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Opportunities in 2022
Solutions Space
Businesses today are plagued by business interruption, cyber attacks and a gamut of other risks. What other risks should you be prepared for?
2021 Global Risk Management Survey
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In a post-pandemic world shaped by digitisation, innovation, and social responsibility, how can business leaders prepare?
A socially responsible post-pandemic world beckons: Are organisations ready?
How will skyrocketing employer-provided medical benefit costs in APAC shape views on future claims patterns?
2022 Global Medical Trend Rates Report
Risk associated with geopolitics, terrorism and political violence continue to plague businesses in Asia. How can you navigate complexities in a post-pandemic world?
2021 Risk Maps
Voluntary benefits can form a crucial part of employer value propositions and address the needs of a diverse workforce.
How innovative benefit offerings can close the health protection gap and turbocharge employee engagement
How are credit insurers supporting financial institutions in financing the green economy?
The intersection of climate risk and credit risk: How are credit insurers responding?
Managing Risk in Connected Asia
2022 Asia Market Review
How can you move forward with confidence and certainty in a volatile business environment? Download Aon's ninth annual Asia Market Review for more insights.
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Industry Space
Title 1
Asia Market Review
Title 3
Title 2
CAPITALISING ON COVID-19 OPPORTUNITIES IN 2022
As markets slowly reopen and recover amid ongoing volatility, future-proofing becomes paramount. Asia’s diverse geopolitics and differing levels of economic development make generalisation of risks – and impact on the business landscape – problematic, especially with the proliferation of long-tail risks. However, with digital transformation moving faster in the region than anywhere else in the world, there are unprecedented opportunities to tap into and maximise growth – particularly in the following key areas.
As pharmaceuticals, renewable energy, and (bio-)technology continue to attract investors as viable industries with vast potential, claims activity is likely to increase in relation to financial statements, tax laws, regulations, stock and inventory, as well as material contracts. Those looking to alleviate financial losses from high-value transactions will look to risk transfer mechanisms, such as tax liability insurance and litigation risk solutions to enhance M&A transactions, supported by insurers who are taking a more commercial approach to underwriting. We anticipate premiums to stabilise somewhat, even amid the uptick in M&A transactions, and an exponential increase in W&I insurance utilisation.
M&A TRANSACTION LIABILITY
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In a recent Aon survey, Business Interruption topped current and future risks in Asia. Organisations must ensure that their current insurance contracts reflect their business requirements and concerns. Exacerbated by geopolitical and supply chain disruptions, insolvencies should increase 15-30% over the year, underlining the importance of pairing mitigative measures (on CapEx and working capital) with innovative policies and solutions, such as green credit insurance. Although we anticipate a more benign market overall, businesses should contemplate and prepare for the next ‘grey swan’ event.
TRADE CREDIT
The magnitude of climate change and global warming is becoming more apparent than ever. Driven by the growing appetite for newer technologies and solutions in Asia, such as offshore wind, floating solar power, and battery energy storage systems, we anticipate more cable-related claims due to installation, design, and/or manufacturing errors, while reinsurance capacity stays largely intact. Risks with Nat Cat exposures will face limited capacity and coverage from traditional markets. However, there will be an increased interest from new sources of capital offering alternative transfer solutions. Rising ESG concerns will force greater focus on exposure to ‘extreme weather’, resulting in an adjustment of terms and a deeper scrutiny into policy language – particularly for serial loss clauses.
RENEWABLE ENERGY
Although 2021 was extremely challenging for the cyber market, we expect it to stabilise with renewed underwriting confidence as ransomware preparedness, response, and recovery capabilities improve. With cyber-attacks rising among the top 10 global risks, businesses need to ensure adequate levels of data protection in line with the digital evolution in Asia. Irrespective of challenging market conditions, demand is set to increase as those with the ability to tolerate more risk will gain better access to coverage and competitive edge.
CYBER
At Aon, we believe that businesses in Asia can grow and thrive in a future that is still in flux, if they are better informed, better advised, and able to make better decisions for whatever the world needs next. No matter what happens in 2022, we are committed to using our experience, expertise, and advanced analytics to bring clarity and confidence to help Asia flourish.
As the world transitions to an increasingly innovation-driven economy, intellectual property (IP) becomes even more important for companies to create, nurture, and protect. Without knowing how to optimise the conversion of innovation into specific IP asset classes, leaders who continue to see IP from a traditional lens stand to lose out on a valuable means to drive their businesses forward. Using new analytics tools, artificial intelligence (AI), and machine learning, we are poised to help them understand and leverage their IP assets as collateral in borrowing, so as to benefit from a non-dilutive, competitively price source of capital. In 2022, we are set to see a significant expansion in lending capacity for this market, with increasing demand from borrowers.
INTELLECTUAL PROPERTY
As the world transitions to an increasingly innovation-driven economy, intellectual property (IP) becomes even more important for companies to create, nurture, and protect. Without knowing how to optimise the conversion of innovation into specific IP asset classes, leaders who continue to see IP from a traditional lens stand to lose out on a valuable means to drive their businesses forward. Using new analytics tools, artificial intelligence (AI), and machine learning, we are poised to help them understand and leverage their IP assets as collateral in borrowing, so as to benefit from a non-dilutive, competitively price source of capital. In 2022, we are set to see a significant expansion in lending capacity for this market, with increasing demand from borrowers. At Aon, we believe that businesses in Asia can grow and thrive in a future that is still in flux, if they are better informed, better advised, and able to make better decisions for whatever the world needs next. No matter what happens in 2022, we are committed to using our experience, expertise, and advanced analytics to bring clarity and confidence to help Asia flourish.
Aviation
Construction
Financial Institutions
Energy
Hospitality
Mining
Life Sciences & Pharma
Power
Real Estate
Private Equity
Tech, Comms & Media
Shipping
Renewable Energy
Claims Observations
COVID-19 has underlined the importance of assessing key equipment replacement times and indemnity periods. Strong communication lines must be established with insurers, loss adjusters and brokers early in the claims cycle to ensure that all parties remain aligned. Attritional losses in the upstream sector continue to erode underwriting margins and negatively impact combined ratios; similar to downstream market trends.
