Measured on a scale from -5 to +5 (very bearish to very bullish), the average business sentiment stood at 1.9, indicating the overall positive business sentiment, but the trend was negative as business confidence stood at 2.3, a year ago.
Even over the next 12 months, business confidence is expected to deteriorate to 1.7, mainly due to expected economic slowdown and a negative outlook on reinsurance prices, the survey revealed.
Shashank Srivastava, chief executive officer and board member of the QFC Authority said: "Asia is one of the fastest growing reinsurance markets in the world and a strategic priority for any aspiring international reinsurer. Given the ever-closer economic ties between Qatar and Asia, it was only natural for the QFC Authority to extend its proven Barometer survey to the Asian reinsurance marketplace."
Based on in-depth interviews with 26 senior reinsurance executives and intermediaries operating in the region, the Asia Reinsurance Barometer examines the current and near-term market opportunities, challenges and key trends in the $30bn Asian non-life reinsurance market.
The executives polled see the region’s economic and insurance growth momentum as its most relevant strength. Reinsurance exposure and premium growth are expected to continue to outpace regional GDP growth, driven by the accumulation of insurable assets in catastrophe exposed areas and low penetration rates.
Reinsurance markets are set to expand further on the back of population growth, low average insurance penetration and an accelerating pace of product innovation, the survey said.
In light of Asia’s growths dynamics, 96% of respondents expect a further increase in reinsurance capacity (supply) over the next 12 months. This trend is a concern for most reinsurers as margins will come under additional pressure.
Of those polled, 69% expect retention levels, the amount of risk retained by primary insurers, to increase over the next 12 months, mainly due to mounting pressure from shareholders and ratings agencies to retain a higher portion of profitable business.
Nearly 62% of survey participants believe that reinsurance prices will decline over the next year. The high catastrophe losses in 2011 only had a limited and short-lived impact on prices as capacity was quickly replenished. Terms and conditions will remain stable, as expected by 54% of respondents.
Reinsurance helps insurers to manage their risks by absorbing some of their losses. Reinsurance stabilises insurance company results and enables growth and innovation to continue. Due to the large sums of money that they invest in financial markets, reinsurers also contribute significantly to the real economy. The global non-life reinsurance market size is estimated at around $200bn.
