It’s not often that we look to the US for lessons on the insurance market that might prove to be useful and relevant here in APAC – but there are exceptions.
In mid-May there was a story on BestDay, AM Best’s daily insurance newsletter, with a headline that may have made many insurers in APAC sit up and take notice.
The headline in question was ‘Commissioner Foresees Legal Challenge to California Property Cover Changes’ and the story went on to explain why California insurance commissioner Ricardo Lara “can’t move more quickly to solve a property insurance marketplace crisis”.
Mr Lara was referring to a delay in enacting a package of reforms by year-end because “we don’t want much-needed reform to be tied up in avoidable litigation”.
The reforms alluded to are the California Department of Insurance’s plans to introduce changes this month to allow primary insurers to include the cost of reinsurance in rate filings if they agree to write coverage in areas at risk of wildfire.
The specific legal minutiae are unique to California and so not relevant to (re)insurers in APAC, but one familiar refrain from reinsurers was that the state is “still failing to spend enough on fire resilience... It’s going to have to be an ongoing commitment.”
Another observation is that there is simply not enough actuarial expertise in the market to go around in these climate-changed times.
Substitute the word ‘cyclone’ for ‘wildfire’ and we could imagine precisely the same thing happening across the APAC region.
The prime message to emerge from this is that nothing is simple, especially when insurance cover crosses over with legislation aimed at boosting resilience.
Australia has taken something of a lead in this already – having established a cyclone pool in 2022 under the auspices of the Australia Reinsurance Pool Corporation (ARPC).
ARPC recently held its inaugural cyclone risk insurance seminar to outline some of the main lessons from the operation of the pool – and readers of Asia Insurance Review can read about the highlights of the seminar in the Australia section of this issue.
But the overwhelming lesson to emerge is that none of this stuff – enhancing resilience, eradicating delays, stabilising the workings of the market – can be done in isolation. It takes a group effort from the government on down to individual households with everything in between including insurers, reinsurers, modelling experts, academics and more.
There are few nations in APAC that do not suffer from Nat CAT of their own and so each may have to juggle with their own priorities. These will vary depending on the nature of the catastrophe – cyclone, flood, bushfire, earthquake, drought, hail – and the solutions will be complex. But it will be worth getting it right and that means getting the detail right from the start.
As Mr Lara said, “We need to be thorough, thoughtful and deliberate. I do not want another insurance commissioner to be back in front of you in five or 10 years because these regulations could not be implemented.” A
Paul McNamara
Editorial director
Asia Insurance Review