Asia Rate Movements
Benign
Moderate
Severe
Asia Loss Experience
Client Tips
Continue leveraging learnings from 2019/2020.
Continue to present risk early and thoroughly.
Increase preparedness around ESG positioning for market discussions.
ENERGY
2020 and most of 2021 saw a high aggregation risk of 'aircraft on the ground'. Returning aircrafts (and pilots) to service will be weighed down by the sheer volume of resourcing required in a concentrated period. Claims continue to occur, particularly in ground-related incidents. In October 2021, a Texas jury awarded a USD 353 million verdict to a United Airlines wing walker, who was struck by a van at Houston’s Bush Intercontinental Airport in September 2019. This incident could set a trend for inflated awards, compelling insurers to alter their approach to airport risks.
i
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Moderate*
* Across the board
Pandemic-induced economic slowdown/slow recovery had a significant impact on the financial health of the aviation industry, leading to cash-flow challenges. Cyber risks remained a major threat and ranged from basic ransomware to threats connected to denial-of-service attacks and stolen data publication. Business interruption continued for the industry – borders remained closed, passenger numbers were slow to recover, and global economic conditions deteriorated further. While a shortage of trained professionals (pilots) was always a challenge for the industry, this was amplified in 2021 due to... download report to read more
• • • •
Reflections
While international travel demand is set to grow year-on-year, it will still be significantly below pre-pandemic levels. The industry will manage risk using both insurance and noninsurance methods, with greater focus on mitigating uninsured risks and preparation for low frequency/high severity events. Underwriting capacity will return to the sector, creating more competition for aviation risks and placing pressure on recent trends of premium increases. Innovation will focus on the travel experience and safety, including ... download report to read more
Predictions
Review risk tolerance and resilience across all areas of the business.
Maintain and retain experienced people, especially pilots, for aircraft operators.
Demonstrate continued investment in safety and risk management.
25%
+5% to +25%*
2021
2022
Flat to +5%
Data 3
There has been some increase in the frequency of fraud losses across the region, as the large commodity fraud losses of the last two years continue to play through the credit insurance market. The threat of ransomware and other cybercrime has all the financial institutions on high alert, not just for their own risk profiles but also for the consumer base.
Deployment increased in credit insurance for project finance transactions aimed at sustainability-linked projects. Amid COVID-19-accelerated market disruptions by fintech and digital economies, incumbents (i.e., regulated financial institutions) were able to embrace the challenges. Fraud risk was ever prevalent without shortage of headlines across cyber and digital currency fraud. Cyber red teaming and adversary simulation attack strategies became...download report to read more
The use of credit insurance to support project finance transactions is increasing, driven by risk mitigation, credit concentration, and capital optimisation. New technologies will continue to be adopted for innovation at scale, balanced against regulatory influences, cybercrime and litigation risk scenarios. Cyber risk governance practices will need to keep pace with threat actors. Larger banks will continue to focus on...download report to read more
financial institutions
Reflecting the reduced footfall and ongoing COVID-19 impact on the hospitality operating model, overall claims volumes remain historically low. The increasing adoption of technology-driven claims solutions is helping to drive efficiencies, improve visibility across the client's claims portfolio, and reduce the claims lifecycle.
The hospitality sector has been facing an over-supply of rooms due to ongoing waves of COVID-19. Due to declining numbers of international tourists and business travellers, there was a significant shift in the hospitality operating model. Talent shortages continued to affect the industry. Conference and event revenue streams were significantly reduced due to ongoing waves of... download report to read more
There will be an increase in distressed sales or assets repurposed to residential properties, senior housing, healthcare, or data centres. Sustainability will increasingly become a board priority and a key risk issue. There will be a number of distressed asset sales requiring the need for transaction liability cover. Various strains of COVID-19 will...download report to read more
Actively manage total cost of insurable risk.
Work proactively with brokers to avoid coverage issues and uninsured exposure.
Understand potential shifts in portfolio (asset class and geography).
Transaction liability insurers have observed increasing claims frequencies and severities, even though they were not directly evident from a regional perspective. Private equity firms are likely to be more vulnerable to more targeted cyber attack campaigns, including business email compromises, while expanding their consideration to supply chain cyber risks for portfolio companies.
Cyber governance strategies were increasingly being assessed across the entire PE ecosystem. Although counterparty credit risk had increased during the pandemic, economic rebounds took hold, resulting in a greater sense of financial certainty as credit markets began to relax from earlier worse-case scenario modelling. Extraordinary government decisions impacting industries highlighted the previous years’ uncertain political environment. For portfolio companies, cultural and organisational alignment with business strategies proved to be key during the pandemic, highlighting the need for... download report to read more
Some insurers have expressed caution on PE investments/exit strategies involving IPO or SPAC transactions, while also being sensitive to geopolitical risk. As economies start to open up, balance sheet and capital optimisation strategies can differentiate clients through the innovative application of credit insurance market products, surety and bonding solutions. IP valuations, financing and ancillary strategies are all likely to gain momentum. ESG positioning has quickly become a driving force for the asset mandates of... download report to read more
Adopt ESG strategies for future capital/fund raisings.
Cyber resilience goes beyond portfolio companies.
Deploy strategies to reduce volatilities in funds, transactions and portfolio companies.
private equity
Some classes of business, such as liability, saw artificially low numbers of losses in 2021 due to the impact of COVID-19 pandemic lockdowns on retail and hospitality sectors. An absence of large catastrophe losses in 2021 also contributed to the benign overall claims environment.
