(Re)in Summary
- Falling insurance prices across Asia reflect abundant capital rather than lower underlying risk, which may be converging and compounding.
- Buyers can use the competitive market to rethink retentions, limits and programme structure rather than only negotiating lower rates.
- Geopolitical, technological, economic and ecological forces increasingly compound, a convergence Veolia’s Miloud Hassene calls the “black dragon”.
- Boards need governance that detects, interprets and acts on visible risk signals before disruption hits.
- Scenario planning, risk control and clearer communication with boards remain central to how corporate risk managers respond.
Falling insurance prices in Asia reflect surplus capital rather than lower risk, and buyers should use the soft market to rethink retentions and limits rather than chase price, speakers told the Pan-Asia Risk and Insurance Management Association (PARIMA) Singapore Conference on Thursday (15 October).
“Even though we have a softer insurance market, it does not mean that we have a softer risk environment,” said Terence Williams, head of commercial risk, Asia-Pacific at Aon. “The volatility still exists.”
Williams described Asia as “truly a buyer’s market”, with increased capacity, competition and programme flexibility. “It’s available, it’s competitive, but that doesn’t mean that the underlying risk has disappeared,” he said.
As an example, Williams cited cyber rates, which have fallen for years — even as claims increased sharply. “What this is telling us is that price is something that relates to capital in a market,” he said. “It does not relate to the pure underlying risk or exposure.”
Buyers need to focus on optionality, and consider what they can do with a more competitive insurance market, Williams said. “Should we retain more risk, for example? Do we buy the most appropriate limits? Could we think about exposure in different ways, as we think about transfer?”
But risks in Asia now have global consequences rather than local ones, said Martin South, chief client officer at Marsh. “What has changed is the impact that Asia has on the world,” South said. “Asia has moved from being an Asian problem to a global issue, and I think that’s the biggest shift that’s happened in the last few years.”
Global trade, capital, technology, supply chains, climate risk and geopolitical risk are starting to converge, South said, changing how organisations operate and the risks they face.
Miloud Hassene, head of global enterprise risk management at Veolia Water Technologies, termed this convergence the “black dragon”: geopolitical, technological, economic and ecological forces that converge and compound, unlike the rare, random “black swan”.
“Instability is a new norm, and geopolitical volatility is [part of the] new structural environment,” he added.
Risk managers are used to assessing risks separately and keeping them in “a neat little box called risk register”, said Michael Wijaya, head of enterprise risk management at PT Astra Honda Motor. “[But] we should start asking, how are these risks interconnected, how are these risks compounding to have a significant impact to our organisations?”
This widens the gap between what risks cost to insure and what they could cost a business. “Disruptions can hit operations, cost, demand, liquidity, all simultaneously, and not when you want them to happen,” said South. “You need to think about assets today.”
Firms may be underestimating how different risks interact, said Michael Wan, senior currency analyst at MUFG. “You’ve got to be also more cognisant potentially about third-party risk,” Wan said. “Many of the risks are emanating from outside your borders… there’s no shortage of risk.”
Taming the Black Dragon
Where “black swan” events are rare, random, and unforeseeable, predicting the “black dragon” is not about reading the future, said Hassene, but instead, building new risk governance that detects the signals already visible, interprets how they converge, and requires boards to decide and act before disruption hits.
The converging risks mean that risk managers have to evolve and understand more than the essentials, Hassene said. “We have to connect the signals together. We have to test converging scenarios, and we have to bring strategy [to the board],” he said.
Boardrooms need to adopt “geopolitical sonar” to detect, interpret, decide and act, Hassene added. “We have a lot of signals… so we have to make a triage. We have to really identify what is real, and then we have to interpret the patterns,” he said. “Once we interpret the patterns, we can understand better, be aware of them, be aware of how exposed we are.”
If boards do not act, “the market will decide for you,” Hassene warned. He cited the last-minute wage deal Samsung reached with its union in May as an event that reflected converging pressures. The union put off a planned strike after government officials threatened to use emergency powers, and Samsung agreed to scrap a cap on bonuses and link them to operating profit, a move Hassene called “adaptive resilience”.
“If you look closer to the signals, you have a true convergence of dynamics,” Hassene said. “The workforce mobilising, the intense AI demand for microchips, and the threatened 18 days stoppage… it could be a global disruption.”
Quantifying exposure
Megatrends around trade, technology, weather and workforce must be assessed together, said Aon’s Williams. “You have to, as a risk leader, start thinking about what happens if many of those fail collectively.”
Risk leaders will have to ask themselves five key questions, Williams said. “What risks do we face, and how do we quantify those financial exposures? What is driving the exposure, and how do we realistically improve it? When we take risk to market, how do we make sure that we can we secure the best outcome? What proportion of that volatility should you retain? And finally, if something were to happen, are you sure that the programme that you have will respond in a way that you expect it to?”
Once risk buyers and organisations have answers to these five questions, they can then make more decisions around retention and resilience, because “ultimately decisions don’t stop”, Williams said. “The more you invest in some of your resilience, the better your risk profile will change.”
Insurance alone doesn’t necessarily make risks any better, said Raymond Seah, head of insurance at Golden Agri. “The risk is still there, and there will still be pertinent need to address the risk through risk control.”
In making decisions, Seah recommended that firms do internal scenario planning to map out actions and undertake typical risk control measures to reduce losses.
Scenario planning has become a mainstay of Keppel’s enterprise risk management, to align senior management on how to respond to risk and to acknowledge that risks are not often isolated, said Loh Kee Huat, managing director, head of risk and compliance at the company.
“With that being said, we also need to acknowledge that we may not always have the solution,” Loh said. “What we really want is to have a more structured discussion with the senior management, with board members, to discuss implications and put them on the table.”
Firms will also need to treat risk as an enterprise issue, said Rahul Kumar, APAC risk manager at Cushman & Wakefield. “How do I look at risk as an enterprise-wide challenge and question, rather than just saying what insurance do I need to buy this year?” he said.
Risk professionals need to be better at communicating about risk at all levels, Kumar said, with the most “compelling story” winning funding. “Data is a big enabler in terms of how you can actually portray the impact of scenarios that you are trying to avoid,” he said. “So it’s a communication and attention challenge as well.”
Ultimately, buyers should continue to challenge, investigate and be inquisitive, said Williams. “You do have a very interesting and very competitive market out there,” he said. “Don’t just use it for a price; use it for something that could be long term, sustainable, and frankly, can help you think about risk in a different way.”
