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Kamis, 07 November 2013

Singapore Insurance and Reinsurance Conference 2013 (SIRC 2013)

Tuesday • 5 November 2013
SIRCDaily Asia Insurance Review’s
SIRC comes to town
It was around this time two years ago that reinsurers attending the SIRC were scrambling for information on their exposures in Thailand as the massive flooding made headlines. The aftermath of that saw one of the costliest loss events in Asia with claims of approximately US$15 billion. The floods led to the exit of several reinsurers from Thailand, including CCR of France. With capacity in the Thai market set to command a premium, Berkshire Hathaway famously made aggressive inroads into the market offering cover mostly on quota share arrangements. Whether they were knights in shining armour or opportunists who distorted the market depends on whose opinion you sought. Today, the Thai market is back on firmer footing.

right to left : Beny Gunarso, Gatut Sasmito, Sonny Dan, Rahmat Sah
SIRC du Soleil is here at Marina Bay Sands. Which is the best ride? Who is taking the biggest risk, and who is offering the best deal? Can they even be compared given the high premiums still given to the “X” factor of relationship, even when discipline and pricing are accorded revered slots in the ERM, training manuals and public speeches of reinsurers? In Monte Carlo, alarm bells were sounded over the fresh alternative capacity turning cartwheels in the market, and over reinsurance brokers making a bigger impact on business. At Baden-Baden, the mixed anxiety was that with not enough big bad disasters, Europe has become a buyers’ market. With increased capacity and fierce competition, reinsurers are responding with more flexibility and tailored solutions.
A solo feat?
So what course will SIRC steer? Is Asia independent enough to be different? The push for geographic spread will help sweeten the Asian deal, even if reinsurance is very much a global business with no real boundaries.
Coming to the real story of SIRC, the figures say it all: with a record number of more than 900 delegates, the crowds are thronging. The record turnout is a ringing endorsement of SIRC at the Bay as the reinsurance event of the day, when other conferences are losing numbers. Credit goes to the organisers who left no stone unturned in setting the stage for reinsurers and brokers to meet under one roof in private rooms, the Lloyd’s Café, exhibition areas and conference halls. Set yourself the task of checking them all out. No prizes though, but information, knowledge and making contacts are still power!
Cirque de nombre
Asia is doing well on the reinsurance scene despite or perhaps because of its contribution of almost 70% of 2011’s record losses. In fact, based on comparative figures extrapolated from Monte Carlo, the region’s share of global non-life reinsurance business almost doubled to account for some 18% of the US$166 billion market since the last SIRC. The global life reinsurance business was only $61 billion, bringing the total pie to $227 billion in 2012.
And in terms of cessions, Asia is still around the world average of 8%, with 7.7% of its $388.5 billion of non-life business going into the reinsurance market in 2012.
The trapeze artistes
With the increasing sophistication in the economy and changing risk profiles, demand is growing. So reinsurers coming on board can create niches in the areas of specialty risks. Awareness and demand for cyber liability and agriculture risks are increasing, and there are serious efforts to get the private sector more involved in offering CAT covers to the masses too.
The social gymnast

At the SIRC, you have the unlimited pass to all the rides. What you get out of it will depend on your personal enthusiasm, networking and leg work over the next three days. Everyone is here. So make the best out of it. To use a Diwali image, let the flames flicker brilliantly to reach the sky. It’s about managing risks to optimise profitability. If there is no risk, there is no reward! But if there is a risk, there must be a cost to it too. Never gamble on that and that is the simple brilliance of the fire.

Building stronger Asian cities
Some of the cities most vulnerable to Nat CATs are in Asia, but residents in these areas tend to be largely unfazed by the threats. Mr Clarence Wong, Chief Economist of Swiss Re Asia, shares why it is important to have a broader view of catastrophes, and how the reinsurer is doing its part.
Several metropolitan areas in Asia are among the world’s most exposed to Nat CAT risks, according to a recent study. The research from Swiss Re ranked the risks facing more than 600 urban areas worldwide and found that Tokyo-Yokohama, Manila and the Pearl River Delta region are the top three at-risk areas globally, with Kolkata in seventh place. The study, “Mind the Risk”, also ranked Mumbai third when it came to storm-surge risks. Just a few weeks before, another Swiss Re output – the “Risk Perception Survey” – had established that residents of these areas were generally upbeat about Nat CATs, when it asked more than 20,000 people around the world to rate the risks they faced. Indian residents, in particular, were largely unfazed by the threat posed by Nat CATs, and were far less alarmed than residents of the UK, Canada or even Switzerland. Asian cities represent the overwhelming share of the people and economies that would potentially be affected by natural disasters, with the eight most vulnerable cities in the survey all in Asia. Yet, by looking at the results of the “Risk Perception Survey”, one also gets a sense that the individuals living in many of these cities are not overly worried about such events. So what explains this optimism?

