Post-pandemic machinery-related losses have become an even more significant issue. Mechanical failures can undermine vessel safety, operational integrity, regulatory compliance, reputation, and even financial stability.

The data shows both the frequency and cost of machinery claims are at an elevated level from the pandemic onwards. For average claims above US$10,000, the average machinery claim cost reached around US$400,000 in 2020 and has generally remained at or above that level since, according to The Nordic Association of Marine Insurers’ 2024 mid-year hull report.

The report also indicates that large machinery claims above US$500,000 reached about 1% of vessels in 2019 and have since stayed near or above that level.

Typical machinery claims are propellers, shafts, steering gear, and deck equipment. Given the sustained elevation in both frequency and cost, identifying the causes of machinery losses is essential.

Shipowners should know how to act to mitigate the risk and contain insurance costs.

Causes of machinery losses

There are several reasons explaining the elevated costs and frequency of machinery losses. The pandemic caused a global supply chain disruption, delaying engine parts and key components and thus increasing vessel material costs.

Along with higher commodity prices and labour shortages, there is evidence that this has helped inflate machinery damage claims since the pandemic.

When ports finally reopened, there was a desire to get idle vessels back to sea as quickly as possible.

There was an impetus to recover lost revenue. The general downturn in the global economy during the pandemic, as well as restrictions imposed by governments, led to international maritime trade volumes falling by 3.8% in 2020, according to the United Nations
Conference on Trade and Development.

Operators and owners, keen to benefit from favourable market conditions when operations resumed, prioritised profit over the necessary downtime for maintenance.

Postponement and delays were common. When vessels were sent to shipyards for maintenance and repairs, busy schedules often led to recommendations to repair only essential work or defer maintenance unless critical. This was not without consequences.

Many insurers later found that engine breakdowns had resulted from using parts past their recommended lifespan. These include examples of nuts and bolts being used beyond the manufacturer’s recommendation, making them more likely to fail.

Another issue was parts that were already worn out but still in use. Issues like these can be small in isolation, but in combination, they can potentially lead to significant engine failure.

Crew problems

Another important factor in explaining the losses derives from issues with the vessel crew. Crews spent extended periods at sea during the pandemic.

In September 2020, 400,000 seafarers were stranded at sea, and another 400,000 were unable to join ships, according to estimates from the International Marine Organization.

Being at sea for extended periods can lead to mental and physical fatigue, which increases the likelihood of negligence or lapses in attention when it comes to vessel maintenance and inspection.

“The next major developments impacting machinery will come from technological advancements, particularly those that can address the root causes of the pandemic-related surge in machinery failures.” 

The Asia Pacific Economic Co-operation’s report detailing the impact of Covid on the maritime industry, released in June 2024, notes that seafarers stranded on ships were often operating well beyond the 11-month maximum period of service on board, set out in the Maritime Labour Convention, the seafarers’ bill of rights for acceptable work conditions. It notes that many seafarers needed medical care, including mental health support.

The report highlights that mental and physical strain was worsened by the inconsistent distribution of vaccines, despite the heightened need for them due to crew members working in confined spaces on board vessels.

Another major crew issue resulting from Covid was a growing gap in crew experience.

During the pandemic, many crew members returned to their home countries and did not come back. This led to less experienced crews being onboard. Although certified, their lack of practical experience made them less aware of when issues were likely to cause problems.

Insurers taking action

Insurers are taking decisive action to manage industry risks. If a particular account or vessel type consistently suffers machinery-related damages, insurers commonly introduce an additional machinery deductible to encourage shipowners to be equally responsible in managing machinery-type losses through risk management.

Whilst one may see insurers’ introduction of additional deductibles to protect their own interest, insurers are not stopping there, and some have extended their in-house risk engineers to assist their clients.

The risk engineers often work with external, third-party risk engineers who are well-positioned to offer valuable advice on upkeep and maintenance.

In a “win-win” for both parties, insurers offer risk management surveys to help owners identify potential areas of improvement.

