APAC's life and P&C insurance sector will remain stable in 2019: Moody's

Ageing populations will boost demand for long-term investment and health coverage.

The outlook for Asia Pacific’s (APAC) life and property and casualty (P&C) insurance industry is forecasted to remain stable on the back of solid capital levels and improving product mixes amidst the emergence of rising asset risks, according to a report by Moody’s Investors Service.

For the insurance industry as a whole, asset risk is rising due to increasing allocations to higher yielding non-traditional assets and widening currency mismatches, the report revealed.

“Given the likelihood of more volatile economic and capital markets developments in 2019, the investment performance of APAC insurers will experience pressure,” the firm noted.

Whilst life premium growth is projected to slow as insurers actively adjust their product mixes, long-term demand for life insurance will remain strong, underpinned by a growing middle class and significant protection gap.

“Economic growth amongst APAC economies will moderate but continue,” Moody’s assistant VP and analyst Frank Yuen said in a statement. “This plus their ageing populations will support growing demand for long-term investment, health and retirement coverage.”

Premium growth in the sector will also moderate as insurers adjust their product mixes in response to tighter capital and regulatory requirements, the report noted.

Meanwhile in the P&C sector, premium growth in APAC is expected to remain ‘robust’ and exceed that of other regions on the back of the APAC’s economic growth, increasing wealth and demand for infrastructure.

“P&C insurers are also searching for new growth drivers from non-motor lines, and pricing disciplines is becoming increasingly important for defending underwriting margins amidst intense competition,” Moody’s added in a statement.

Across the region, regulatory changes are reportedly raising the bar on capital and internal risk management, with regulators gradually pushing for more sophisticated capital standards. The implementation of IFRS 17 which aims to ensure that an entity provides relevant information that faithfully represents insurance contracts will be a key focus for insurers, according to Moody’s.

“Whilst the changes are expected to be gradual, insurers are stepping up their efforts to improve asset-liability management and internal risk management, as well as embed capital analysis in their daily product offerings and asset allocation decisions,” the firm highlighted.