Inga Beale, the first female chief executive at the world’s largest insurance market, Lloyd’s of London, aims to raise the body’s penetration in the Asia-Pacific region on par with its GDP growth, as she sees a golden age for insurance and reinsurance.
Asia is the largest source of outward foreign direct investments and remains an attractive source of inward investment, suggesting business opportunity for insurance with complex risks, she said.
“GDP growth in this region has created new insurance markets for valuable assets that need protection and we are to raise our industry’s exposure in tandem with global GDP growth,” she said before joining the East Asian Insurance Congress in Taipei on Monday last week.
Photo: Bloomberg
Established 326 years ago, Lloyd’s has been a pioneer in insurance, underwriting some of the world’s first motor, aviation, space, energy and liability policies.
It remains a leading provider of customized and secure cover for all kinds of risk, from hurricanes and earthquakes to satellites and ships. In Taiwan, the market operates as a reinsurer with major local insurance companies.
Lloyd’s intends to underscore the need of insurance against business interruption, which made up a third of all claims after the Sept. 11, 2001, terrorist attacks in New York and Washington, she said.
Business interruption is a significant risk in Asia, given the high rate of natural catastrophes amid the region’s preponderance of globally significant manufacturing, Beale observed.
China’s Pearl River Delta, for instance, considered the world’s manufacturing base for high-tech electronics, machinery and chemicals, as well as clothes and toys, is highly vulnerable to rising sea levels, cyclones, flooding and storm surges caused by climate change, she said. The past year also witnessed how the destruction of factories in Vietnam halted production in clothing, furniture, toys and electronics on the part of Taiwanese firms, lending support for the need of reinsurance, she said.
UNDERINSURED
Another opportunity lies in penetration for natural catastrophe cover, though business leaders are underestimating the risks, Beale said, adding that Taiwan is prone to earthquakes and typhoons.
While Asia houses three of the five economies with the highest insurance penetration — Taiwan, Hong Kong and South Korea — the region is seriously underinsured in property and casualty (P&C) penetration.
Asia has borne almost half of the global economic costs of natural catastrophes over the past 20 years, but just 7.6 percent of its economic costs were insured last year, compared with 67 percent in the US, she said, citing the Asian Development Bank.
Lloyd’s sees a global insurance gap of US$168 billion in premiums needed to protect economies against catastrophe exposures, she said.
ANTICIPATED CHALLENGES
Beale is not naive to challenges down the road.
The chief executive appreciates a natural desire by policymakers to keep premiums in local markets, but argued that the point of reinsurance is to transfer out risks. Lloyd’s also needs to overcome the pricing issue and a shortage of talent to grow business in line with GDP growth, Beale added.
The low interest rate environment is driving capital to the insurance market, while constraining its yielding ability, she said.
Lloyd’s has guided underwriters and brokers to think hard on prudence and discipline and to make sure that pricing reflects risks.
“Prudence and growth are two sides of the same coin. We cannot achieve sustainably growing businesses without prudence,” she said.
A shortage of insurance talent poses a threat to the industry across the globe and is particularly evident in the US and Europe, Beale said.
TALENT SHORTAGE
The average age of a US insurance agent is 59, meaning that by 2018, 25 percent of the US insurance industry’s workforce is due to retire, she said, adding that up until last year, actuaries were on the UK government list of shortage occupations.
Surveys show many college graduates worldwide do not want to work in insurance because of its public image, Beale said.
Lloyd’s has not done enough to reverse the impression, she added.
In the future, Lloyd’s will work harder to advertise the benefits of the profession — one that adds real value to the ability of economies to withstand disaster, she said.
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