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How can the C-suite make strategic decisions in a volatile business environment? Download Aon’s seventh annual Asia Market Review for more insights.
Managing Risk in Connected Asia
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2020 Asia Market Review
Asia entered the changing market during the second half of 2019, and capacity has reduced in high-hazardous accounts. Flatter premium reductions are the result of several large losses throughout the year, including the dam collapse in Brazil and Takata’s airbag recall of 49 million vehicles. These, and other losses, affect all large multinational risk carriers, which is why underwriters are now bottom-line focused. 2020 will see reduced capacity especially to high-risk accounts. Companies with high claims incidents will see premium increases. This trend will continue throughout the year ahead... download report to read more
Reflections
Predictions
• Asia has entered the changing market • Global and local losses resulted in reduced capacity • Underwriters focused on bottom-line and rates were under pressure • Premium remained flat, with few clients achieving any discount
Play
Cyber
Credit Solutions
Financial Lines
Human Capital
Health
M&A Transaction Liability
Property
Political Violence
Benign
Moderate
Severe
Asia Loss Experience
-5% to flat
2019
Asia Rate Movements
2020
Benign industries
+10%
High risk exposure
Flat to +5%
-5% to +5%
Prepare detailed, quality information for better results
Client Tips
• Capacity will continue to decrease globally and locally • Rates will be under pressure as markets seek increases • The change will gain momentum
1
2
3
Understand appetite to retain risk, and avoid dollar swapping with insurers
Start the renewal process earlier in a changing market
+10% to +30%
-5% to +15%
Encourage global marketing. Different insurance markets behave differently and can offer other options for specific industries
Optimise client retention structures and policy cover to minimise potential premium impact
• Asia’s cargo market is firming • Commodities, automotive and pharmaceutical sectors most affected • Capacity more strategically used
• Commodities, automotive and pharmaceutical sectors will continue to harden • Insurers will continue their focus on increased pricing and client retentions • Cost of risk rather than premium will become a major focus
In 2019, we saw more restrictive underwriting with an increased focus on premium uplifts and increasing client retentions. Several significant global losses occurred in the automotive and commodities sectors, as well as other sectors. The attacks on vessels in the Gulf of Oman also compelled insurers to cancel war covers for shipments in that region and led to higher war premiums. In 2020, the cargo market in Asia will face hardening in key sectors, including commodities, automotive and pharmaceutical. With Asia market exits from several large insurance providers, combined with more focused lead insurer terms, companies will increasingly consider restructured programmes and spreading their risk more globally... download report to read more
Review technology platforms to drive operational efficiency
Use insurance and guarantees to optimise working capital
Plan a long-term credit solution acquisition strategy
• Demand for credit solutions increased • Increased insolvencies and political volatility • Stable insurance capacity
• Continued increase in demand for credit solutions, driven by risk and liquidity • Stable capacity with a cautious outlook • New technology platforms being utilised for operational efficiency and capacity
Credit Solutions (credit/political risk insurance and surety) goes right to the heart of geopolitical uncertainty and liquidity issues, helping mitigate economic and political risk, improve finance and accelerate growth. 2019 saw a continued year of economic and political volatility, including trade disputes between countries, social unrest in Hong Kong and an uncertain BREXIT outcome. Globally, insolvencies are increasing, with high profile cases including Jet Airways, PG&E and Thomas Cook, all having multi- billion exposures owed to creditors. For 2020, despite the increasing volatility, we expect insurer capacity to remain stable and product use to continue expanding, with corporates using the product to enhance finance and lenders using it across new asset classes… download report to read more
• Large losses caused by data breaches originating from third-party vendors • First fines issued in Asia under legislation mirroring the EU GDPR • Continued adoption of new technologies introduced new cyber risks • Cyber insurance saw significant growth
• Driving factors of insurance purchase to vastly differ across companies • Companies will adopt a more holistic approach to cyber resilience • Mainstream adoption of new tech will increase the organisational attack surface