Future-proofing the maritime industry

The next major developments impacting machinery will come from technological advancements, particularly those that can address the root causes of the pandemic-related surge in machinery failures. Specifically, vessels designed or modified for decarbonisation are now using new fuels and technologies.

For example, vessels now have advanced sensors connected to engines to monitor parameters like vibration, temperature, oil quality, and pressure in real-time.

AI-driven analytics analyse the data to predict potential failures before they happen, allowing for timely maintenance.

While some major companies are pursuing innovations, many owners remain cautious. Engine overhauls and retrofitting are expensive.

Therefore, owners are hesitant, especially those who believe it is unclear whether new fuels will achieve widespread adoption backed by clear regulation.

Staying ahead

In summary, the maritime industry is experiencing an elevated level in both the cost and frequency of machinery losses; however, there are measures available to help reduce these risks.

These include working closely with insurers to understand the risks, taking a cautious approach to maintenance reductions, and potentially embracing modern technologies.

The pandemic’s ongoing effects are still impacting claims, highlighting the importance of prompt action rather than delay.

The post Amid backlogs and breakdowns, Covid-19 maintenance delays put vessel safety at risk appeared first on InsuranceAsia News.

Once a niche product used predominantly for large-cap transactions, W&I is now being utilised with increasing frequency across a far broader range of deal sizes and geographies in the region. Coverage terms have broadened, retentions have fallen, and underwriting processes are being continually refined to become increasingly streamlined.

Much of this is a welcome development as the ability to maintain a commercial mindset and offer efficient underwriting processes are key considerations for insureds.

Greater competition has fuelled improvements in underwriting speed and increased willingness among insurers to adapt to client needs which have, in many cases, improved the overall client experience. Price competition and responsiveness have also helped to make W&I insurance more accessible, particularly among mid-market and small cap deals in the region.

At the same time, some of the drivers of this growth also mean that these developments are not built on entirely stable foundations. The rapid influx of new underwriting capacity in 2022 coincided with global economic headwinds hitting the region, creating a surge of aggressive competition for a shrinking pool of deals.

Underwriting discipline

In the resultant race to win mandates, premiums have been driven to historic lows, while coverage has simultaneously been expanded rapidly, often without corresponding price adjustments or sufficient risk assessment. Individually, each of these pressures undermines the long-term sustainability of the market; together, they converge to create the perfect storm as these are the conditions which are likely to induce a contraction in capacity, spur hard market corrections and trigger uncertainty in settlement in the future.

The erosion of underwriting rigour in recent years is a prime example. In the broader context of an M&A transaction with its myriad moving parts, it can be tempting to see fewer questions and looser engagement with diligence as a boon.

In truth though, disciplined underwriting is not the burden it appears to be. Balanced underwriting is not about slowing a deal down but rather about enhancing the clarity and certainty of coverage. When commerciality is balanced with careful underwriting, coverage is better aligned to the real risk profile of the deal without unduly slowing down the underwriting process. This means fewer grey areas that could otherwise serve as breeding grounds for disputes down the line.

Conversely, when underwriters race to bind without giving due consideration to the nuances of the risk, the chances of the insurer being surprised or defensive upon a claim arising increases, which could affect the speed and efficiency of the ultimate claims experience – a dynamic that benefits no one.

Rate adequacy works in much the same way. Competitive pricing is certainly beneficial to insureds to a large degree. However, if pricing consistently fails to reflect the actual risk and loss experience, the consequences in the medium to long term are likely to be stark: capital flight, hard corrections in the market by remaining insurers in both rates and coverage, and potentially more fractious settlement as each claim is felt more keenly within the portfolio.

Mission critical

Sustainable pricing, on the other hand, allows insurers to remain committed to the product in the long term, to respond confidently to valid claims, and to keep offering competitive terms consistently over time – all of which are critical for long tail products like W&I insurance.

