Swiss Re delivers verdict on APAC life market

Swiss Re delivers verdict on APAC life market | Insurance Business New Zealand

Reinsurance

Swiss Re delivers verdict on APAC life market

Industry to become a retirement lifeline

Reinsurance

By
Kenneth Araullo

Forecasting a strong resurgence in life insurance premium growth during 2024-25, Swiss Re head of financial market portfolios Robert Turnbull pointed to the increasing consumer demand for savings and retirement products in the APAC life market.

This trend positions the life re/insurance sector as a pivotal support system for retirement readiness. With reinsurance acting as a strategic partner, life insurers are well-placed to address the needs of policyholders, promoting sectoral expansion.

In a report, Turnbull highlighted the impact of ageing demographics, financial market volatility, and the evolution of accounting and solvency regulations on the growing sector.

An ageing demographic: cause for concern and opportunity

The ageing demographic across Asia-Pacific is creating a dual scenario of concern and opportunity for the re/insurance industry. A report by the Swiss Re Institute indicates a significant retirement savings gap, projected to grow from US$106 trillion in 2022 to US$483 trillion by 2050 across major markets.

Notably, mature markets like Japan and the US are expected to see their annual gap increase by 2.5% and 4.7%, respectively, while emerging markets such as China and India could face even higher growth rates.

With pension systems under pressure from ageing populations, individuals are increasingly shouldering responsibility for their retirement savings. The global middle class’s planning for retirement is steering the market towards unit-linked and savings products, which now constitute over half of the global life and health (L&H) market.

The life savings market is expected to expand significantly, with savings premiums expected to reach US$4.0 trillion globally by 2033, up from US$2.3 trillion in 2022.

Reinsurance emerging as a vital tool

The prevailing high-interest-rate environment is boosting the demand for savings-type products but also poses challenges for life insurers in managing interest rate risks and asset-liability matching. These challenges, alongside regulatory and accounting changes such as IFRS17, necessitate innovative capital management strategies.

Reinsurance emerges as a vital tool in this context, aiding life insurers in portfolio optimization and product innovation. It offers a comprehensive risk transfer mechanism that addresses both market and technical/biometric risks, enhancing capital efficiency and streamlining risk management for life insurers.

Asset-liability management (ALM)-linked reinsurance solutions are gaining traction in Asia-Pacific, helping insurers minimize duration mismatches and associated interest rate risks.

Additionally, reinsurance strategies are being employed to boost liquidity and manage longevity risk, which is increasingly pertinent given the rising life expectancy and elderly population in the region.

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