A continued increase in business interruption losses in 2019, several of which originated from third-party IT vendors, highlighted cyber exposures within a company’s supply chain. Companies in Asia increasingly took a more sophisticated approach to network security, understanding the need to move from more basic penetration testing to sophisticated adversary simulation, and the importance of engaging highly accredited service providers. In 2020, we hope to see some legal guidance around whether GDPR fines are insurable, significantly impacting cyber insurance adoption. Increased losses originating within the supply chain will prompt companies to move beyond regulatory compliance and take a more proactive approach to the testing of cyber security measures, not just within their own systems but of their vendors as well... download report to read more
CYber
• Regulatory risks increased across Asia • Securities- and fraud-related investigations • Capacity management • Global underwriting mandates were tested
• Emphasis on risk presentations • Optimal programme design discussions • Inbound capacity demand to grow • Elimination of non-core and/or contentious enhancements
Asian risks saw minor reduction in capacity with negligible impact on programme syndication in 2019, given supply typically satisfied demand. Rate reductions for certain product lines were more challenging to achieve with this reduced competition and/or the adoption of global underwriting mandates. In 2020, companies will be more focused on risk governance, social media and incident response management. Insurers will continue to adopt more technical underwriting standards so optimal insurance programme design considerations will take more precedence during renewal strategy discussions. We will continue to experience greater global client demand for capacity from regional insurers as well... download report to read more
Enable employees to manage chronic health conditions
Provide quality healthcare treatment
• Multi-generational workforces remained top risk • Limits of regulations for gig-economy employees • APAC companies promoted wellness • Organisations digitised to improve employee wellbeing
• Employers’ medical-plan costs will escalate • Social issues will be more prevalent • New types of coverage still not ready • APAC healthcare moving from reactive to preventative
For employers in 2019, the prevalence of multi-generational workers within organisations presented the greatest risk. The gig economy continued to grow, and it was unclear how these workers fit into employee benefit regulations. Companies in APAC also promoted wellness and digitised access to programmes, so their employees could benefit. In the year ahead, we expect employee benefit costs to rise as populations continue to age. Social issues not covered by previous policies, such as LGBTQ rights and mental health issues, will come to the fore… download report to read more
health
in Hong Kong SAR, China
Flat (for investment grade risks) to +5%
-5% (for investment grade risks) to Flat
Flat
i
Source: Aon Salary Increment Study * Subject to changes arising from volatility due to the 2019 Hong Kong Protests
Set limits to coverage
Seek tailored, sophisticated cyber insurance
Engage in threat-focused stress testing of systems to determine true cyber resilience
Flat to +10%
Seek C-suite engagement on risk and insurance strategies
Review your optimal insurance programme as defence against changing market dynamics
Allocate greater time to your insurer engagement strategies
6.30%
China
6.50%
4.10%
Hong Kong
4.20%*
9.90%
India
10.10%
2.40%
Japan
5.20%
Malaysia
5.30%
3.80%
Singapore
4.00%
Salary Increase Rate Movements
Adopt a digital-native mindset
Encourage life-long learning and climbing career walls
Be more agile in human capital management
• Technology disruption challenged existing business models and converging industries • Digital transformation quickened pace to achieve speed, agility and innovation • Employees desired experience and opportunities, transparency and inclusion
• Speed of disruption and transformation will continue • Organisation models will be even more porous and agile • Jobs will disappear, be augmented or recreated
Human capital remained a top-10 risk in any organisation in 2019, but took a different shape and form, requiring innovative solutions. Changing workforce demographics posed multi-generation workplace challenges, skills upgrading and transition issues. Navigating the current volatility but staying invested in future-proofing the business and organisation is key to success. In 2020, Asia remains a growth market, albeit growing at a slower rate than before due to continuing economic volatility. With the confluence of global forces, fast-changing technologies, and significant demographic shifts, skills supply and demand are out of balance… download report to read more
-10% to Flat*
-15% to -10%
