Strong economic momentum, ageing population boost APAC insurance outlook

The adoption of technology is streamlining the delivery of insurance products.

Steady economic momentum and an increasingly ageing population will continue to drive strong demand for insurance products in Asia Pacific, according to Moody’s Investors Service.

“Long-term demand for life insurance will also be driven by the region's sheer population size, rising income and wealth, and the existing significant protection gap,” Moody’s added.

Insurers in the region have also learned to adapt to historically low interest rates by offering lower credit and guarantee rates and shifting to non-traditional or foreign assets with higher yields but also elevated risk.

"The solvency positions of insurers across Asia Pacific remain solid despite increasing capital requirements, while product margins and asset liability management have improved," said Moody’s Senior Credit Officer Qian Zhu.

Greater adoption of technology is also enhancing the insurance industry’s operations by streamlining the delivery of insurance products, easing claims processes and broadening customer bases and sales channels. 

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And in the case of Chinese life and P&C insurers, the increased asset risk is also reflected in their rising allocation to alternative investments, with often complex transaction structures and a lack of transparent disclosure standards.

These alternative investments also introduce additional layer of credit risks, thereby weakening asset transparency, return stability and liquidity profiles.

Underwriting performance remains stable across the region. Specifically, for Chinese P&C insurers, loss ratios have increased generally for small to mid-sized players as a result of lower premium rates following the liberalization in motor pricing, but expense ratios have improved, reflecting the regulator's efforts to reign in excessive acquisition costs.

Meanwhile, Japanese P&C insurers should see their underwriting profitability peak as motor rates retreat after a multiyear uptrend, but this coming adjustment will not reverse the significant improvement in their combined ratio in recent years.