As you may recall, a few weeks ago I mentioned I was planning a trip to Asia to try and find out how insurers, brokers, and reinsurers are handling their risk assessment, particularly for flood risk.
As I sit on the flight from Hong Kong to San Francisco, I have the memories from my 10-day Asia Risk Tour still fresh in my mind. Foremost are the warm welcomes we received everywhere we went, with immaculate hospitality from all our hosts. The food is also still vivid in my mind, from the Under Bridge Spicy Crab in Hong Kong to the famous street food stalls of Singapore, filled with sate and spicy seafood. Coffees and cocktails were enjoyed both under the ground and hundreds of feet in the sky.
I also learned a lot about how the insurance market in Asia manages location-specific risks, especially from natural catastrophes (nat cat), which of course is what I was there to do.
Until 2011, nat cat was largely neglected in Asia Pacific. Compared to the amount of available business and the other risks involved, it was a low priority and did not get much attention from the industry as a whole. Then, in the space of 12 months, Brisbane flooded, Japan was damaged and then inundated by the Tohoku earthquake and tsunami, and Thailand flooded. Nat cat mattered in Asia Pacific practically overnight as the region led the world innat cat losses.The real efforts to put nat cat squarely into underwriting, though, are coming from the reinsurance brokers. The brokers we talked to all expressed their desire to teach their clients to manage nat cat risk more effectively, and are furnishing them with the necessary information and tools to do it. Each broker is taking a slightly different approach, including technical workshops, custom peril models and advanced analytics to this endeavor, but they are all committed to increasing the understanding of nat cat in underwriting. I am sure the reinsurers greatly appreciate this.
Asia Pacific definitely has challenges that are specific to the region, including: potential impact from a full array of natural perils across huge land areas, remote business units, a lack of commercial software available to help them, and immature data sources within most of the countries. These are all challenges I’m looking forward to helping address in the coming months, because they can all be overcome.