Mitigate M&A risks by being proactive, not reactive
Consult us on any risks that arise in M&A transactions
Early engagement with deal teams
• Macroeconomics caused global uncertainty • Asia enjoyed strong growth • Hesitation in engaging in M&A activities • Losses in shipping created caution
• Expect an increase in acquisitions • More awareness of M&A tax exposures • Complex tax solutions for Asian jurisdictions
In 2019, Brexit, the China-US trade war and unrest in Hong Kong were making buyers from Europe and the US nervous about Asian M&A targets. In Asia, the year saw an increase in enquiries about bespoke, hybrid solutions on M&A transactions. Insurers have sought to become more commercially responsive to the evolving M&A landscape. In 2020, post-Brexit, a potential lower value of the pound sterling could fuel acquisitions in the UK in property and valuable industries. With continued initiatives to combat tax avoidance and tax evasion, including the implementation of the OECD Multilateral Instrument and EU Mandatory Disclosure Regime, companies will be keen to reduce their tax exposures in M&A activities… download report to read more
* Rates are expected to fall for some key developed jurisdictions, and to hold for emerging markets
Plan for increased instances of political unrest, even in historically benign territories
Quantify non-damage revenue exposures such as loss of attraction
Consider broad form Political Violence cover
• Major losses in Hong Kong and Sri Lanka • Significant resultant rate increases in these two territories • Capacity remained stable
• Domestic capacity emerging from China • Terrorism market will still have ample capacity • All eyes on Tokyo Olympics and Hong Kong
On the back of massive losses in Sri Lanka and Hong Kong in 2019, insurers were expressly excluding strikes and riots from their property programmes, prompting companies to turn to the standalone terrorism market. Rates were spiking for risks in affected areas, though premiums in the rest of Asia remained relatively flat. In 2020, rising unrest across the region means traditionally secure territories may experience disruption, including threats to overseas investment. Following years of relatively benign loss history, property underwriters will pay particular attention to the presence of Strike, Riot and Civil Commotion (SRCC) extensions under traditional property programmes. This will necessitate the take up of standalone terrorism and political violence cover… download report to read more
-10% to Flat
Flat to +10%*
across the board
* for special circumstances, could be significant
+5% to +10%
• Heavy losses in recycling and Food and Beverage • Soft rates were no longer sustainable • Hazardous occupancies saw rate increases • Rising exposure from non-tangible assets
• Rates will continue rising • Silent cyber wording revisions • New non-damage BI and parametric cover
With investments deteriorating, years of soft rates were catching up in 2019. Insurers were pulling out and tightening rates as losses cut into profitability, especially following significant losses in recycling and Food and Beverage. Supply chains were also seeing disruption from factors like global events and a gradual shift from assets to non-tangible exposure. The market will continue hardening for the next 12 to 18 months. Insurers are prepared to walk away even from long-term relationships, thereby contributing to tightening capacity. Therefore, risk quality is becoming even more of a differentiator in underwriting… download report to read more
Insurance value should be derived and viewed from risk mitigation angle instead of treated as an overhead cost
Non-physical damage exposure may call for unconventional solutions
Consider cost benefit deductible analysis
+2.8%
+8.6%
+8.7%
General inflation rate
Medical trend rate (gross)
Medical Trend Rates
Source: Aon’s 2020 Medical Trends Report & 2019 Employee Wellbeing Survey
Educate employees, thereby improving health and reducing risks
Automotive
aviation
Continued losses and natural disasters in 2017 and 2018 saw the soft market come to an end in 2019. Insurers were hardening their position and tightening policy conditions to recoup on attritional claims and catastrophic losses. Several major insurers and syndicates withdrew from aviation altogether, impacting capacity in Asia Pacific. Airline solvencies in 2019 will have a long-term effect throughout the sector as auxiliary industries suffer. There is also intensifying scrutiny on manufacturing risks in particular… download report to read more
• Market impacted by global economic downturn • Losses from serious natural catastrophes • Carriers braced for major grounding losses • Manufacturing risks were top of mind
Aviation
Energy
Construction
Financial Institution
Power
Mining
Real Estate
Shipping
Renewable Energy
20%
*15% to 20%
Airlines
*20% to 25%
Look to global market conditions to gauge your insurance needs
