Sharing Session Tugure: Key Factors Influencing the Global and Domestic Reinsurance Markets

Labuan Bajo, East Nusa Tenggara - The occurrence of catastrophic disasters and limitations in coverage related to climate change risks are considered to be the main factors that will affect the supply and demand in the global and national reinsurance markets.

This was revealed by Rudolf Regent, Director of PT Aon Reinsurance Brokers Indonesia, during a Sharing Session titled "Reinsurance Treaty: Market Update and Alternative Structure," organized by PT Tugu Reasuransi Indonesia (Tugure) in Labuan Bajo, East Nusa Tenggara, on Saturday, May 27, 2023.

In his presentation, Rudolf revealed that global factors, particularly catastrophic events in several countries, also affect the pricing of treaties in the reinsurance industry, both globally and in the domestic market.

"The losses and dynamics in the global reinsurance market will directly impact the insured parties in Indonesia because domestic reinsurance and insurance companies require additional capacity and catastrophic protection from the global market," he said.

Rudolf elaborated that in the first quarter of 2023, catastrophic events occurred in several countries with significant financial losses. For example, storms in the United States caused loss of life and financial losses of approximately $5.5 billion. Devastating earthquakes in Turkey and Syria resulted in more than 57,000 casualties, with estimated total economic losses reaching $39 billion.

In addition to catastrophic disasters, another key factor that affects the global and domestic reinsurance industry is underwriting restrictions related to environmental issues. Rudolf explained that the coal sector has become a target for underwriting limitations by major reinsurance companies as an effort to mitigate climate risks or enhance Environment, Social, and Governance (ESG) achievements.

Tugure regularly organizes events like this Sharing Session to provide the latest information on the insurance and reinsurance industry, both in the domestic and international markets, to its ceding partners.

Erwin Basri, Director of Operations at Tugure, stated that this event is also expected to build understanding and consensus among all ceding partners regarding reinsurance business, especially treaty arrangements.

"For this reason, we regularly hold events like this, which serve as a discussion platform among insurance companies regarding current issues, so that we can gain a common understanding in managing our businesses," he said.

It was also mentioned that next year will be a challenging year, especially with the implementation of the International Financial Reporting Standards (IFRS) and anticipation of new regulations regarding minimum capital requirements to be applied by both insurance and reinsurance companies.

"It is only appropriate for players in the insurance industry to start anticipating these developments, by beginning to formulate new treaty structures that align with the company's appetite and needs," he explained.

Some alternative treaty structures include continuing to use a Proportional Treaty structure combined with Net XOL or changing the treaty structure to Gross XOL.

In addition, through this event, Tugure also hopes to provide additional insights into other alternative simulations that can be prepared in advance, in order to address future challenges that will be more challenging for companies in preparing their Annual Work Plans and Long-Term Strategic Plans, ensuring the sustainability of the business in line with the expectations of all stakeholders," concluded Erwin.