Moody’s Investor Service sees a stable outlook for 2019 for the life and property and casualty insurance industry in the Asia-Pacific (Aspac) region, despite the emergence of asset risks.
Based on a report by the Moody’s Investor Service released on Tuesday, its outlook for the insurance industry within the region for next year is stable, brought about by the strong capital levels and improving product mixes.
“Economic growth among Aspac economies will moderate but continue. This plus their aging populations will support growing demand for long-term investment, health and retirement coverage,” Frank Yuen, Moody’s assistant vice president and analyst, was quoted in a statement as saying.
The report said it sees long-term life-insurance demand within the countries in the remaining strong. The strong demand, Moody’s said, is backed by a growing middle class, as well as a significant protection gap.
However, these countries will see a slowdown in life premium growth early on as insurers would still adjust their product mixes in line with keeping up with regulatory requirements, the report said.
In terms of the property and casualty insurance sector, premium growth in Aspac remains to be robust and continues to exceed that of neighboring countries on the back of the region’s economic growth, increasing wealth and the need to build infrastructure, Moody’s added.
The emergence of rising asset risks were pointed out to be coming from increasing allocations to higher-yielding nontraditional assets and widening currency mismatches, which will put some pressure in line with the investment performance of insurance companies in the Aspac.
“Given the likelihood of more volatile economic and capital markets developments in 2019, the investment performance of Aspac insurers will experience pressure,” the
report mentioned.
Still, Moody’s said the insurance industry will be strengthened further, helping it absorb shocks through the tightening requirements for capital and asset liability management coming from the regulators’ side.
Moody’s said insurers in the Aspac are now stepping up their efforts to improve asset-liability management and internal risk management, and embed capital analysis in their daily product offerings and asset allocation decisions.
It also said that insurers should be more adept with incorporating technology in their respective business models as technological advancements is seen to gradually reshape how the insurance industry works.