Prepare for the economic downturn by diversifying risk management solutions
See insurance as an operational priority that requires careful strategising
+5% to +7%
Create an effective crisis management playbook
Focus on rigorous scenario planning
• Technological advances have created advantages • Electronic systems can lead to recalls • Sector only suffered traditional losses • Demand in China for recall insurance
Asia was the only region to experience sustained, long-term growth for automotive manufacturers in 2019. Capacity and appetite remain mid-range for most insurers with only moderate increases in premiums. There has been growing demand for recall insurance for equipment manufacturers in China, and the furtherance of technology in vehicles has posed several risks, including cyber. In 2020, the economic slowdown being experienced by the rest of the world will not be felt by automotive manufacturers in Asia, but concern is growing over risks posed by cyber-attacks on technology built into vehicles, particularly around manufacturing and auto theft… download report to read more
automotive
Understand and communicate the details of your project documents (e.g. re- testing and/or defects)
Adopt a holistic, value-added approach vs a transactional one
Provide more in-depth underwriting and EHS information to insurers
• Capacity withdrawals led to an increasingly challenging market • Many projects took longer to achieve financial close • Projects saw more complex risk and insurance allocation • CSR and sustainability practices were priority
• Infrastructure sector will see increased growth • Underwriting discipline will remain paramount • Innovation in construction technology will play an increasing role
2019 was a particularly challenging year for companies and insurance markets exposed to construction risks. Specifically, the withdrawal of several Lloyd’s insurers from the sector and some high-profile construction losses led to a more stringent underwriting environment gathering pace during the year, where pricing adequacy and underwriting discipline prevailed. Even though political uncertainty remains a challenge in some geographies, international developers and contractors are expected to expand their presence within Asia in 2020. As projects become more complex, innovative construction technology will start to play an increasing role in project development… download report to read more
Moderate*
Severe*
• Major global downstream losses impacting Asia rates • Greater scrutiny of wordings by underwriters • Focus shifted from top-line to bottom-line underwriting • Pressure on global markets to compete with domestic capacity
• Domestic pricing no longer aligned to international markets • Downstream energy projects will face capacity issues • Offshore rig reactivations and crew experience in focus
Improved oil prices and reduced contractor costs paved the way for increased offshore exploration and development drilling with mobilisation of rigs, helping to maintain a soft upstream market in 2019. Greenfield developments remained on hold in Asia. Downstream, insurers tightened renewals and new accounts following significant global losses. Major onshore energy construction projects faced withdrawal of capacity. In 2020, many opportunities for Asia-based companies to purchase oil fields from the majors will likewise present growth opportunities for clients and markets. While rig reactivation is expected to increase for reserve replenishment delivering growth for the sector, maintaining deductible levels will become increasingly challenging for companies… download report to read more
energy
• Internal and external fraud-related events • Global trends impacting the Asian market • Reduction in capacity • Greater focus on risk management and mitigation strategies
• Capacity reduction to continue but not yet critical • Risk differentiation becoming more important • Premature imposition of global coverage limitations
The first half of 2019 saw a relatively benign marketplace with insurers looking at each other for guidance. Later in the year, clearer trends emerged from the London market, influencing multinational insurer behaviour in region. Also, as insurers looked to manage capacity relative to the rate of return generated, the Asian story was no longer a compelling top-line premium growth market, meaning further redeployment of capacity to chase returns elsewhere. In 2020, insurers will consider a few risk-specific areas. Positive developments will be seen in fraud-related cover, providing financial institutions with risk transfer options previously not available, addressing the convergence of credit, marine, financial lines markets. Risk differentiation will be important to counter global claims trends… download report to read more
Financial institution
Benign*
Take a proactive approach to assessing cyber risks
Be prepared (early) to provide detailed technical information for renewal and new business