This is especially pertinent in the current environment as the M&A insurance market is facing heightened scrutiny following an increase in paid claims and rumours of several potentially significant payments on the horizon, which makes capacity quality a particularly key consideration.

Carriers with their own capacity may be exposed to line size contractions if their reinsurers look to manage down their exposures, but they have ultimately still made the long-term investments in infrastructure and resources to stand firm through market cycles.

Conversely, providers relying on third-party capacity may be able to deliver excellent service during underwriting but are far more exposed to capital flight if claims ratios deteriorate or profitability wanes.

In the context of W&I insurance, where claims could arise years later, this is a particularly pertinent risk as the insurer at inception may not be the one making the decisions when you need it most.

In W&I insurance, the value of a policy is tested not at signing but years later, when the claims arrive which is why these fundamentals still matter. Markets chasing short-term victories may be able to offer cheaper, quicker solutions today, but in a long-tail class, the only metric that truly matters is certainty when it counts.

That certainty comes from having a durable partner who is in it for the long run — one who can respond decisively when the claim arrives and who remains committed to doing so for years to come.

Keshaya Yap is a senior underwriter and Southeast Asia lead at Liberty Global Transaction Solutions

The post Balancing growth, commerciality and sustainability in Asia Pacific’s W&I market appeared first on InsuranceAsia News.

Until recently, nuclear energy in Asia was largely the domain of India, China and Japan.

Today, momentum is building across the region: Indonesia, Vietnam, Philippines, Malaysia and Thailand are among those actively planning or studying how they can bring nuclear power into their energy mixes.

Even land-scarce Singapore, which once ruled out nuclear, has invested SG$66 million into setting up a nuclear research centre. Visiting the island-state in August 2025, the International Atomic Energy Agency’s chief remarked that Singapore’s strong technical capabilities put it in a position to deploy nuclear power in a few years if it decides to proceed.

Asia’s commitment to nuclear energy has fluctuated over the decades, influenced by factors such as government support, energy security and public opinion – especially after events like Japan’s 2011 Fukushima disaster.

Japan, once intent on phasing out nuclear, is now seeing broad cross-party backing and has restarted 14 reactors since the disaster.

In July, Kansai Electric Power announced it will begin studying plans for a new nuclear power reactor – the first such initiative since the incident.

Recent events have compelled Asia to reassess the role of nuclear power in their energy mix.

Governments are grappling with the real-world challenges of achieving net-zero emissions while maintaining reliable energy supplies.

The cost concerns are also significant, as evidenced by the spike in global energy prices triggered by Russia’s invasion of Ukraine, which has resulted in rising gasoline and electricity bills that are weighing heavily on households.

This has exposed the vulnerability of countries that rely heavily on imported resources.

However, the biggest driver of nuclear expansion in Asia is the massive increase in power demand from data centres, which are essential for the growth of artificial intelligence (AI).

It is estimated that a typical AI-focused data centre consumes as much electricity as 100,000 homes.

The chip industry, closely tied to the data centre sector, is also driving demand for nuclear power. Taiwan, home to the world’s largest chipmaker, TSMC, celebrated its “nuclear-free homeland” in May this year after shutting down its last operational nuclear reactor.

Yet shortly after, authorities passed an opposition-backed proposal to hold a referendum in August to decide whether to restart the plant.

Big tech companies are investing heavily in energy-hungry data centres across Asia, with many, including Amazon, Microsoft and Google, having to tap into clean energy to power these facilities and achieve their decarbonisation commitments.

Nuclear power, providing stable, low-carbon baseload generation, is being considered as a key enabler alongside intermittent renewables.

The SMR revolution

The nuclear renaissance will look different to the nuclear we see today.

Gigawatt-scale, bespoke power plants will continue to play their role, with around 70 new nuclear reactors under construction globally, with around 100 more planned, the majority of which are in Asia.

The real transformation, however, will be driven by small modular reactor (SMR) technology.

SMR’s promise scalable manufacturing, lower costs, and shorter build times, making them attractive for emerging markets.

