SIRC 2026: Geopolitical fragmentation reroutes capital toward Asia

(Re)insurers are following trade and capital as geopolitical fragmentation reroutes both, said executives on the second day of the Singapore International Reinsurance Conference (SIRC) on Tuesday (3 November).

About half of Lloyd’s premiums come from the US and 60% from North America, said Nick Donovan, Lloyd’s director of market development, and while the market is dominated by the Anglosphere, Lloyd’s will need to make sure that it is well-equipped to access opportunities and support Asian economies.

“We are extremely aware that the real-world economy dollars are moving towards Asia,” Donovan said.

Dubai has been Lloyd’s fastest-growing platform for the past few years, he said, and the market has seen no significant slowdown in exposure growth in the US, Asia or the Middle East.

Victor Kuk, Peak Re’s chief executive, said that trade “hasn’t really stopped”, but has instead rerouted along with capital. “What we need to understand is how do we help clients look at the exposures?” Kuk said. “Our job is to follow our clients wherever they go.”

Insurers still dealing with pandemic inflation

One challenge is that insurers may still be dealing with inflation shocks that can be attributed to post-COVID economic change, and that has not gone away, said Edward Ler, chief underwriting officer at ERGO Group.

Adding to the complications is that consumer price inflation is “not a good indicator for the insurance business”, Ler said, because exposures can take considerable time to develop and manifest as claims.

The effects of geopolitical shifts will likely persist in the same way, he said.

“I still am very concerned about the lingering effects of geopolitical conflict with kinetic conflict and of course the hybrid conflicts that the world is experiencing,” Ler said.

Shifting geopolitical winds have meant that businesses now see a need to diversify, said Ler. “If 95% of your business is in a particularly vulnerable geopolitical hotspot, that is something to be dealt with.”

EVs rewrite the motor book

Shifts within individual lines add to the pressure, with motor a case in point. A case in point is automotive, which is evolving rapidly both globally and in specific locations.

For instance, the expanding use of Chinese EVs in  Europe and North America is changing the underwriting paradigm, said Kuk. “How do they find the right cover, and how do you do the right kind of protection, not just for the drivers, and for the manufacturers?”

The first generation of EVs from the US pushed claims costs up partly due to supply chain problems and partly because of the new technology, Kuk said.

Similar trends are visible for Chinese EVs, but “with the supply chain being expanded and stabilised” loss ratios are expected to come down, Kuk said.

Still, Ler warned against chasing growth alone and urged insurers to think long-term.

“It’s sometimes indulgent to only grow where you see growth. You need to be able to find the right set of guardrails and limits,” Ler said.

Disruptions along the Strait of Hormuz have shown how something as specific as terminology can work against the industry, Donovan said. Marine war policies typically carry a seven-day notice of cancellation, which lets underwriters reprice cover for ships entering a war zone. Technically it is a cancellation, though in practice it usually means a repricing.

But some governments and regulators read that as the market withdrawing cover, said Donovan. That was “very damaging for our industry”, he said. “It projects us as not being there at the moment of need, when insurance cover is absolutely required.”

Who carries the risk?

Another challenge for the industry is that governments’ willingness to absorb disaster losses has held back insurance demand, said Donovan, but that model is now under strain in the West.

“Particularly in the European Union, what we’re seeing now is sovereign ratings balance sheets under stress because they no longer have the fiscal capacity to play that backstopping role that their citizens have kind of got used to,” he said.

The perception gap — a situation where it’s unclear who is going to pay for a loss — has meant that businesses and consumers who could afford cover have often gone without it, expecting the state to step in at the moment of need, Donovan said.

Asian economies should learn from Europe and the United States and put themselves in a position where citizens and businesses have a “full understanding” of what insurance can really do for them, Donovan stressed. “While that might seem quite expensive in the context of the inflationary environment, it’s actually going to pay off in the long run.”

Only about 12% of Asia-Pacific’s US$73bn in natural catastrophe losses last year, or about US$9bn, was insured, according to a Munich Re report.

Insurers need to continue finding mechanisms to address this protection gap, said Kuk.

Kuk pointed to public-private partnerships, such as Thailand’s government-funded disaster insurance scheme, which is set to cover an estimated 30 million households against flood, windstorm and earthquake.

Governments mostly favour parametric products, he said, which do not pay for everything but help communities return to normal quickly.

Reinsurers play a role beyond providing capital in these partnerships, said Kuk, and they also provide product development and risk retention support.

“I think we shouldn’t just want to provide financial capacity as a standalone; it needs to be coupled with products as well as some kind of prevention, to give governments more knowledge about how they manage those risks,” he said.

“Far more stable” than before

The panel followed a keynote in which DBS chief economist Taimur Baig argued that Asia can absorb the current wave of war and energy shocks in its “golden age of trade”, even as the world heads into a “bifurcation” of technological spheres.

The world economy now needs less energy per dollar of output than at any point in the last 60 years, making the world “far more stable” with respect to energy, Baig said.

Asian exports rest on three pillars, Baig said, from AI-related hardware such as chips and data centre equipment to green-transition goods such as EVs , wind turbines and pharmaceuticals.

The inexhaustible demand for products made in Asia will make the region more resilient to shifts, even if the AI boom dissipates, Baig said.

“We are much more resilient, we’re much more capable of taking shots than the big boys give us credit for.”