Premium rates are expected to continue increasing, particularly for property classes that have been affected by extreme weather-related losses, Fitch Ratings says in an Asia Pacific (APAC) report. 

Many markets in the region were hit by catastrophes last year, including China, Japan and Australia while severe weather has also affected New Zealand this year. 

“Primary insurers have been able to pass on higher premium rates to customers, to reflect the rising reinsurance costs,” Fitch says. “Australian insurers have managed to achieve double-digit rate hikes in recent periods, without affecting their business retention, which in turn has supported their overall underwriting profitability.” 

APAC general and life insurers’ underwriting fundamentals are likely to remain steady despite short-term volatility in investment markets caused by higher interest rates, Fitch Ratings says. At the same time, impacts from Covid-19 and related measures are easing.  

Capital and profitability metrics were affected by adverse market moves caused by recent interest rate increases, and insurers booked large unrealised losses on lower fixed-income and real asset valuations. But Fitch says the regulatory capital positions of most of its rated insurers remain above rating sensitivities and well above regulatory minimums.  

Slowing economic activity in several markets, like Korea, Australia and Indonesia, is likely to create temporary growth headwinds, the report says, but the improving outlook for inflation later in the year should help alleviate affordability related concerns. 

Fitch says it maintains neutral sector outlooks for key APAC insurance markets.