In 2024, the US Department of Energy began government-to-government talks on SMRs with the Philippines, Singapore, and Thailand; the Philippines has set a target for its first nuclear plant to operate by 2032 and is in active cooperation with international partners.

SMRs are advancing globally: Canada’s first commercial SMR at Darlington is set for 2028, and similar deployments are scheduled in the US and Europe by early next decade. What’s clear is that while SMRs are still emerging tech, they’re no longer theoretical – they’re being built, financed and, in some places, already delivering power.

However, regulatory harmonisation remains a challenge and with the likely development of multiple SMR models, cross-border regulation may prove challenging.

The other key component to the nuclear renaissance will be in the form of nuclear fusion.

If commercialised, fusion holds the promise of clean energy without the waste and risk profiles associated with today’s fission reactors. But while prototype fusion reactors exist, scientists haven’t yet generated sustainable electrical power with them. That breakthrough could be only five years away – or as long as 30 years.

Supporting nuclear development

The nuclear industry’s safety record has improved immensely in recent decades, with highly stringent engineering standards and strong regulatory oversight now making it the second safest form of power after solar and the cleanest form of energy production.

The insurance sector is poised to play a central and enabling role in Asia’s nuclear expansion.

As countries in the region move from exploration to active planning and construction – especially with a focus on SMRs – they will require innovative risk transfer solutions.

These solutions are critical to attract investment, satisfy evolving regulatory requirements, and build public confidence in nuclear projects.

Nuclear liability coverage for SMRs is yet to be determined by international conventions, and therefore the limits and requirements provided by Insurers are still to be realised.

Given Asia’s diverse regulatory environments and the variety of emerging nuclear technologies being considered, insurers will need to craft flexible products that can respond to new operational risks and cross-border considerations.

Now is the time for the commercial insurance market to lead with purpose.

By collaborating with governments, nuclear operators and sector experts, insurers can innovate new products, expand capacity and can cement their place at the heart of a safe, resilient and sustainable future.

This cooperation will be essential to underpin a safe, resilient, and sustainable nuclear renaissance in Asia, supporting the region’s clean energy transition and energy security goals.

Clifford Blayney is head of power and offshore sustainable energy for Markel International

The post Insurance sector’s role in the region’s nuclear renaissance appeared first on InsuranceAsia News.

Yet, while the trajectory is upward, capacity constraints, particularly in talent and training, are threatening to impede progress and increase operational risk, with direct consequences for airlines and their insurers.

The battle for talent

Aviation maintenance colleges continue to graduate new engineers, but many prefer to join airlines where pay and prestige are higher, leaving independent MRO providers struggling to attract and retain talent. At the same time, Asia’s historically lower labour costs have become a double-edged sword: while they’ve drawn international business, they have also led to a brain drain. Engineers from Asia are increasingly being recruited by Middle Eastern and Western MROS, which offer significantly higher salaries. The most acute gap lies in mid-career engineers with 10–15 years of experience, those best equipped to train the next generation.

Manufacturing developments

The aviation industry does not stand still, and constant technical development is accelerating its adoption of composite materials – lightweight, high-strength alternatives to traditional metals – as it seeks to improve fuel efficiency and performance, as well as enabling new markets to be developed.

The region is also gaining prominence in aircraft manufacturing and technology adoption. In China, the state-owned Commercial Aircraft Corporation (Comac) has introduced the C919 jet as a homegrown alternative to Boeing and Airbus.

Chinese drone maker EHang Holdings has introduced the EH216-S, a passenger-carrying unmanned electric vertical take-off and landing (eVTOL) aircraft. This aircraft received type certification approval in early 2025.

China is expected to dominate growth in this new transport category, driven by domestic aviation demand and heavy investments in both commercial and military aerospace sectors.

Training challenges

Yet, the complexity of modern aircraft has outpaced current training programmes. New recruits often require significant additional instruction once on the job.

Some MRO firms are using customer aircraft as informal training platforms for junior engineers. While this may provide necessary hands-on experience, it poses problems if not supervised by a sufficient number of experienced personnel.