Correction in asset prices was expected in China, India, and Australia. Many corporates looked to access working capital from longterm real estate holdings using sale and leaseback transactions and a transition to an asset light business model. Asset class focus pivoted towards those with reliable income streams, such as logistics, multi-family residential, and data centres. ESG was firmly in focus for investors. Asset owners recognised... download report to read more
COVID-19 has accelerated changes in the way we work and live. We will see ongoing changes to the portfolios that hold traditional office/retail and hospitality assets. Traditional assets may be repositioned, and the risk profile will change. Policy wordings will continue to be tightened by insurers looking to remove ambiguous coverage areas, specifically for cyber, infectious disease, and areas related to contingent business interruption. Rates will continue to increase for... download report to read more
Ensure that your programme remains competitive and fit for purpose.
Communicate changes in business strategy to the insurance market.
Manage the impact of repositioning and transactions on portfolios and insurable risk profiles.
real estate
Due to COVID-19 and oil price volatility-induced CapEx cuts across the oil & gas (O&G) sector in 2020-21, operational activity reduced, negatively impacting demand and supply, geopolitical issues and the global upstream premium pool. Following the sharp downstream market correction in 2019, appetite gradually returned during the second half of 2021. Policy language clarity was improved, particularly around business interruption in 2019-20, resulting in...download report to read more
• • •
More insurers will refine their underwriting positions on fossil fuel, making ESG a higher priority when underwriting risk assessments. Sanctions and their impact on underwriting positions will continue to impact markets and clients when reviewing expansion risks to the Myanmar O&G sector. Although downstream business appetite is set to return for energy markets with new capacity added, existing underwriting controls...download report to read more
Container ship losses have notably increased over the last 24 months, with the Suez Canal incident highlighting issues around vessel sizes, the unavailability of suitable salvage equipment in many of the world’s shipping lanes, etc... Generally speaking, there have been fewer claims with a significantly higher quantum of loss.
Insurers continued to apply corrections on poor performing accounts, but increases were less drastic than before as rates, deductibles and conditions have been gradually adjusted over the last few years. Competitive rates were witnessed on select good business fleets – led by Asian-based insurers. The decline in seafarers’ mental health over the last 18 months started to affect ship schedules and maintenance, pushing crew retention initiatives to the forefront of shipowners’ concerns. High freight rates for container ship and bulk carrier owners boosted... download report to read more
Marine cyber will become the must-have insurance in the coming years. Although H&M insurers will continue to ensure their book remains profitable, pricing is expected to plateau. New entrants have emerged in international hull markets (mainly as MGAs) while insurers have begun employing senior/class marine insurers particularly in Europe, increasing competition. Insurers will start looking at... download report to read more
Consider amending deductibles and insuring conditions for changes in premiums.
Detailed information packages and risk prevention strategies can lower premiums.
Explore global markets for the best offers and alternative capacity.
shipping
Cyber ransomware was a consistent theme through the year. There are concerns on IPO, SPAC and related securities claims emanating from valuations, disclosures and geopolitical interference in the year ahead.
Unprecedented volatility in the financial lines market reached fever pitch in 2021. Capital raisings witnessed extremes of success and failures (IPO withdrawals). Businesses had to raise the bar for cyber underwriting... download report to read more
Additional capacity entering the market will have positive impact for buyers across most product lines. Headwinds remain for financial lines, albeit without the level of volatility seen in 2021. Cyber governance, resilience and risk mitigation strategies will be critical for successful market outcomes. All eyes will be on China. Supply chain disruption will impact... download report to read more
• • • • •
Align cyber security strategies with Intellectual Property risks.
Stay ahead of disruption, be it political, economic, social, technological, legal, or environmental.
Focus on cyber resilience, keeping abreast of remote work strategies, and internal colleague training.
Technology, Communications & Media
The insurance industry endeavoured to keep pace with the latest technologies rolled out by the OEMs, necessitating a deeper technical underwriting assessment and impacting available policy terms. Markets continued to take a conservative approach to Nat Cat-limiting capacity for highly exposed risks, leading to increased interest in alternative risk transfer solutions where traditional markets are only willing to offer limited cover. Due to ESG considerations, in contradiction with their growth aspirations, some insurers could not support renewable energy projects if the parent company of the project developer had coal generation in their portfolio. There was increased interest and appetite for... download report to read more
Reinsurance capacity will remain largely intact, but the industry will continue to be tested as newer technologies emerge. Defects in design, workmanship or materials remain a leading cause for losses – tighter terms and policy exclusions can be expected. Greater attention will be paid to the potential exposure of extreme weather, resulting in an adjustment of terms to reflect this. A deeper scrutiny of policy wording/language, particularly around... download report to read more
renewable energy
Cyber threats continued to increase with digital advancements in products, movements towards AI, clinical trials taking on hybrid models and increases in telemedicine and virtual care. Supply chain vulnerabilities and resulting business interruptions remained a top concern of clients. 2021 saw some of the highest turnovers and competition for talent in the industry. Human capital remained key to all organisation... download report to read more
Greater efficiencies will become fundamental to sustain innovation at the current expected rate, e.g., embracing opportunities for hybrid/decentralised trials or utilising AI/new technology. With the pandemic putting many trials on pause, studies are moving towards home participation, resulting in a more diverse patient population being recruited, added data points and results, as well as chances for greater innovation – bringing new considerations to exposures. The competitive landscape will remain with increased M&A/IPO market activity, increased...download report to read more
Adapt your strategic roadmap to IPO by reviewing heightened exposures.
Remain open to conversations for greater underwriter clarity (e.g., D&O insurance).
Capitalise on your brokers’ inquisitions and your carriers’ value added services.
Life Sciences & Pharmaceuticals
Large loss activities have been benign overall. Technology continues to be a key investigation tool in supporting remote investigations into the cause of loss and damage analysis. On a positive note, there have been improvements in post-loss coordination with a careful selection and review of loss adjust or nominations.
