Insurance profitability remains subdued across the Asia-Pacific region, according to the latest market overview by credit ratings agency AM Best.

In its latest report on the region’s life and general insurance sectors, the agency says the current underwriting cycle is characterised by intense price competition.

It says general insurers will need to tighten their underwriting standards to maintain profitability amid a leaner investment environment and low interest rates.

“Premium income may decline for companies that choose to focus on underwriting profits and cutting expenses, rather than on new business volume that may not meet their underwriting criteria.”

AM Best says general insurers will need to adhere to “careful asset and liability management, particularly with respect to reserves for casualty and other long-tail business”.

In Australia, natural disasters and challenging investment markets have affected the results of general insurers, with AM Best citing the 5.9% fall in industry net profit of $2.9 billion reported by the Australian Prudential Regulation Authority.

The report says regulatory developments including stronger solvency standards will require insurers to keep a close watch on risks from non-core activities.