Inflationary environment tests insurers' resilience

Apprehensions around a new retirement scheme and higher claim payments are amongst some factors that dragged down insurance companies’ revenues across Asia Pacific in the first half of 2023, data from various insurance commissions showed.

In Indonesia, the 56 life insurance companies operating in the market reported US$66.4b in revenues for Q1, according to data released by the Indonesian Life Insurance Association (AAJI). This revenue performance is relatively low compared to the same quarter in 2022, the AAJI reported. However, Indonesian officials remained optimistic that public awareness regarding the function of life insurance protection is growing, citing a rise in the total value of sum assured by the end of the first quarter, at US$332.15t. This is 17.3% higher than in Q1 2022, the AAJI said.

Total claim payments made by Indonesian life insurance providers reached

US$3.02b in the three-month period, a 5.1% increase from the previous year.

India’s life insurance providers also saw their premiums contract, this time for the month of April, when premiums fell by 30% compared to the same month in 2022.

Data from India’s Life Insurance Council showed that insurance premiums contracted 30% in April.

This was mainly dragged by the stateowned Life Insurance Corporation of India, whose life insurance premiums severely dropped 50%, according to data from the Life Insurance Council.

On the other hand, life premiums from the private insurance sector went up 9%.

Group single premiums in India recorded the largest drop, by 50%. This was followed by individual single premiums, with a 12% decline; and individual non-single premiums, with a 2% decrease. Indonesia’s group yearly renewable premiums offset the declines, rising by 53%.

Singapore, meanwhile, saw new business premiums fall by 13.6% during the first quarter, according to data from the Life Insurance Association of Singapore (LIA).

Singapore’ sluggish economic growth during the first quarter and apprehensions about a possible technical recession in 2023 all weighed down on demand for singlepremium products, LIA said. The rising interest rates and the competitive market also did not help insurers in Singapore.

Moving beyond life insurance, Hong Kong’s insurance market also saw a 7% decline in gross premiums, to US$18.83b in the first quarter, according to data from the insurance authority of Hong Kong.

The Hong Kong insurance industry saw its total revenue premiums contract 8.9% to US$16.19b, dragged down by “isolated transactions concerning Retirement Scheme business” for the same quarter in 2022.

Further, total claims and benefits paid reached US$10.04b.

During the quarter, the general insurance business in Hong Kong experienced growth in both gross and net premiums. Gross premiums rose by 6.9% to reach US$2.65b, while net premiums increased by 4.1% to reach US$1.6b.

Insurers to weather equity markets decline

Despite reported sluggishness across various markets in APAC, the region’s insurers should be able to weather up to a 10% decline in regional equity markets.

Results by a stress test conducted by S&P Global Ratings indicated that potential losses resulting from a decline in the equity market could negatively impact the earnings and capital adequacy of insurers in the region.

“This would affect the financial risk profile assessment. A weaker financial risk profile assessment could affect the standalone credit quality and rating on an issuer,” analysts from S&P Global said.

In the APAC region, approximately half of the rated insurers maintain a capital level within 10% of the required capital adequacy to support their credit rating. Around 30% of insurers are even closer, within 5% of this threshold.

The insurance industry in the AsiaPacific region remains well-built to take on some moderate equity market volatility, observed S&P Global.