Construction capacity continued to be squeezed with markets withdrawing from the sector, creating greater supply and demand pressure, especially in terms of Nat Cat capacity. Some delayed construction projects that required period extensions have been subjected to premium increases and adjustment of terms beyond normal expectations, especially where automatic extension periods are exhausted. The repercussions of heavy losses in construction risks over the last 2 to 3 years, coupled with COVID-19, have... download report to read more
The volume of anticipated projects in 2022 is set to drive increased market appetite and a balanced approach to underwriting. Positive risk management and comprehensive underwriting submissions will continue to remain critical in achieving differentiated terms. Greater consideration will be given to innovative covers such as parametric solutions, which will continue to be considered inconjunction with... download report to read more
Strong risk management and mitigation measures will be viewed more favourably.
Robust underwriting due diligence means longer timelines are needed to achieve optimal results.
Provide detailed information regarding design/construction methodologies for the best results.
2021 has seen relatively lower large loss activity compared to the last 3 years. On a positive note, there have been earlier interim payment approvals with the higher utilisation of risk accounting in the claims preparation process, improving the timeline of cashflows to clients.
Estimated Maximum Loss (EML) studies and increased attention to design standards, especially in Nat Cat-exposed locations, provided valuable insight to clients’ exposures and assisted in determining the right levels of risk retentions and transfers to manage rate increases. Early engagement to determine the appropriate go-to-market strategy was vital in managing expectations, especially on more challenged, complex risks such as coal and hydro, and particularly where lenders are involved. Decisions made on risk and insurance were ideally not considered in isolation, given their interlinkage. Tougher market conditions called for more... download report to read more
The market looks set to stabilise but hold firm. Robust risk management practices will remain key to achieving optimal terms. Consideration of alternative structures and the blending of traditional and non-traditional solutions will become increasingly important. Early engagement to determine the... download report to read more
Allow sufficient time to collate and present detailed information to insurers.
Pay particular attention to Nat Cat resilience and mitigation measures.
Nurture relationships with insurers for more visibility and engagement.
POWER
Markets were consistent in their approach and sought to meet internal growth targets following remediation in the previous years, making renewals less challenging in 2021. Although competition had returned to the insurance market and insurers had seen their working capital increase to enable growth, underwriting was yet to exceed their technical appetites. Focus on key exposures such as tailings dams, contingent business interruption, and port blockage continued into 2021, with some markets perceiving limits to be... download report to read more
Although property markets are starting to report underwriting profits, renewals will be somewhat challenging with rate increases expected to be less substantial than in previous years. Like 2021, more opportunistic capacity will be replaced in 2022 as prices start to plateau. Notwithstanding, prudent underwriting of coverage will remain. Business interruption volatility clauses are expected to continue. Companies need to be transparent about their ESG initiatives, projects, targets, strategies and third-party ratings. These will... download report to read more
Recovery time from a loss event has been exacerbated by COVID-19 and resulting supply chain disruption. This and changing commodity prices are important factors to consider when establishing an insurance programme. A strong working relationship between the client and insurers, loss adjusters and brokers is also key to ensuring smooth claims processes.
The rate of acceleration to which clients are changing their operating models presents new exposures, creating a crucial need for innovative insurance solutions to fill potential coverage gaps. They should continue to seek advice in areas such as ESG, NDBI, IP, recall and cyber exposures to best assess their exposure and potential solutions.
1
2
3
Cable-related claims continue to make up a majority of reported loss activities. The causes of loss in respect of installation errors, design and/or manufacture are estimated to represent more than 50% of overall claims.
20%
30%
40%
50%
55%
Data 4
Benign*
Moderate**
Flat to +10%
+10% to 15%
-5% to +7.5%
+2.5 to +15.0%
Upstream
Downstream
Flat*
Non-financial risk
Credit risk
Flat to +5%*
Nat Cat-exposed property
+5% to +20%
Financial lines (Non-US D&O)
+5% to +15%
+10% to +25%*
Flat to +20%
+20% to +50%
+5% to +10%
Financial Lines (D&O, non-US)
Casualty
+10% to +15%*
+10% to +15%
P&I
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*Softening for investment-grade risks.
Digital Economy
2021 saw many Asian digital economies announcing public listings, with organisational readiness and regulatory compliance playing a major role in their success. Global supply chain disruptions and unprecedented increases in technology adoption caused major chip shortages, which are likely to continue into 2022. Digitalisation created a new paradigm for workforce attraction, development, and culture, requiring companies to look into new ways to retain high-quality talent. Due to an increasingly interconnected world, companies have had to...download report to read more
Digitalisation and technology adoption will continue to accelerate as more borders open, though a return to pre-pandemic habits remains unlikely. Increased investment in AI, automation and 5G deployment is likely, even as global supply chain challenges persist. Many digital economies will permanently adopt remote working or a hybrid model, which will help with the tech talent crunch. Digital economies will play a bigger role in ESG initiatives that benefit communities via...download report to read more
Data 7
Data 6
Data 5
Flat to +5.0%
+2.5% to +7.5%
5%**
+5%
Liability
Flat to +15%
+20% to +40%
+10% to +20%
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Data 2
Data 1
15%
35%
Robust underwriting due diligence means longer timelines are n eeded to achieve optimal results.
Large loss activities have been benign overall. Technology continues to be a key investigation tool in supporting remote investigations into the cause of loss and damage analysis. On a positive note, there have been improvements in post-loss coordination with a careful selection and review of loss adjustor nominations.
Align company business models with social impact elements – or regulators will.
Pay close attention to data rotection regulations and ensure compliance.
Ensure thorough risk assessment of vendors and fulfilment of contractual responsibilities.
Several major e-commerce sites in Asia suffered largescale data breaches that exposed personally identifiable information belonging to millions of customers. Cyber risk was one of the key drivers of losses and was further complicated as governments implemented stricter regulatory regimes. Digital economies cannot afford to ignore this further and must have a robust cyber resilience strategy in place for prevention, detection, and response.
Cyber risk governance needs to be best in class.
