Kathmandu. Insurance companies in Asia have been facing rising damage claim costs in recent times.
According to Marsh Rica, there is room for expansion in the damage insurance market in Asia. This is because insurance penetration is low. However, insurance companies are facing rising claim costs, longer payback times, and new types of liability risks.
In Asia, the total premium for damage insurance averages about 0.1 percent of GDP. Whereas in the U.S., it is about 0.5 percent.
Marsh Reilly said in a September report that China accounted for about $19.8 billion in damage premiums. That represents about 70 percent of Asia’s total premiums.
The report excludes motor insurance and divides the damage insurance business into general liability, workers’ compensation or employer’s liability, and financial lines. There is also a growing demand for general liability coverage in construction, building materials, logistics, consumer goods, and technology.
Marsh Riley also sees opportunities in financial lines. This is because companies are facing increasing regulatory and governance requirements and increasing cross-border investment. With the exception of South Korea and India, the loss ratio in Asia is generally less than 55 percent. Where in South Korea and India, it is more than 60 percent.
However, it can take 4 to 8 years to resolve damage claims, and in some cases, 20 years or more. This makes it difficult for insurance companies to determine the final cost of a claim and build a suitable stockpile. Especially when inflation and other loss trends are changing.
Claims frequency in Asia is generally stable or slightly increasing. However, individual claims costs are rising. Rising labor, material and medical costs are contributing to this trend. However, geopolitical and economic uncertainty is adding to the pressure.
Mars Relay Asia noted that so far it has seen limited evidence of a significant increase in litigation costs seen in the U.S. However, Asian companies with operations, exports, director and officer exposure or products sold in the U.S. could still face large contracts and jury awards.
Insurance companies in Asia are seeing claims costs rising faster than general inflation in some cases. In addition, strong capacity and competition among insurance companies is leading to a steady decline in general liability and financial line insurance rates in much of Asia. Some insurance companies are focusing more on pricing discipline or more complex liability risks for businesses with U.S. ties.
Damage losses continue to be a concern. Previous production liability cases in Asia — such as Takata airbags, Samsung phone batteries and Takeda’s diabetes drug Actos — have led to more than $1 billion in claims each.
Industrial damage, traffic incidents, environmental damage, and corporate governance failures can also lead to large claims. New emerging risks include artificial intelligence (AI), electric vehicle batteries, PFAS pollution, climate-related liability, cyber-physical risks, and microplastics.
According to Marsh Rica, damage catastrophe models are still less developed than property catastrophe models. However, their Vista platform now covers more than 300 scenarios. -Agency