• No major Asia losses • Reputational risks from tailings dam losses • Capacity stable except thermal coal mining
• Heavier scrutiny on tailings dams • Stricter underwriting across the board • Environmental liability insurance gaining popularity • Growing exposure to cyber risks
Though Asia experienced no major incidents in 2019, notable losses in the global market saw cover being further restricted for tailings dams as well as tighter underwriting for underground exposures. Due to the rising social responsibility, most international markets have reduced or removed their capacity for new thermal coal mining, though domestic capacity remains. Following various losses in 2019 and development of 2018 losses, companies can expect to see more detailed underwriting information, especially around Property, Business Interruption and Liability exposures in 2020. Changing commodity prices and burgeoning cyber exposures are also increasing business interruption values… download report to read more
mining
Flat to +20%
Flat to +15%
• Downstream: Benign in domestic markets; severe in global markets • Upstream: Benign in domestic markets; moderate in global markets
Compile up-to-date business interruption data
Consider carefully the structure of market quotation tenders
Be more proactive in planning renewals
Look at global trends and articulate why your risk story is different.
Invest in incident response and contingency planning.
Be prepared for red teaming and pen-testing engagements as regulators gear up.
• Coal came under more pressure • Some major losses led to a more challenged insurance environment • Hydro risks saw greater underwriting scrutiny • LNG Gas-to-Power is becoming more attractive in certain regions within Asia
• Strong growth will be needed to bridge future demand/supply gap • Supporting transmission infrastructure will need to improve • Robust underwriting discipline will continue to prevail
Environmental issues have been at the forefront of many discussions taking place over 2019 within the power sector. This led to a number of international financiers and insurers reviewing and subsequently taking a stronger position relative to coal, hydro and waste-to-energy power generators while simultaneously taking a more disciplined approach to technical underwriting. In 2020, we anticipate the regulatory framework in certain countries will need to change in some areas to enhance project bankability. Also, as pressures around coal and hydro prevail, this in turn will continue to impact market certainty… download report to read more
power
+5% to +15%
+10% to +15%
Consider standalone country or shared limits
Review natural catastrophe limits
Isolate difficult asset classes
• Forever 21 went bankrupt • Hong Kong retail severely disrupted
• Some state owned enterprises tenants may withdraw • Hong Kong poses risk
In 2019, the real estate market continued to be competitive due to the sheer weight of capital from institutional investors such as insurance companies and pension funds. They were increasing their allocation to real estate from traditional levels of 5% to 8%, to 10% to 15%, driving investors up the risk curve into new asset classes and geographies. In addition to core commercial real estate, we saw clients actively investing in some new asset classes such as logistics, student housing, data centers, cold storage and multi-family. In 2020, companies should consider reviewing parametrics solutions to challenge traditional natural catastrophe risk transfer. They should seek to understand how non-material business interruptions can help support ongoing business strategy. Case in point is what happened in Hong Kong for a large part of 2019. From a logistics perspective, this could mean supply chain disruption in 2020… download report to read more
real estate
* subject to Natural Catastrophe exposure
• Asia was the fastest growing region for Renewable Energy • Offshore wind gained traction in Taiwan, China, Korea and Japan • Domestic financing was used more • Some large losses in other regions impacted premiums in Asia
• More reverse auctions will happen in 2020, reducing tariffs and project costs • Renewable Energy developers will give greater consideration to non-traditional solutions • Natural catastrophe exposures will drive insurer appetite and pricing
Whilst the bankability of some Power Purchase Agreements caused investors some concern in 2019, this did not yet adversely impact the development of Renewable Energy projects within the region. Insurance capacity and appetite was stable albeit some adverse industry loss experience notably on operational risks that have started to impact pricing in the region. In 2020, we expect Renewable Energy growth to remain buoyant. Offshore wind, whilst still a relatively immature technology in Asia, is attracting much attention due to the growth potential, although some of the accumulated exposures are leading to aggregation challenges… download report to read more