The coronavirus pandemic exacerbated this reliance on informal training. When operations slowed during Covid-19, many veteran technicians retired, taking decades of experience with them. The resulting loss of mentorship capacity has left a gap that formal training alone cannot fill.

Competency and knowledge of their certifying personnel is also hampered by new, advanced technology that increases reliance on computers to perform troubleshooting and maintenance.

There are also emerging cultural challenges, including a perceived decline in long-term commitment and teamwork among younger recruits. While anecdotal at present, if substantiated, such trends could pose further challenges for already strained operations.

Impact on insurance

The growing reliance on less experienced staff has increased the risk of costly maintenance errors. These risks are particularly acute for next-generation aircraft and engines, which are both more complex and more expensive to repair.

MRO contracts increasingly include indemnity clauses, shielding airlines from liability if maintenance errors result in damage. The financial burden, in such cases, often falls to insurers.

As maintenance-related claims increase in frequency and cost, insurers may intensify their scrutiny of MRO providers’ capabilities, particularly in fast-growing but overstretched markets.

In summary

The Asia Pacific MRO market is growing, but beneath the surface, challenges persist. Without a deeper talent pipeline, better training infrastructure, and more rigorous oversight, the region’s capacity to meet rising demand may falter, impacting insurers and operators alike.

Tan Soon Keat, Asia regional director at McLarens Aviation .

The post Growing pains in Asia’s maintenance industry will have implications for insurers appeared first on InsuranceAsia News.

But this comfort may be dangerously misplaced.

The fundamental flaw in our reliance on certifications lies in their very nature – they’re frozen moments in time. When an organisation displays its ISO 27001 certification, it’s showing proof of compliance at the moment of audit, not proof of its current security posture.

Considering that the average time to detect a data breach is still 204 days, a company can maintain its certification while being completely compromised.

This temporal disconnect creates significant problems across industries. Financial institutions might require PCI DSS compliance from vendors handling credit card data, yet major breaches still occur at “compliant” organisations.

Healthcare providers in the US achieve HITRUST certification to satisfy HIPAA requirements, only to suffer ransomware attacks months later.

The insurance industry faces particular challenges in this environment.

A false dichotomy

Underwriters reviewing cyber policies often treat certifications as risk mitigants, yet there’s little correlation between holding certifications and avoiding breaches.

A company could have a perfect SOC 2 attestation while neglecting basic patch management. Another might maintain PCI DSS compliance while failing to monitor for credential stuffing attacks.

The uncomfortable truth is that certifications, while valuable for establishing a baseline security posture, create a false dichotomy between being “certified” and being “secure.”

“True security requires continuous monitoring and improvement of the security posture, which periodic assessments and audits simply cannot provide.”

It is important to remember that most standards are designed to provide only the absolute basic controls for establishing a security posture.

If a standard becomes too prescriptive, it can stop organisations from using it. Further, the scope of the certification audit may not be the same as what is to be insured.

This isn’t to say certifications lack value – they establish important frameworks and demonstrate initial commitment and a baseline security posture. But they were never designed to be the finish line.

True security requires continuous monitoring and improvement of the security posture, which periodic assessments and audits simply cannot provide.

How do you know you’re secure today?

The most sophisticated organisations now supplement certifications with real-time monitoring, automated threat detection, third-party audits, and continuous improvement processes.

They understand that security isn’t a state to achieve but a process to maintain and improve on.

For insurers, rather than treating certifications as sufficient proof of security, they should demand evidence of ongoing monitoring of their security posture.

This might include regular vulnerability scan reports, incident response testing logs, or third-party assessments and audits of the security posture.

The question shouldn’t be, “Do you have certification X?” but rather “How do you know you’re secure today?”

The cybersecurity landscape evolves too quickly for annual checkups to be sufficient. As threats grow more sophisticated and attack surfaces expand, our approach to assurance must keep pace.

