RMS sits at the intersection of technology, science and domain experience, giving us a unique perspective on what’s going on in the world of tech, modeling and computing. “In Case You Missed It” is our round-up of the latest developments from Silicon Valley to Bangalore that EXPOSURE doesn’t want its readers to miss. In this edition, Paul Burgess, client director for Asia-Pacific at RMS, picks his top three headlines from across the region.

01. Regulating Regulation

The Philippines recently introduced regulations to increase solvency and resilience to shocks for its insurance market. Insurers must maintain a minimum risk-based capital ratio of 100 percent and statutory net worth requirements. But news reports state that up to 10 non-life insurers left the market as a result of net worth requirements. It is always difficult for national insurance regulators to get the balance between ensuring stability, promoting market growth and encouraging competition with local and foreign companies.

Myanmar is a typical example. Aon reported a total gross written premium of US$46 million in 2015 for a country with a population of around 53 million — very low, even by developing market standards.  In a news report in Frontier Myanmar, Aon forecast that with an “increasingly open, competitive market,” the market for non-life insurance could rise to US$1.4 billion by 2030. Toward the end of 2017
a total of 24 foreign insurance companies await licenses from the regulators. But hopefully, the stage is set for a strong, growing market to boost innovation and insurance penetration levels.

02. Reaching 50 percent

India’s Prime Minister Modi has been instrumental in increasing the level of agricultural insurance coverage in his country. Now in its third year, the Pradhan Mantri Fasal Bima Yojana (PMFBY) scheme has its sights on increasing insurance coverage to 50 percent of the gross cropped area in 2018-19. In its first year, insurance coverage increased to 30 percent of the gross cropped area in 2016-17, compared to 23 percent in the previous period.

Getting to 50 percent is not without its challenges. Increasing the efficiency of claims payouts and encouraging all 36 states and territories to embrace the scheme will help. Model adoption is also increasing, as insurers recognize the benefits, such as simulating losses over periods of 10,000 years rather than yield records dating back just 15 years. Despite these bumps along the road, Prime Minister Modi shows what can happen when a government sets bold targets. With a clear goal, government, farmers, insurers and innovators from science and technology have come together and set their sights on 50 percent coverage. This is vital in a country where 55 percent of the population rely on farming for their livelihood.

Should high risk mean high cost?

New Zealand property owners are starting to see the impact of more granular earthquake risk modeling in terms of adjustments to their premiums. After the major earthquakes in 2010-11, RMS invested heavily in developing risk models that considered new insights from the Canterbury Earthquake Sequence, including extreme liquefaction and the important contribution of seismic hazard from previously unknown faults.

According to recent media reports, major New Zealand insurers will start using modeling to price premiums based on how at-risk each property is to earthquakes. As an example, a news story in New Zealand news site Stuff stated the annual cost to cover a NZ$1 million (US$740,000) home in Auckland for earthquake-related damages was about NZ$40 but the equivalent property in Wellington cost NZ$5,400 to insure.

New Zealand Insurance Council chief executive Tim Grafton was quoted saying,  “Increasingly we want to see communities around New Zealand are not undertaking developments that are just going to end up in social and economic disaster for people.” Insurers increasingly signal to government, property owners and planners about the need to manage the risk posed by buildings in high-risk areas, and transparent, granular risk pricing kick-starts the debate.