ESG is increasingly important from a risk perspective.
Consider the use of credit insurance across multiple asset classes.
Non-Nat Cat-exposed property
+5%**
Capitalise on your brokers’ inquisitions and your carriers’ value-added services.
CGL, financial loss, recall, clinical trials
Review risk retention appetite against risk philosophy.
Prepare for ESG conversations and understand the market appetite.
Understand and declare business interruption issues amid changing commodity prices.
Adopt ESG strategies for future capital/ fund raisings.
Manage the impact of repositioning & transactions on portfolios and insurable risk profiles.
Pay particular attention to resilience, especially for Nat Cat-exposed sites.
Combine risk management with alternative solutions and best-in-class information.
Early engagement with your broker and market is key.
* Increases beyond 15% for high Nat Cat-exposed countries, where unproven or prototypical technologies or wider coverage is being purchased.
Financial Lines
Property & Casualty
* Property & Casualty (P&C)
* Rates are expected to fall for some key developed jurisdictions, and to hold for emerging markets.
Pay close attention to data protection regulations and ensure compliance.
Several major e-commerce sites in Asia suffered large-scale data breaches that exposed personally identifiable information belonging to millions of customers. Cyber risk was one of the key drivers of losses and was further complicated as governments implemented stricter regulatory regimes. Digital economies cannot afford to ignore this further and must have a robust cyber resilience strategy in place for prevention, detection, and response.
**Downstream
*Downstream & upstream
Flat to +5%***
Review risk retention appetite against risk philosophy
* More if Nat Cat exposures are high, where losses prevail, or where there are capacity contraints with some jurisdictions able to stabilise local pricing.
Flat
Financial Lines (Professional Indemnity)
Property
H&M
** Directors and Officers Liability
Non Nat Cat-exposed property
* Dependent on the construction, protection and Nat Cat exposure of the physical asset locations.
** Many hospitality locations are targets and present a considerable exposure.
*** Decreased footfall due to the pandemic has translated into lower exposures for many assets with public spaces.
•
* More if Nat Cat exposures are high, where losses prevail, or where there are capacity contraints, with some jurisdictions able to stabilise local pricing.
Affinity
Captives
Cargo
Credit
Cyber
Directors & Officers Liability
Human Capital Solutions
Health
Use risk prevention strategies to mitigate losses and detail risk.
Political Violence
M&A Transaction Liability
Reinsurance
Wealth Solutions & Employee Financial Wellbeing
Analyse retentions and evaluate options to optimise TCOIR.
Accounts were still being closely reviewed and modelled but aggressive underwriting and competitive ratings on good business started to return. Underwriters continued to apply corrections on poor performing accounts but with less drastic increases, as rates, deductibles and conditions were gradually adjusted over the last few years. Insurers continued to manage stock exposures by modelling them to prevent potential accumulations/aggregations and ensure adequate pricing while... download report to read more
Although pricing is expected to plateau, insurers will continue to ensure that their book remains profitable. Overall capacity will remain relatively unchanged, but competition is expected to increase as insurers get back to growing their top line after cleaning up their portfolio. Active market movements in 2021 may have... download report to read more
Container ship losses have increased over the last 24 months, including One Apus in November 2020, Maersk Essen in January 2021 and X-press Pearl and Maersk Eindhoven a month later. Despite this, the 2021 claims environment has been fairly benign with the most significant event being the Ever Given incident, which resulted in a large General Average (GA) claim.
Businesses strove to complete placements and access reinsurance markets via captives. Directors and Officers (D&O) remained a concern but with planning, innovation and due diligence, clients utilised captives to complete placements, especially Sides B and C. More clients considered including employee benefits by self-insuring through captives. Timing was crucial. Businesses discussed... download report to read more
Live enquiries from organisations about forming a captive or protected cell are projected to increase. Captive owners will reassess their programmes to optimise risk retention and return on investment. The general upward mergers and acquisitions (M&A) trend will lead to risk finance optimisation reviews for risk retention and captives. Based on current activity, more captives will... download report to read more
Perform a feasibility study on captives over the next 3 to 5 years.
Choose the right Risk Finance Decision Platform to review risk classes and reports on optimum risk retention strategies.
Review major risk classes to set optimal boundaries for risk retention and transfer.
2021 saw a return of the two-speed market, with the rate increase directly aligned to one’s industry and/or a poor claims history. The information required from insurers remained at an all-time high as renewal processes increasingly became centralised or escalated for approval. Large recall losses in the London market did not impact capacity in 2021 but in turn, stimulated capacity growth in certain industries (excluding battery manufacturing and the like). Enquiries and acquisitions of environmental liability increased in Asia, especially in... download report to read more
The market is expected to be slow throughout the year, with rates flattening should no large losses occur in 2022. Demand for clients with good risk management in benign industries is set to increase. Existing relationships in ‘difficult’ industries need to be maintained and built upon as no new insurer capacity seems to be on the horizon. European insurers, such as Munich RE, Swiss RE, HDI and AXA XL, are establishing the... download report to read more
Maintain/ implement contractual discipline with new and existing relationships.
Engage with markets when changing operating models/developing new products.
Maintain ongoing insurer dialogues outside of the renewal cycle.
According to the Berne Union, insurers had the lowest ever claims ratio for short-term trade credit insurance in 2021. To future-proof their policies, customers should ensure that contracts reflect their business requirements and terms can be adhered to. Customers would also benefit from ‘dummy’ claims exercises and policy coverage audits.
Improvements in the credit risk environment resulted in increased capacity in many sectors, with more customers benefitting from credit insurance. Although government stimulus kept insolvency levels low, credit risk varied across sectors and economies, depending on their stage of recovery from the COVID-19 pandemic. Global growth bounced back in 2021 with a forecasted GDP growth rate of 5%-6%. Volatility remained in the credit risk environment, particularly due to geopolitical risks and... download report to read more
Inflation will lead to tightening monetary policy. Leveraged, weaker companies may struggle with increased finance costs. Insolvencies are forecasted to increase by 15%-30% globally in 2022, as government support tapers. As supply chain volatility is set to remain, companies are likely to increase inventory levels (working capital impact) and diversify supply (capital expenditure (CapEx) impact). Innovation will continue in areas such as... download report to read more
Review innovation in areas such as project financing and green credit insurance.
