The property insurance market in Asia is currently caught in the balance between growing premium volume and reducing premium rates. Premium volume growth is being fuelled by Asia’s booming economy, while reducing premium rates are being driven by competition among insurers and the growing recognition by buyers of the rewards to be had from quality risk-management practices. While underwriters insist that returning an underwriting profit is their key goal, we believe that they are also driven by a desire to maintain or grow market share. The pressure from insureds for rate reductions, combined with a competitive insurance market and underwriters’ need to maintain market share, will fuel the continuation of market softening in 2005.

Asia is a diverse and expanding market with abundant opportunity for insurers to expand and win new business. However, buyers in the region are very price conscious and demanding and will shop around to get what they consider to be the best deal. Accordingly, the buyers anticipate competitive behaviour from insurers keen to grow, and expect rates to come down further in 2005. Some insurers are justifying the continuing softening to themselves by citing the increased volume of premium they are achieving from their growing book of business.

Many improvements have since been made. Countries have bolstered their regulatory transparency and supervisory oversight, corporate governance, risk management, and the quality of economic data. Central banks are now more independent, government debt has been reined in, and financial systems are stronger. Yet the growth-reducing effects of the crisis linger.

After seeing how the current-account deficits in trade and investment flow that they were running at the time left them vulnerable, a number of Asian countries refocused their internal investment policies on export capacity, maintaining low currency values and building current-account surpluses.