Insurers in Asia-Pacific to Prioritize Investment Risk Management Amid Economic Slowdown

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S&P Global Ratings reports that credit trends within the Asia-Pacific insurance sector remain stable overall, though prospects vary across different regions. A significant majority, 98%, of the Asia-Pacific insurers rated by S&P maintain a stable outlook. In their latest report titled “Asia-Pacific Insurance Sector Trends — Returning To Fundamentals As Undercurrents Unfold,” S&P outlines key trends in both the non-life and life insurance markets, along with anticipated developments over the coming year.

Here are the key points highlighted in the report: Heightened Capital Market Volatility: With major central banks adjusting monetary policies, there’s a possibility of increased capital market volatility. Insurers in Japan and Taiwan are particularly exposed to risks associated with asset and foreign exchange movements, which could impact their capital buffers.

Focus on Investment Risk Oversight: As economic growth slows, insurers are expected to shift their focus towards managing investment risks more effectively. Credit stresses, especially in real estate and alternative investments, may prompt insurers to reassess risk-return balances and adopt a more selective approach to investments.

Dual Risks from Climate Change and Sustainable Finance: With discussions on climate change and sustainable finance gaining momentum, insurers face dual risks both in underwriting and investments. Extreme weather events are leading to a surge in insurance claims, affecting earnings for property and casualty (re)insurers. Additionally, higher reinsurance costs and expanding catastrophe budgets are putting further pressure on profits.

As insurers navigate these challenges, effective risk management strategies will be crucial to maintaining financial stability and resilience in the face of evolving market dynamics.