renewable energy
• Capacity down as insurers exit • This, combined with global losses, is pushing premium upwards • Increased tendency towards vertical placements • Underwriters were increasingly focused on bottom-line performance
• Capacity will continue to contract • Restrictive underwriting to limit losses • Facilities will continue to prove more cost-effective for many SMEs • As rates improve, remaining insurers will see return to profitability
With major insurers merging or withdrawing from the market altogether, underwriting had tightened in 2019. However, placement options were still plentiful at the right price. Major losses from the ‘Golden Ray’, ‘Star Centurion’ and attacks on tankers in the Middle East in 2019 have sharpened underwriters’ focus and putting further pressure on rates. IMO 2020 introduces new questions about the supply and viability of compliant fuel while ISM 2021 is another growing consideration as cyber threats loom, especially with the Internet of Things playing an increasing role in onboard risk management… download report to read more
shipping
Explore the viability of long-term partnerships in order to enjoy competitive and stable terms
Pre-emptively consider cyber solutions and risk management strategies
Consider how Business Interruption can enable you to trade with more assurance
• Auto sector to grow in Asia • Higher cyber risk with vehicle automation • Capacity and appetite to remain positive • Global supply chain hit by trade war
Adapt strategically to geographic shifts and other changes in the risk landscape
• Capacity will shrink in Asia Pacific • Market will remain hard • Premiums will increase overall, with individual variations • Aviation market will undergo a transition period
General Aviation
15%
Aerospace
+2.5% to +5%
+10% to 25%
Downstream operational
Upstream operational
* Both are operational and construction ** Globally severe
Engage in proactive risk management practices
Strengthen key long-term strategic insurance partnerships to manage market volatility
Have a clear and strong position on CSR/sustainability measures
Partner with a risk and insurance advisor with the relevant placement experience from Europe in this sector
Adopt a holistic view of risk
Adopt Natural Catastrophe Modelling in high exposed areas
*Though losses seem proportionally greater against low premium levels from the last five years
+5% to +25%
Flat to +7.5%
Protection & Indemnity (P&I)
Hull & Machinery (H&M)
* for special circumstances, rate movements could be significant
* Severe losses outside Asia
Affinity
Captives
Cyber Security
Cryptocurrency
Data & Analytics
Intellectual Property
Digital Economy
Reinsurance
Reputation Risk
SMEs should look at Affinity-type SME insurance schemes for best value-add
SMEs should use new and innovative distribution options to better understand their full risk exposure and to find tailored insurance solutions
Focus on insurance needs of entrepreneurs
Business and Individual insurance needs start to become blurred
Customer experience to be enabled by digital and AI
SME insurance offerings will include non-insurance services
Small and medium enterprises (SMEs) are a key growth area in Asia, making up more than 96% of all businesses in the region* and contributing to around half of total Commercial Insurance premium. In 2020, SMEs can look forward to insurers countering heightened competition and pressure on pricing by providing better and segmented customer experience, enabled by digital and AI. They will also offer insurance solutions that are less siloed and more diverse, e.g. non-insurance services. Sponsor-led SME insurance offerings, i.e. companies that have large SME customer bases (banks, retailers) providing access to bespoke insurance products, will become an increasingly attractive channel for SMEs to buy insurance at competitive prices… download report to read more
Innovation in SME Insurance Offerings: Segmentation, Digitalisation and Sponsor-Led SME Insurance Distribution
More companies in the region have been enquiring about captives in the face of shrinking capacity and a gloomy outlook for natural catastrophe risks. Claims for property damage have increased, and companies with large claims have had to contend with even higher premiums. In a bid to retain risk internally, many have shown keen interest in captives over the past twelve months and will continue to do so in 2020. The advantages of forming a captive insurance company are numerous and significant. Types of risks that are typically run through captives include Property Damage/Business Interruption, General Liability and Workers Compensation, amongst others. In 2020, companies that already have captives will continue to study emerging risks, including cybersecurity and environmental… download report to read more
Captive Insurance: Are Attitudes Changing in Asia?
