip the rest of the world in terms of its economic growth. While China is seen as the engine room powering the charge, the region’s vast population and low operating costs have led global economists to predict that Asia is set to become the dominant force in the 21st century.
With this new global economic giant comes massive potential for the international insurance markets. Asian economies will need to cover increasing levels of risk that come with exporting vast amounts of goods to the Western market. Commercial and personal lines of insurance are also set to be in high demand as personal wealth and standards of living continue to increase across south east Asia.
When Italian city Turin plays host to the Winter Olympics in February, hundreds of millions of pounds of liability cover will ride on the ability of the organisers to run the event, and broadcasters to beam the action into homes across the world.
The Olympics and the football and rugby world cups not only bring together the world’s most famous and highly paid sports people, but also advertisers and sponsors galore.
Specialist events need specialist cover. For David Bruce, head of Hiscox’s speciality division, the natural home for these risks is Lloyd’s.
“For the major sporting events there are three choices: Munich Re, Swiss Re and us, which I think speaks volumes for the reputation of the market,” he says.
The 2005 hurricane season is the biggest single Influence on the industry in 2006.
Lloyd’s heads into the new year expecting market conditions to provide opportunities for underwriters. Hardening rates and tighter conditions are predicted, but the events of the last 12 months will have changed the way underwriters approach risks.
The biggest change is likely to be the use of risk models to estimate exposure and liability levels.
There has also been a re-evaluation of the risk modelling tools used by the market in the aftermath of the hurricanes. This is due to continue as underwriters seek to get a greater understanding of their exposure to risk. David Indge of Lloyd’s Underwriting and Business Planning department said: “With the likelihood of higher retentions and less vertical reinsurance cover, underwriters will look at their exposures on a gross basis going forward and it will affect the way they approach their portfolio of risk.”