Leverage data to improve credit modelling and loss provisioning.
Explore how credit insurance can help working capital.
Although the expected wave of D&O litigations from insolvencies did not eventuate, there were reports of non-severe increases in non-cyber fraud and crime claims. There were also concerns expressed by some insurers on Outside Directorship Liability claims, but none of them were of material concern.
The D&O marketplace experienced another year of extreme volatility, with Special Purpose Acquisition Company (SPAC) transactions proving to be the most challenging of risks alongside Chinese-US-listed entities. Loss-driven underwriting was a key theme, where clients had to demonstrate risk mitigation/remediation initiatives to prevent repeating their previous claims. There was a capacity crunch on all products and industries across the board where... download report to read more
A greater underwriting acceptance of SPAC D&O risk is difficult to contemplate, but non-Chinese-US risks will balance it out as domestic D&O risk looks set to benefit from less hubris and rational underwriting. As capacity continues to increase, a much-needed balance will be added to pricing models, particularly where Increased Limit Factor curves are challenged. ESG underwriting will continue to gather momentum, particularly in areas like... download report to read more
Meet with incumbent underwriting panel along with alternative insurers.
Engage internal risk stakeholders to assist in risk narrative development.
Ensure that the renewal process is started early.
Dirctors & Officers liability
Medical plan utilisation is expected to exceed pre-pandemic levels in 2022, as movement restrictions are eased further. The normalisation in utilisation patterns, emerging mental/musculoskeletal health risks, and the potential for a greater COVID-19 cost burden will fall on the private sector. This will require employers to carefully analyse their medical plans and employee needs, as cost pressures increase.
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Utilisation of outpatient services dropped the most due to pandemic-related movement restrictions, but there was a significant increase in musculoskeletal conditions likely brought about by increase in working from home. Medication-related expenses experienced some of the largest inflationary increases. Many insurers responded to emerging needs by developing their ability to deliver virtual consultations, prescriptions, and support for employee wellbeing (physical and mental). The impact of non-communicable diseases on global healthcare costs increased, with... download report to read more
The easing of movement restrictions will increase utilisation levels for both inpatient and outpatient claims. Further cost increases will be driven by rising inflationary pressures and an expectation that more COVID-19 healthcare costs will transition to the private sector. As the roadmap to normal will be uncertain and vary by country, plan sponsors need to be agile and secure commercial protection upon renewals to deal with volatility. The largest change in insurer capability is set to... download report to read more
Analyse population risk factors to improve employee wellbeing and productivity.
Digitalise the employee benefits experience to support agile working.
Use commercial protection to deal with pandemic-related volatility.
With employee turnover rising and talent shortages increasingly widespread, winning the talent war is not a numbers game. Employers need to deploy lead analytics on workforce intelligence in order to identify gaps and construct roadmaps to realise the full potential of their current workforce. This will help to build a strong value proposition for attracting top talent in the market.
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As virtual working became the new reality, companies had to consider the ‘remotability’ of roles and the applicability of location-based pay strategies. Many companies started to rethink their employee value propositions as they embarked on a journey of organisational transformation. There was a renewed focus on employee wellbeing to build workforce agility and resilience. Companies became more employee-centric, assessing employee personas and obtaining the opinions of... download report to read more
A clear and consistent value proposition for the future of work is crucial for building a foundation for post-pandemic success and beyond. There will be a greater need for companies to deploy lead analytics to understand their workforce and implement programmes that build workforce agility and resilience. Companies will need to optimise their workforce for the future by identifying future skills and developing... download report to read more
Construct roadmaps to realise workforce potential.
Build agility and resilience by assessing current and future people risks.
Incubate, incentivise and lead transformation through workforce intelligence.
Claims notifications are becoming more frequent in Asia, due to the increase in claims associated with higher-value deals. Common claims were in relation to financial statements, tax issues, compliance with law, stock and inventory, as well as material contracts. There will likely be increased claims activity, fuelled by more insurance policies being placed and businesses looking to alleviate financial losses.
Deal timelines between signing and closing increased, as parties sought longer periods to fulfil condition precedents. Most insurers became more commercial in their approach to risks associated with COVID-19 and were no longer mandating blanket exclusions. Seller-flip buy-side policies continued to be on the rise as auction processes increased and sellers wanted a clean exit. Premium rates increased as coverage remained comprehensive, due to the uptick in M&A transactions in Asia and the... download report to read more
Markets will grow as investors seek new opportunities in pharmaceuticals, renewable energy, technology and biotechnology. Distressed transactions will emerge in tourism, retail and hospitality as these industries continue to struggle. Tax liability insurance and litigation risk solutions are increasing as risk transfer mechanisms in M&A transactions. Hard market conditions are expected to... download report to read more
Engage proactively with a consultant early in the M&A process.
Understand how Warranty & Indemnity (W&I) insurance can accelerate negotiations.
Introduce transaction liability solutions to facilitate M&A transactions.
With no significant catastrophic events hitting Asia in 2021, the year saw a healthy claim margin overall in the property space. COVID-19 related claims are still trickling into the portfolios, while overall adjustments in losses continue to be prolonged due to movement restrictions.
Large manufacturing industries continued to show resilience in curbing COVID-19 related disruptions in key production. Semiconductor industries struggled to keep up with supply chains, leading to potential knock-on effects in various industries, including automobiles and electronic appliances. Despite interest, take-up rates remained low in Asia as companies did not budget adequately for parametric and... download report to read more
Market differentiation in rate increases will start to widen between heavy and light industries. Catastrophe rates will continue to weigh on international reinsurers, with focus on specific territories. Market capacities are expected to... download report to read more
Consider regular valuations against business fluctuations to prepare for underinsurance issues in loss scenarios.
