Expert Spotlight: Moses Ojeisekhoba on natural catastrophe challenges for Asia-Pacific re/insurers

In the second installment of a two-part series, Swiss Re Asia CEO Moses Ojeisekhoba examines the challenge of natural catastrophes, laying out the issues and opportunities he sees for re/insurers in the Asia-Pacific region.

In total, Asia-Pacific suffered economic losses of USD 290 billion in 2011 due to natural catastrophes, of which less than one-quarter, or USD 68 billion, was insured. As one may expect, insurance penetration is low in emerging Asian markets.

A key task for reinsurers and insurers in the region is to better understand the loss exposure and correlations. For instance, much of the loss from the Japanese earthquake was due to the tsunami; not the earthquake itself. Likewise, soil liquefaction structurally weakened many buildings in Christchurch, and thus contributed to overall insurance losses. The floods in Thailand also resulted in numerous business interruption and contingent business interruption claims.

The importance of modelling

While these are all examples of secondary loss agents that have significantly contributed to insurance losses, so far insurers have failed to take these perils adequately into consideration in insurance pricing or loss modelling.

Swiss Re Asia CEO Moses Ojeisekhoba

Reinsurers will have to work closely with clients in the coming years to better understand the risk exposures in all markets and the price adequacy of their products, if business growth is to remain sustainable. Substantial improvements must be made to the quality of data for better risk assessment and management.

At Swiss Re, we continually refine our own natural catastrophe models and are developing new ones for locations where there may be significant loss potential. An example is the recent launch of Swiss Re Global Flood Zones™, an enhancement to our hazard atlas CatNet®. Global Flood Zones™ provides detailed flood hazard information for any location worldwide.

Leveraging growth opportunities

Asia-Pacific, particularly emerging Asia, will lead the world's insurance business growth in the coming decade. Primary life and general insurance premiums are expected to grow by 8% and 9% per annum respectively. Reinsurers will continue to play a key role in this growth by providing technical expertise, offering capacity for peak risk –thus smoothing the results of primary insurers –and developing new products. But insurers and reinsurers will need to better understand the underlying trends in the Asia-Pacific markets, adapt to local requirements, and devise increasingly tailored products if they are to realise the region’s full potential.

In part one of Expert Spotlight, Moses looks at at the key mortality protection gap challenges faced by the insurance industry in the Asia-Pacific.


Published 26 October 2012

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