Certifications can be part of the solution, but only if we stop treating them as the complete answer.

The organisations that understand this – those that view security as a continuous journey rather than a destination – will be the ones truly managing their risk.

Everyone else is just waiting for their next audit.

This article is written by Marc Krisjanous, associate director of audit at SixBlocks Audit, and Qubit Underwriting CEO Helen Ye.

The post The false promise of flawed certifications appeared first on InsuranceAsia News.

These measures aim to protect domestic industries from what the US government perceives as unfair trade practices, global excess capacity, and imbalanced trading relationships.

The policy includes mainland China, delayed actions against Canada and Mexico, extended duties on steel and aluminium, a new review of copper, and the potential for other significant duties. 

The imposition of these tariffs has far-reaching implications for global trade, affecting various industries and economies, and is generally expected to lower economic growth and increase inflation rates, and unemployment.

The economic consequences of these tariffs are expected to include higher costs for businesses and potential disruptions in supply chains, with consumers ultimately bearing the brunt of these costs and fuelling concern for a protracted inflationary environment.  

A “reciprocal” tariff system introduced in February allows the US to impose like-for-like tariffs against any country that retaliates. Moody’s estimates that a 10% universal tariff on all US imports could push inflation higher, with consumer price inflation increasing from about 2.4% to about 3.3%, in 2025 and about 2.3% to about 2.8% in 2026. 

How will Asia-Pacific fare?

Asia-Pacific countries are well-positioned to benefit from redirected trade flows as global supply chains adjust.

The region’s diversified trade relationships and growing intra-regional trade put it in a strong position to absorb shifts caused by global tensions.

Southeast Asian nations, in particular, have already attracted increased foreign direct investment, with manufacturers relocating production to avoid trade tensions, especially those between the US and China.

Vietnam, Malaysia, and Thailand have seen significant inflows as companies seek alternative hubs for production. 

“Offering tailored insurance solutions to help businesses manage these risks effectively and collaborating with insurers to develop tailored risk management solutions can alleviate some of that risk.”

However, companies in sectors such as manufacturing, motor, and consumer electronics will have to remain vigilant and brace for impact, as they often depend on imported components and materials. Other sectors vulnerable to insolvencies or cash-flow disruptions include manufacturing, agriculture, and retail.

The increased costs have led to higher prices for raw materials and finished products, which will result in reduced profit margins and increased operational costs for businesses.

This will strain working capital and financing requirements within an already higher interest rate environment, with potential re-alignment and restructuring contributing to increased operational and administrative burdens. Small and medium-sized enterprises (SMEs) are especially at risk due to their limited financial resilience.

Manufacturing and electronics

APAC countries are key players in global electronics and semiconductor supply chains. As US tariffs on Chinese tech products increase, Asean and India could see higher demand for production and assembly services, though navigating trade restrictions will be challenging.

Automotive and consumer goods

Japan and South Korea face tariff pressures but benefit from diversified supply chains. Southeast Asia may see production shifts from carmakers. The consumer goods sector in APAC may experience mixed effects due to price volatility. 

Agriculture and commodities

The US agricultural sector has been significantly impacted by retaliatory tariffs, with a 20% increase in farm bankruptcies in 2019. China’s retaliation has particularly targeted agricultural exports, leading to billions in losses.

Managing trade risks in Asia

The tariffs increase operational costs and strain cash flows, especially for industries reliant on imported components. This puts SMEs at greater risk of insolvency or cash-flow disruptions.

Delays and payment defaults due to tariff-related disruptions highlight the importance of trade credit insurance in mitigating non-payment risks.

To mitigate risks, businesses in APAC can diversify supply chains, renegotiate contracts to include tariff clauses, and explore alternative markets.

Trade credit insurers work closely with clients to identify sectors or suppliers that may be at high risk due to tariffs. Trade credit insurance can help stabilise cash flows and provide financial resilience during global trade disruptions.