Reassess potential price and coverage gaps between international and local markets, particularly for global programmes.
Start the renewal process early to accommodate requests for lead times.
Whilst the global reinsurer capital position had strengthened over 2021, intense scrutiny from investors and rating agencies remained. Pricing was very sensitive to loss activity and exposure movements. Integrity of data was essential. Reinsurers were more cautious in deploying their catastrophe capacity, particularly on proportional accounts. ESG (both sides of the balance sheet) became... download report to read more
Coverage for COVID-19 (and the like) will remain restrictive but there will be clarity around exclusionary language. The reinsurance market is expected to be consistent, focused on individual performance with a continued emphasis on catastrophe capacity. Rapid growth is expected in PA travel-related business and new travel-related... download report to read more
Differentiate portfolio to achieve superior results from reinsurers through the utilisation of data and analytics and a bespoke view of risk.
Consider evolving risk and new product lines and establish reinsurance partners who can deliver real value.
Establish optimum reinsurance structures for capital efficiency, future performance, and profitable growth.
Employee financial wellbeing has been affected by levels of vaccination rates and gender. The secret to employee financial wellbeing includes aligning needs to measured actions and outcomes. Influencing employees’ ‘behaviour to money’ is key to instil sustainable changes in habits and financial resilience. Effective employee financial wellbeing requires an inclusive approach by considering all... download report to read more
Foregrounded by volatile investment markets and rising inflation, monetary policies and regulatory settings will tighten, having impact on bond yields and employer pension accounting liabilities. Life expectancies will continue to increase due to wealth and healthcare improvements, as will above-inflation healthcare costs. ESG strategies will focus on how climate change is set to affect the investment landscape due to... download report to read more
Focus on the effective governance of retirement programmes.
Focus on linkages to drive engagement and better employee financial decisions.
Focus on the smart design of retirement strategies.
Wealth solutions & Employee Financial Wellbeing
Ransomware preparedness, as well as response and recovery capabilities, have become crucial due to the increase in ransomware related claims. Customers can conduct ransomware simulations, where key stakeholders strategise difficult discussions around paying an extortion demand, as opposed to attempting to recover systems. Customers should also identify the vendors they would engage should an incident occur and incorporate them into the simulations.
Premiums and retentions increased sharply while appetite and capacity saw a downturn in 2021, the most challenging year yet for the cyber insurance market. Exposure to ransomware was a key concern. Several markets introduced new questionnaires to better understand exposures or imposed co-insurance and sub-limits on ransomware-related losses. Retentions, which have historically been low in Asia, almost uniformly... download report to read more
With market stabilisation and renewed underwriting confidence being key goals, the Jan 1 treaty renewals will be seen as the first signpost of where the market is moving. Market conditions will remain challenging with no immediate or significant softening due to persisting global threats, although adjustments look set to be less severe than 2021. Demand is expected to increase irrespective of challenging market conditions as customers... download report to read more
Implement multifactor authentication – a non-negotiable for insurers.
Scan systems to detect vulnerabilities before it is too late.
Prepare for a rigorous underwriting process.
Digital solutions that were aligned with the ‘new normal’ flourished, while traditional products suffered during the pandemic resulting in a two-tiered recovery. COVID-19 helped to bring much-needed innovation into the Affinity space in terms of improved distribution models and new, relevant insurance solutions. In a difficult economic situation with low interest rates, fee-based revenues via insurance distribution became increasingly important for banking sponsors to meet their financial goals. Affinity programmes that did not pay enough attention to... download report for more
Embedded insurance solutions will continue to excite customers and insurers, but only well-designed programmes will succeed in a sustainable manner. A ‘digital-first’ approach will no longer be optional, but the only way to succeed in an increasingly competitive market where customers have ample choice. The rate of product innovation is set to accelerate further, particularly in the travel, digital, and wellbeing sectors. More non-traditional players will... download report for more
Provide flexible and customisable products that cater to individual needs.
Align your insurance solutions with customer needs in the ‘new normal’.
Drive additional revenue and customer loyalty through embedded insurance solutions.
2021 has proved to be a less turbulent year for Asia than prior years. A reduced level of claims could have resulted due to COVID-19 and the resultant enforced lockdowns across the region. In 2022 and beyond, a surge is expected in civil and political unrest in areas impacted by the pandemic-induced socio-economic downturn.
Civil/political unrest was a top threat to businesses, driven largely by socio-economic fallouts from the pandemic. Consequences from the withdrawal of Western forces from Afghanistan and the reestablishment of the Taliban regime likely impacted Islamist extremism across the world. The insurance market experienced another year of political violence-related losses, notably due to... download report to read more
The socio-economic fallout from the pandemic will remain the most likely cause of civil disturbances but will hopefully abate with vaccine rollouts. Heightened tensions around the South China Sea and increased levels of civil/political unrest in the Philippines, Thailand, and Myanmar, could make for a turbulent 2022. As climate change becomes a bigger issue across Asia, civil/political unrest will likely follow as the... download report to read more
Consider long-term programmes to lock in rates and avoid future spikes.
Check if contingent business interruption is adequately covered.
Ensure that coverage extends beyond terrorism to civil/ political unrest.
©2021 Aon plc.
Special Commentary
+15% to +30%
* The increase in rates was higher in the second half of 2021, given hard market conditions.
*The increase in rates was higher in the second half of 2021, given hard market conditions.
*Based on general industries, financial # services and technology companies, excluding companies with no increases.
+10% to +100%
Financial Lines (Others)
Professional Indemnity
D&O (US)
+15% to +75%*
+15% to +100%
+5% to +10%*
-5% to +5%*
Rates are industry-dependent and based on accounts with favourable loss experience.
