Expert Spotlight: Moses Ojeisekhoba on mortality protection gap challenges for Asia-Pacific re/insurers

In the first of a two-part series, Swiss Re Asia CEO Moses Ojeisekhoba sets out the challenges and opportunities he sees for re/insurers in the Asia-Pacific region.

Our world is dominated by increasingly large and complex risks  - the eurocrisis, ageing populations, and natural catastrophes, to name just a few. Yet it is fair to say that Asia-Pacific – due to its vastly diverse cultures, economies and insurance landscapes, as well as the pivotal place it holds as the home of many of the emerging economies – presents a risk landscape unlike any other region.

Great opportunities exist for insurers and reinsurers who work collaboratively in Asia-Pacific. Yet there are also great challenges in both life and general insurance. These challenges are nearly as numerous, and as varied, as the different markets themselves.

In part one of this series, I look at one of the key challenges within the life insurance industry.

The protection gap challenge

A significant mortality protection gap exists in Asia-Pacific despite the prevalence of life insurance. According to the Swiss Re study Mortality Protection Gap: Asia-Pacific 2011, the size of this gap amounted to USD 41 trillion at the end of 2010 for 12 Asia-Pacific markets.

Swiss Re Asia CEO Moses Ojeisekhoba

In order to tackle the protection gap challenge, reinsurers are working with insurers to come up with strategies that include developing more attractive products, educating the general public on life insurance needs, and diversifying distribution channels.

The world is also facing a rapidly ageing population. According to the United Nations' 2007 World Economic and Social Survey 2007 –Development in an Ageing World, the percentage of those aged 65 and over in Asia will more than quadruple over the next century. Such a trend raises a number of significant questions for our industry: How do we finance the retirement needs of such a rapidly ageing population? How should we deal with illness, disability, and dependency associated with an ageing population? How will ageing affect healthcare and social costs?

Re/insurers can help fulfill the need

On the other hand, many factors are contributing to growing medical and health insurance needs such as wealthier societies, health cost inflation, and rising government health expenditure. The medical and health protection to meet these needs can come from government-sponsored social security schemes, employers' benefit offerings, private insurance coverage, and individuals' out-of-pocket expenses.

In Asia, there is huge variation between different countries' funding to support total health expenditure –from 26% in Taiwan to 81% in Japan –so the challenges faced by each ageing society differ. With medical cost inflation remaining high and government budgets increasingly coming under constraint, many people in the region need to pay for their own medical expenses. It is therefore in the interest of many societies to allow private sector insurers to take on more responsibility for financing and managing healthcare risks –at the same time reinforcing the need to partner with a reinsurer with not only capacity and risk management expertise, but also in-depth market knowledge and flexible solutions.

The health gap, together with the ageing society trend, will lead to a greater need for post-retirement health solutions. The opportunities exist for insurers to fill this gap in the funds available to support life and healthcare needs in retirement.

Reinsurers, as much as primary insurers, have the responsibility and resources to help to promote increasing risk awareness, transfer knowledge from advanced markets, and structure new products that meet the requirements of local markets. Reinsurers are playing a key role not only in risk sharing, but also in teaming up with insurers to create, innovate and deliver the best solutions.

In part two of Expert Spotlight, Moses looks at the key natural catastrophe challenges faced by the general insurance industry as well as the greatest challenge for the Asia-Pacific region.

Published 26 October 2012

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