The Asian (re)insurance market is growing up. And like most coming-of-age stories, it’s trading drama for nuance.
For years, this market moved in predictable waves. Big losses? Rates go up. Too much capital? Prices crash. It was simple, even if it wasn’t exactly stable. Everyone knew where they stood.
But as our reinsurance coverage shows, the industry is done with broad strokes. Instead of blanket rate increases, reinsurers are fine-tuning individual risks – adjusting deductibles here, tightening terms there, and utilising mountains of data to improve outcomes. The upcoming APAC renewal season is expected to be “orderly and disciplined”, which has been the trend over the past couple of years.
But here’s the thing: This shift to precision underwriting is happening exactly when risks are getting harder to read.
Climate change isn’t just making catastrophes more frequent – it’s making them less predictable. Infrastructure is more interconnected, meaning losses can cascade in ways that traditional models miss entirely. Slapping a 10% rate increase on a fundamentally mispriced risk doesn’t solve anything.
Reinsurers get this, which is why they’re investing heavily in risk selection. The growth potential of APAC is appealing, but as markets get more sophisticated, they also get more selective. Not every risk finds coverage. Not every buyer gets stable terms.
Traditional reinsurance assumed one carrier’s property CAT capacity was pretty much like another’s – price was what mattered. Precision underwriting kills that assumption. When every placement needs bespoke terms and conditions, capacity becomes harder to deploy at scale.
This matters enormously for a region where Nat CAT exposures keep growing while protection gaps stay stubbornly wide. Asia’s protection gap is currently estimated to sit at $1tn. Closing that not only requires capital but also the willingness to deploy it efficiently.
If nuanced underwriting means cherry-picking the best risks while leaving challenging exposures unprotected, we’ve achieved market discipline at the expense of market purpose.
The shift also creates headaches for brokers. Small to mid-sized brokers are already scrambling to modernise. Now they need to translate increasingly complex underwriting requirements to clients who may lack the data or systems to meet them. The risk? A growing divide between sophisticated buyers who can provide granular information and everyone else.
None of this means precision underwriting is wrong – it’s absolutely necessary. The alternative, hoping diversification covers our bad bets, has failed repeatedly. The Lloyd’s syndicates operating here in Singapore seem to get the balance, emphasising transparency and cultural understanding while staying rigorous about risk selection.
The challenge is ensuring precision doesn’t become exclusion. Nuanced underwriting should enhance the market’s ability to protect Asian economies, not just segment them into haves and have-nots.
The era of easy answers is over. The market’s orderly renewal season reflects genuine maturity – a market learning to match sophisticated tools to sophisticated challenges. But maturity brings responsibility. The question needs to be more than just “Can we price this accurately?” but also “Can we price it accessibly?”
As APAC cements its role as the profit centre of global (re)insurance, how we answer that question will determine whether all this precision actually serves the market or just makes it pickier.
The era of better questions is just beginning. A
Ahmad Zaki
Editorial director
Asia Insurance Review