Reinsurance premium spending ‘declined significantly’ in Asia-Pacific

Outstanding catastrophe bond limit in the Asia-Pacific region has reached US$1.625 billion and about 6% of the region’s catastrophe limit is covered by alternative capital, but the growth rate in the cat limit has “failed to keep pace with overall economic growth” in the region, Guy Carpenter & Company LLC suggests.

This year the catastrophe limit purchased in the Asia-Pacific region has increased, but “a confluence of factors, including the weakening of some key zone currencies has meant that reinsurance premium spend in the region has declined significantly,” Guy Carpenter stated in a release on its Asia Pacific Catastrophe Report 2014.

“Over the past ten years, growth rates in catastrophe limit have failed to keep pace with overall economic growth in the Asia Pacific region,” Guy Carpenter added. “In fact, this picture is more extreme in the emerging markets where insurance penetration continues to be modest.”

In its report, Guy Carpenter estimates that over the past 12 months, “the weakening of key zone currencies against the U.S. dollar alone has extracted USD315 million of regional reinsurance premium spend from the market on a like-for-like basis.”

Alternative capital activity “remains subdued when compared to other regions,” Guy Carpenter noted. “However, outstanding catastrophe bond limit in the region has more than doubled over the last year to USD1.625billion. When combined with capacity from collateralized vehicles Guy Carpenter estimates that close to six percent of regional cat limit bought is now from alternative capital.”

That capacity “is concentrated predominantly in Japan and Australia and excludes the supporting aggregate excess of loss and retrocession products where the percentage would be significantly higher,” Guy Carpenter added.