+5.6%
+10%
Premium growth (expected)
Property Damage & Business Interruption (PD/BI) increases
Clients who performed full probable maximum loss (PML) reviews understood their risk appetite and ability to retain risk and outperformed others.
There were no major property losses in Asia for both Cat and Non Cat events. However, the regulatory judgements in Australia and the UK (which ruled in favour of assureds on COVID-19 business interruption claims) could have a significant impact on 2021 renewal rates, especially in these territories.
The experience was moderate across the region with localised events in Malaysia and the Philippines.
+8.0%
+8.7%
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2020
+2.5%
+2.8%
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5.93%
3.16%
5.55%
2.95%
China
3.73%
3.50%
Hong Kong
9.00%
8.70%
India
6.83%
6.90%
Indonesia
2.70%
2.40%
Japan
4.76%
4.65%
Malaysia
5.26%
5.50%
Philippines
3.86%
3.65%
Singapore
4.20%
3.90%
South Korea
3.30%
Taiwan
4.56%
Thailand
Australia
Trends Impacting Key APAC Markets
9.0%
4.8%
4.4%
3.2%
2.9%
6.5%
5.8%
8.4%
4.0%
3.6%
6.0%
5.6%
3.4%
Medical Trend Rates
Source: 2022 Global Medical Trend Rates Report
2.4%
2.3%
8.2%
8.0%
Medical inflation rate
Medical trend rate (gross)
The impact of COVID-19 continues to shape the Affinity space. Although digitalisation of the claims process has become a vital factor in the insurance industry, cybercrime is up by 600% – and looks set to continue rising. Spare parts have become increasingly expensive due to ongoing supply chain delays, while coverage for infectious diseases is becoming a norm.
Choose the right Risk Finance Decision Platform to review risk classes.
Captive risks are typically capped by the reinsurance market providing aggregate and stop-loss protection.
Premium Growth (expected)
Property Damage & Business Interruption (PB/BI) increases
-5% to +5%
Maintain/implement contractual discipline with new and existing relationships.
Engage with markets when changing operating models/ developing new products.
Insurers are wary of new technology with unknown potential losses, evolving best practices, and possible sharp rises in demand/ sales. A recent example is the $1bn electric vehicle recall due to battery failure, which resulted in most Liability and Recall markets withdrawing from this industry. In most cases involving new technology, insurers need to be taken along the client journey to fully understand the exposures before they can be comfortable with the risk and support the full product cycle.
Leverage data to improve credit modelling an loss provisioning.
According to the Berne Union, insurers had the lowest ever claims ratio for short-term trade credit insurance in 2021. To future-proof their policies, customers should ensure that contracts reflect their business requirements and terms can be adhered to. Customers would also benefit from ‘dummy' claims exercises and policy coverage audits.
Flat**
Ransomware preparedness, as well as response and recovery capabilities, have become crucial due to the increase in ransomwarerelated claims. Customers can conduct ransomware simulations, where key stakeholders strategise difficult discussions around paying an extortion demand, as opposed to attempting to recover systems. Customers should also identify the vendors they would engage should an incident occur and incorporate them into the simulations.
+15% to +75%
D&O (Non-US)
Flat to + 20%
Digitalise the employee benefits experience to upport agile working.
Medical plan utilisation is expected to exceed pre-pandemic levels in 2022, as movement restrictions are eased further. The normalisation inutilisation patterns, emerging mental/musculoskeletal health risks, and the potential for a greater COVID-19 cost burden will fall on the private sector.
Salary Increase Rate Movements*
Claims notifications are becoming more frequent in Asia, due to the increase in claims associated with higher-value deals. Common claims were in relation to financial statements, tax issues, compliance with law, stock and inventory, as well as material contracts.
Ensure that cove rage extends beyond terrorism to civil/political unrest.
Reassess potential price and coverage gaps between international and local markets.
With no significant catastrophic events hitting Asia in 2021, the year saw a healthy claims margin overall in the property space. COVID-19 related claims are still trickling into the portfolios, while overall adjustments in losses continue to be prolonged due to movement restrictions.
There were no major property losses in Asia for both Cat and Non Cat events. However, the regulatory judgements in Australia and the UK (which ruled in favour of assureds on COVID-19 business interruption claims) could have a significant impact on 2021 renewal rates, especially in mthese territories.
Flat to 5%
Recent insights: Global Retirement Update | Aon
* Rates flattened FY 2021. ** Price reductions for investment-grade risks/well-rated portfolios.
Captive risks are typically capped by the reinsurance market providing aggregate and stop-loss protection. Once a claim occurs, the procedures manual will document the claims process, who handles the claims adjustments and represents the captive until ultimate settlement.
*Rates are industry-dependent and based on accounts with favourable loss experience.
Insurers are wary of new technology with unknown potential losses, evolving best practices, and possible sharp rises in demand/sales. A recent example is the $1bn electric vehicle recall due to battery failure, which resulted in most Liability and Recall markets withdrawing from this industry. In most cases involving new technology, insurers need to be taken along the client journey to fully understand the exposures before they can be comfortable with the risk and support the full product cycle.
* Rates flattened FY 2021. ** Price reductions for investment-grade risks/well- rated portfolios.
*Depends on the timing of the renewal cycle (i.e., if major corrections have already happened)
4.6%
4.2%
3.9%
3.8%
3.7%
Key focus markets where there are material changes that employers need to have on their radar and comply with are detailed below:
Aon Insights - APAC Retirement & Investment Insights
Learn more from our Aon Insights Series 2021 (Asia) interview with Karl Woon, Executive Director, Human Capital Management Benefits from Goldman Sachs. Aon Insights Series 2021- Asia | Aon
*Based on general industries, financial services and technology companies, excluding companies with no increases.
Aon Insights - APAC Retirement & Investment Insights Key focus markets where there are material changes that employers need to have on their radar and comply with are detailed below:
* Rates flattened FY 2021.
** Price reductions for investment-grade risks/well-rated portfolios.