Aon Study: Asian Buyers Want Rate Cuts

NU Online News Service, Nov. 23, 11:11 a.m. EST?Property insurance buyers in Asia are expecting continuing rate cuts and are looking more closely at self-insurance and larger deductibles, according to a survey of the marketplace by Aon.[@@]

The findings were contained in the "2004 Asia Property Report: A market in the balance," prepared by Aon's London office. The study was based on an electronic survey of buyers and sellers of property insurance in Asia, including 22 insured clients and 41 insurers.

The study found that buyers are lending greater importance to, and investing more in, reducing their exposures, and sellers are rewarding their efforts with lower rates.

Aon said these factors have led to a continuing softening in rates, which is being further fueled by competition in a market where premium volume is growing strongly as a result of the area's booming economy.

Besides interest in risk management, self-insurance and larger deductibles, most buyers, Aon said, are expecting further rate cuts and many are becoming more confident about shopping around for "keener prices."

The survey found insurers in Asia are paying more attention to risk information and risk management, but their primary focus remains on returning an underwriting profit.

Oliver Schofield, director of the Global Property Practice at Aon Group Inc., said heightened awareness of good risk management procedures has been driven by the impact of globalization on the Asian insurance industry.

"As U.S. firms continue to invest heavily in Asia, they bring high engineering and construction quality standards with them, and Asian companies are learning from this," said Mr. Schofield.

He added that investment by Asian firms overseas is having a similar impact. He mentioned that when these firms build facilities in the United States or Western Europe, they must comply with local construction and risk management standards, which can be tougher than those traditionally maintained elsewhere in the world.

"Risk managers are bringing their experiences and higher quality standards back home, which
is raising the bar across the region," commented Mr. Schofield. "Pressure to improve safety standards and risk management is therefore coming from both directions."

Commenting on the Asian insurance market, Benjamin Chang, regional director of Global & Risk Managed Accounts for Aon Asia Ltd., said: "Although there are now signs of a moderate slowdown, the Asian economy has enjoyed exceptional growth in recent years."

He added that "this has fed into the insurance market, boosting premium volume but also resulting in stronger competition as insurers aim to take advantage of the opportunities that are now available, particularly in China and India."

As a result, according to Mr. Chang, premium growth is being offset by a continuing softening of the market, "creating a fine balance that could tip in either direction."

The survey showed that Asian insurance buyers' views on terrorism coverage vary widely--from those
who have little or no interest at all, to those who believe it is essential.

According to the insurers surveyed, the reasons for those showing little interest in terrorism coverage boil down to cost and/or a perception that the risk is very low.

Aon said this low-risk attitude--despite recent terrorist attacks in the region and the continuing
threat of further action by Al Qaeda--led it to conclude the report with a word of caution to insurance buyers that their apparent indifference to this risk may be misguided.

Special Reports /

Aon Study: Asian Buyers Want Rate Cuts

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