Base costs will increase in 2020
Captive enquiries continue to surge
Companies with captives to examine emerging risks
Corporate governance and compliance landscape uncertain
Expect more insurance-linked securities (ILS) transactions in Singapore in 2020
Review suitability for captives regularly
Review total cost of risk and test current retention levels
Relationships in the insurance market are key and these need to be nurtured and preserved
Invest time in preparing a robust underwriting risk presentation to the insurance market
Conduct regular red teaming exercises to reduce cyber risks
The insurance market catering to digital assets insurance is growing
Regulators thinking of investor protection
Robust risk governance frameworks becoming the norm
Capacity for insurance set to grow internationally
Asia is moving closer to embracing the token economy, and its cryptocurrency ecosystem is becoming more robust. Yet, cryptocurrency is a digital asset that is still viewed with a degree of scepticism by some investors whilst regulators are operating at different speeds across the region. Similarly, the insurance industry has been slow in providing solutions to enhance the overall risk governance infrastructure for digital assets. The media created an adverse perception of the level of insurable risk in the crypto market in its infancy. However, as the legitimacy of this asset class is gaining momentum, there has been a concerted effort to develop more flexible risk transfer offerings to enhance investor protection and address the risks of managing this sector… download report to read more
Is Asia Keeping Its Bitcoins and Blockchains Secure?
Cater to individual circumstances with tailored coverage with appropriate limits nurtured and preserved
Scrutinise vendor accreditation to protect against cyber threats
Risk transfer must be paired with continuous assurance such as red team testing
Strong appetite for cyber risk in Asia
Regulatory focus on silent cyber risks
Stronger regulatory push for testing
Shift towards continuous assurance
Despite substantial data breaches in 2019, there remained a healthy appetite for cyber risk in Asia. Unlike traditional lines, companies did not see market restrictions or pricing increases, and markets have not pulled out. New products were released to specifically address cyber risks in the physical damage space, such as in marine and energy, for instance. In 2020, coverage decisions will clarify the scope of cyber policies and how traditional cover addresses cyber risks, such as the insurability of fines and the extent to which war and terrorism exclusions apply to state sponsored attacks. There will also be a shift in appetite from off-the-shelf cover to tailored solutions, with the rise in the employment of holistic risk transfer strategies… download report to read more
How Can Companies Manage Surging Cyber Liability in Asia?
Conduct operational due diligence with efficiency
Investors and their managers will keep facing ops-related risks
Operational due diligence (ODD) is a must
Data and analytics can quicken the ODD process through automation
Use data and analytics to create insights and assess ops risks more objectively
Operational due diligence (ODD) is no longer considered optional for investors, but rather, a must-have to manage operational risks that can help identify environments that are susceptible to frauds, blow-ups, cyber security breaches, reputational risk, and alpha degeneration, amongst other potential risk events. However, the approaches that were established were and continue to be expensive, time consuming, manual and highly subjective. Therefore, institutions have been moving towards new, effective and cost-efficient solutions to identify and quantify operational risks. In 2020, organisations will continue managing operational risks using new technology solutions… download report to read more
Operational Due Diligence: How Can New Tech Help?
