Involving 15 regional markets including China, Japan, and South Korea, RCEP aims to remove up to 90% tariff on goods.
The marine, aviation and transit (MAT) insurance industry in Asia-Pacific will grow from an estimated $11.9 billion in 2021 to $16.2 billion in 2026, in terms of written premium, driven by positive economic developments, forecasts GlobalData, a leading data, and analytics company.
According to GlobalData, MAT insurance in Asia-Pacific is estimated to grow at a compound annual growth rate (CAGR) of 6.4% over 2021-26, supported by increasing trade activities, recovery in flight services, and demand from renewable energy infrastructure projects.
Deblina Mitra, Senior Insurance Analyst at GlobalData, comments: “MAT insurance is estimated to have recovered in 2021 with 7.2% growth after remaining almost flat in 2020 as the COVID-19 pandemic adversely impacted air travel, and caused supply chain issues.”
The establishment of the Regional Comprehensive Economic Partnership (RCEP) in January 2022 is one of the major developments that is expected to create new business opportunities for insurers in Asia-Pacific. Involving 15 regional markets including China, Japan, and South Korea, RCEP aims to remove up to 90% tariff on goods.
RCEP is expected to increase trade among the member nations by $42 billion, out of which 40% will be from new trade creation, according to the United Nations Conference on Trade and Development (UNCTAD). The increased foreign trade through road, maritime, and air facilitated by RCEP will create new business opportunities for the MAT insurance industry.
MAT insurers will also benefit from the ongoing shift towards clean energy in the Asia-Pacific region. The construction of offshore energy plants to replace fossil fuels, such as wind power projects, have gained traction in the region creating demand for marine renewable insurance lines within MAT insurance. China, India, Australia, and South Korea are among the major markets for wind and hydro energy in the region.
Deblina continues: “The ongoing Russia-Ukraine crisis will be a prime focus area for the regional MAT insurers, and it is expected that policy wordings might be revised, and premiums will be increased at the time of renewals to re-assess the insurers’ exposure to war risks.”
Lloyd’s Market Association (LMA), for example, announced high-risk status for all of Russia’s territorial waters in April 2022. Before that, in February 2022, the Joint War Committee assigned high-risk status to the Sea of Azov and the Black Sea waters. These straits are a prominent gateway for crude and agriculture transport between the Asia-Pacific and European countries. Vessels crossing these straits will be required to inform their insurer/ broker beforehand to negotiate their policy terms.
Deblina concludes: “The Asia-Pacific MAT insurance industry will present expansion opportunities for domestic insurers, as many foreign insurers, especially from Europe, are either reducing their presence in the region or exiting from the market due to unsustainable natural hazard losses. Also, their withdrawal from coal-related underwriting, to comply with ESG targets, enhances opportunities for the domestic insurers. The profitability of insurers, however, remain exposed to enhanced security threats posed by geopolitical tensions, supply-chain issues, volatility in oil prices, and extreme weather repercussions.”