Wednesday • 6 November 2013
Day 2
Hot Issues in Reinsurance: “Managing the Cycles & Nature”
Beny Gunarso berpose didepan boot EnergyRe
Managing cycles is a perennial hot issue. And there was a time we all believed that with discipline and strict underwriting, the cycle could be managed if only the competitors behaved themselves. If only the clients or the brokers didn’t push for greater discounts on the technical rates? If only reinsurers could charge stable prices and produce consistent results, without worries that the market was softening again. Then came Katrina with a double whammy to challenge the very wits, expertise and guts of the insurance and reinsurance industry. Several big names were put under credit watch, many had already confessed in advance that they cannot meet their profi t target for the year. Katrina, though geographically isolated to the Gulf of Mexico and neighbouring areas, has already widespread ramifi cations on the global insurance industry with estimated insured losses being put at between US$35 to US$60 billion, making it the worst ever.
Calling on Relationship
There is talk coming out even in London, that though only a natural catastrophe loss, it will have a strong impact all over the globe across all classes of business, including homeowners and motor cars even in areas not exposed to catastrophes. The premise of this view is that the cost of capital has become a global issue and cannot be isolated anymore. Some, especially the direct buyers, will say this smacks of profi teering or taking advantage of a situation that has no bearing on them. But there are several insurers and maybe even reinsurers already fi rming up their position on this score. This will be a great hot issue at the SIRC.
This then is a time when your carefully nurtured relationship with your long-term partnering reinsurers becomes a hot issue you can draw upon. The prevailing view in Europe and the US is that the spoils of Katrina will overtake 9/11. And they believe that although terrorism was more readily seen as a global problem affecting every market, Katrina will come to be viewed in the same light. Worse still, even markets not exposed to catastrophes have to pay the price of solidarity in the insurance industry calculations for survival.
Modeling Tools Broken
The other serious hot issue that Katrina has patently shown is that, despite the most extolled models and sophisticated tools used, there is really no predicting the ravages of such natural disasters and their toll on society, the economy and the insurance industry. So it is back to the drawing board to fi nd any tools that will help in more accurately predicting the impact of such losses so that they can be priced appropriately.
New Capital?
Lastly, the worst (or is it the best?) hot news is that new capital will be more reluctant to enter the market unlike in the aftermath of 9/11 when a clear opportunity was perceived. Now, which capital will dare come in to cover natural catastrophes when Katrina has shown that the so-called once-in-50-year storms can occur twice within a year. There were many who were awaiting the hurricane season 2005 to see if they should move in to capitalize after Ivan of 2004. So is any investor waiting on the sidelines for the next hurricane season? On a less acceptable note, Katrina once again drives home the unpalatable point that when the US sneezes, the rest of the world catches the cold too.
So the real hot issue is: “Can Asia immunise itself against the severe storms of the Gulf?” The answer may well be blowing fi ercely in the wind. Keep the doors open to get the message as you watch the waves surge beyond even the heights reached by the Indian Ocean Tsunami, another on-going hot issue.

Thursday • 7 November 2013
Day 3
Opportunity for Reassessment
Although the global reinsurance industry has managed to weather the challenges of 2004 well, with the help of stronger balance sheets and prudent risk management, the industry has no room for complacency, stressed Mr Low Kwok Mun, Executive Director (Insurance) Monetary Authority of Singapore to more than 500 delegates gathered for the 8th SIRC, the event’s second-largest turnout ever. Reinsurers should take this opportunity to reconsider pricing models and risk-management strategies, to ensure that they are able to meet their obligations, especially with the increasing frequency and severity of natural catastrophes, he added.
Mr Low, who was the Guest of Honour at the conference, told delegates that, in order to minimise the occurrence of boom and bust cycles of the past, insurance supervisors around the world also have an important role to play in promoting better risk management and underwriting discipline. With the extent of insurance supervision varying across jurisdictions, Mr Low welcomed initiatives by the IAIS to adopt a Standard on Supervision of Reinsurers in 2003, which encompasses areas of financial strength, supervisory review and disclosure requirements.
Pak Beny AAAI-K berpose didepan kantor L'loyds
Another significant development of the IAIS is the recent passing of a EU reinsurance directive earlier this year which introduces a standard level of supervision which would enable European reinsurers to operate across the EU.
Turning to Singapore, Mr Low revealed that the guiding principle of MAS’ regulation for reinsurers in the country is to ensure a balance between having sound regulations and providing adequate business flexibility. It is definitely in the interest of the MAS that reinsurers operating in Singapore remain financially sound and well managed. Call for Greater Clarity Referring to recent debate surrounding claims from Hurricane Katrina, on whether losses were the result of one event, or if the flooding that followed the hurricane constitutes a separate event, Mr Low said these complications, although not unique, highlight the deficiencies in reinsurance contracts.
Calling for greater clarity and certainty in insurance and reinsurance contracts, Mr Low recognised that it was impossible to craft a reinsurance contract so tight that it would not give rise to any legal disputes, especially in relation to catastrophes. He urged the industry to come together and work out solutions to problems that have already beenidentified.
“We cannot control the forces of nature, and natural catastrophes will continue to occur, we can only be better prepared to face the consequences. Much can be done to mitigate the financial consequences,” he said. Risk Management A key lesson to be learnt from the events of the last few years is the importance of risk analysis and management of accumulation of risk arising from natural catastrophes.
Going forward, Mr Low said that reinsurers will need to adopt more sophisticated risk-management techniques to identify, model and monitor risks. “In order to ensure their long-term viability, reinsurers will need to invest in appropriate risk-management systems that will allow them to access and accept only the risks 
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Item Reviewed: Singapore Insurance and Reinsurance Conference 2013 (SIRC 2013) Rating: 5 Reviewed By: EnergyRe Reinsurance Brokers