Offer creative solutions to manage risk
Key IPOs are on the horizon
More global insurers are servicing digital economy players
Insurtech companies are partnering with legacy insurers
Premiums will be on the rise
The growth of the on-demand economy is changing the way many people work, prompting insurers to innovate to better serve this growing segment. Large traditional insurers are starting to see the advantages of working in the digital space and are actively developing digital economy teams internally, so they can offer bespoke services to companies in an agile manner. From an emerging risk perspective, it is likely we will see more IPOs from digital economy companies in 2020. Firms in this space are realising more profitability, and this will increase the depth and breadth of products available to them from traditional insurers, as they seek to find more efficient ways to underwrite their risks… download report to read more
How Can On-Demand, Sharing Economy Players Protect Themselves in Real-Time?
Ensure security of trade secrets via alternative programmes
Protect intellectual property via risk transfer programmes
Increase awareness around protection of intangible assets
Trade secrets losses on the rise
Growing appetite for IP and trade secrets cover
Capacity expanded for IP and trade secrets
Aon’s Trade Secret Registry launched in May 2019
The value of intangible assets such as intellectual property (IP) is increasing at a phenomenal rate, accounting for 84% of the value of the S&P 500*. However, companies are facing persistent threats to these assets as they operate in today’s knowledge economy. Costly litigation and business disruption due to IP infringements and trade secret misappropriation, coupled with increasing cyber security breaches, is causing companies to actively seek protection. Recognising a gap in and growing demand for IP and trade secrets exposure risk mitigation, insurers released more capacity in 2019. Still, there remains a need for more robust products and the months ahead may see further innovation in this space… download report to read more
Attacks on Its Most Valuable Asset: How Can Asia Keep Up?
Study the pros & cons of gross excess of loss protection
Multi-year deals as many view we are at the bottom of the cycle
M&A to increase market share
No major CAT losses in the region
Numerous risk losses affecting certain insurance companies
Much talk around silent cyber and climate change
Cyber penetration is still in the developing stage
At different renewal dates over the year (1 Jan, 1 Apr and 1 Jul), the flexibility of reinsurers towards proportional treaty has reduced whilst capacity for excess of loss remained abundant in 2019. We saw some M&A activity in Thailand and anticipate this to also gain momentum in other countries across the region as regulators continue to focus on increasing the minimum capital requirements. In 2020, reinsurers will likely look to ensure that cyber exclusions are tighter to avoid any misunderstanding. This will enable purchase of cyber reinsurance on a stand-alone basis. For treaty capacity, we envisage continuing scrutiny by reinsurers as to the profitability and coverage of proportional treaties, potentially leading to further reduction of capacity for this type of reinsurance... download the report to read more
What Lies Ahead for Asia?
Plan for a crisis with leadership
Keep up-to-date with the latest regulations
Include cyber risk in due diligence
New cyber technology increases risk
Risk will continue to grow in 2020
Shareholders want greater accountability
Reputation will be managed more closely
Top companies are now placing increasing importance on reputation, brand and other such intangible assets. The value of these types of assets among S&P 500 companies grew 70%* over the last 45 years. As organisations realise the true worth of their reputation, they also face the challenge of protecting it. Over the years, large organisations have faced major reputational crises, including Samsung in 2016 and Facebook in 2018. In 2019, Cathay Pacific continued to feel the impact of their 2018 data breach, while the recall of Boeing’s 737 Max wiped 25% off the brand’s value. As cyber technology continues to advance, risk will increase in the form of cyber-attacks or product recall, potentially turning shareholders against boards across the region… download report to read more
How Can Companies in Asia Control the Uncontrollable?
Assess all managers across all asset classes
Seek advisors and insurance partners who are investing in specialised resources and teams
* Source: Asian Development Bank
Ensure ongoing due diligence as best practice and investment managers change over time
Learn from your peers, understand what’s available in other regions and challenge Asian underwriters
*Source: Ocean Tomo’s 2017 Intangible Asset Market Value Study
(excluding Japan and Greater China)
