Australia and New Zealand have catastrophe-tested prudential standards that other nations can learn from, according to Willis Group.

The resilience of insurers in the two countries – which have faced floods, cyclones, bushfires and earthquakes – are testament to the prudential requirements set by their respective regulators, the global broker says.

“In Australia and New Zealand the sophistication of the insurance sectors are among the most advanced in the world in modelling and analysing risk,” CEO Capital, Science and Policy Practice Rowan Douglas told insuranceNEWS.com.au.

“Because of that sophistication and that world-leading position – and the broad range of risks they face in the wider economies – they are a great example of how these successful techniques in risk analysis could be appropriately applied to the wider financial and business sectors and indeed the public sectors too, both locally and globally.”

Australian insurers are required to report to the Australian Prudential Regulation Authority on the various risks they face, Mr Douglas says.

“It forces the insurers to understand both frequency and severity of risks from a range of perils. The regulatory regime in place in Australia and New Zealand includes the need for boards and senior management to understand their exposure as part of their responsibilities.”

Willis says risk regimes in most Asia-Pacific countries have yet to catch up with their rapid economic progress.

They must put more focus on risk management, given their vulnerabilities to natural disasters.

“Nations across Asia-Pacific are exposed to a broad range of natural hazards,” Willis Re Australia MD Karl Jones told insuranceNEWS.com.au.

“They do not have regulatory regimes that are as stringent as Australia and New Zealand, and it’s critical that they develop equivalent processes to protect their economies.

“They are more vulnerable to natural shocks and far less resilient than New Zealand or Australia.”