The rating agency said on Tuesday the rising asset risks are due to increasing allocations to higher-yielding non-traditional assets and widening currency mismatches.
“Given the likelihood of more volatile economic and capital markets developments in 2019, the investment performance of Apac insurers will experience pressure.
“Tightening requirements for capital and asset liability management will strengthen the industry's capacity to absorb shocks,” it said on Tuesday.
Moody’s pointed out that across the region, regulatory changes are raising the bar on capital and internal risk management. Regulators are gradually pushing for more sophisticated capital standards with the implementation of IFRS 17 being a key focus for insurers.
Moody’s analyst Frank Yeun said in a recently released report on the insurance outlook: “Economic growth among Apac economies will moderate but continue. This plus their ageing populations will support growing demand for long-term investment, health and retirement coverage.
"At the same time, premium growth is moderating, as insurers shift to protection and investment policies, with profit-sharing features, and away from short-term interest-sensitive products.”
According to the report, life premium growth will slow as insurers actively adjust their product mixes.
“However, long-term demand for life insurance remains strong, underpinned by a growing middle class and significant protection gap,” it said.
Moody’s pointed out that premium growth in the sector will also moderate as insurers actively adjust their product mixes in response to tighter capital and regulatory requirements.
With the property and casualty (P&C) sector, premium growth is robust and continues to exceed that of other regions on the back of Apac’s economic growth, increasing wealth, and the need to build infrastructure.
P&C insurers are also searching new growth drivers from non-motor lines, and pricing discipline is becoming increasingly important for defending underwriting margins amid intense competition.
Though the changes are gradual, insurers are stepping up their efforts to improve asset-liability management and internal risk management, and also embed capital analysis in their daily product offerings and asset allocation decisions.
Early investment by large players will help offset the competitive threat posed by new entrants.
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