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ASIA PRICING STILL UNCERTAIN AS LOSSES YET TO ERODE REINSURANCE CAPITAL
Thursday 08 September 2011
Author: Russell Group
 

In the run up to the Monte Carlo rendezvous Standard & Poor'sRatings Services said it believes the impact of the series of natural disasters between September 2010 and June 2011 on reinsurers' overall financial profiles are at manageable levels.

The company has issued a stable outlook on the global reinsurance sector but added that with the hurricane and typhoon seasons still active a series of major shocks and these include a collapse in global equity market could change their thinking. They said the current losses were earning events and as yet the reinsurance capital has remained untouched by the losses.

The report said: “Underwriting results for a number of global reinsurers with operations in Asia-Pacific were hit by the disasters, which included an earthquake and tsunami in Japan, two major earthquakes in New Zealand, and floods and a cyclone in Australia. However, outside Japan, regional domiciled rated reinsurers have limited or manageable exposure to the region's catastrophe events as they write mostly domestic business. As a result, we have not taken rating action or changed the outlook on reinsurersincorporated in Asia-Pacific recently. “

Insured claims from these Asia-Pacific events could amount to as much as $51 billion, according to information from AIR Worldwide. “Prospectively, we could see higher property catastrophe reinsurance premiums and tighter terms and conditions--especially in Japan, Australia, and New Zealand--as international reinsurers attempt to claw back some of the losses,” said S&P.

Reinsurance pricing in the rest of Asia (outside Japan) is uncertain, reflecting the counteracting effects of shrinking global reinsurance capacity and the competitive but rapid growth of primary insurance in the region. Nevertheless, soft reinsurance pricing is likely to continue in some parts of Asia markets, especially in those markets not prone to catastrophes, such as Singapore, Malaysia, and Thailand.