With trade in flux, APAC businesses must stay agile and ensure they have the right protections in place. Offering tailored insurance solutions to help businesses manage these risks effectively and collaborating with insurers to develop tailored risk management solutions can alleviate some of that risk.

This article is written by Nicholas Davies, head of trade credit Asia at Markel.

The post Amid trade war, APAC firms must stay agile and ensure adequate protection appeared first on InsuranceAsia News.

Fuelled by new data streams and advancements in IOT, and wearables, predictive capabilities are reaching new heights. However, prediction alone is insufficient to reduce loss ratios systemically; meaningful impact requires proactive interventions such as education, guidance, alerts, and real-time responses based on monitoring and analytics.

The industry is transforming towards a smarter, more personalised risk ecosystem, where AI becomes a foundational capability embedded within intelligent products and processes.  

With this as a backdrop, here are eight predictions for 2025 for the insurance industry:

Rise of predictive and GenAI pairing. Amidst the continued hype regarding GenAI, other streams of AI have received less attention. Insurers and insurtechs are seeking ways to combine different streams of AI to deliver vastly improved outcomes and mitigate risks. The pairing of predictive AI with GenAI orchestrated by AI agents is becoming an extremely powerful capability to drive customer experience and improve protection.

Depth of AI will define industry leaders. While early adoption of GenAI can be a differentiator, staying ahead in 2025 will demand more complex workflows and non-public data to provide a unique experience. Whether it is traditional insurance products like home, auto, pet, life, health, or solving for broader protection needs like cyber and identity, delivery and e-commerce, or warranty, traditional product constructs and features such as excesses, waivers, inclusions, and pricing will continue to hold relevance for consumers.

AI embedded within these products and trained on domain-specific datasets and knowledge bases will become increasingly powerful in delivering optimal protection for customers. AI is also becoming a product differentiator for early movers. However, consumers, supported by evolving privacy laws and regulations, will ultimately decide how much personal data they share to access these advancements.

Hyper personalisation through embedded intelligence. We are witnessing a growing trend of original equipment manufacturers (OEMs) integrating embedded AI into their devices and operating systems. Similar advancements are emerging in wearable technology and digital lifestyle and protection solutions. This embedded intelligence enables the development of hyper-personalised customer insights, providing tailored coaching, advice and real-time recommendations.

With AI’s ability to enhance loss prediction, prevention and recovery, the insurance industry will make significant strides in integrating AI into traditional and emerging product verticals.

With GenAI, choice matters. When saying choice matters, it is not about deciding on a specific foundational model. It is the availability of choices and access to a wide range of options that matter as the insurance and protection industry addresses the needs of numerous use cases. Over the past year, we have witnessed a surge in public and private large language models (LLMs) and the distillation of models to balance cost and latency considerations.

Even in this early stage of GenAI adoption, the abundance of options makes selecting the right model for each use case significantly easier. Switching between models or choosing from within a family of models is becoming increasingly easy. 

We expect regulators to be proactive in embracing AI and developing frameworks for responsible use, ensuring that insurers can balance innovation with consumers’ trust and compliance.

Focus on internal efficiencies and automation. Insurers face growing pressure to operate more efficiently year after year. Nearly every insurer and insurtech is striving to enhance efficiency across the board. From finance, operations, marketing, HR, as well as technology and engineering functions, every facet of the business must adopt AI and advanced automation to remain competitive. Staying ahead will require pioneering efforts and continuous innovation.

Regulatory oversight on AI to accelerate. As AI adoption gathers momentum, so will regulatory scrutiny. AI has advanced so rapidly that regulators have the same challenges as insurers in keeping pace. Perceived customer benefits and risks of sharing and processing data with insurers and third parties vary significantly based on the product and proposition. Regulators will focus on addressing ethical concerns, biases and transparency issues. We expect regulators to be proactive in embracing AI and developing frameworks for responsible use, ensuring that insurers can balance innovation with consumers’ trust and compliance.

Workforce transformation with hyper-automation. The insurance industry is undergoing a generational shift in workforce dynamics. In 2025, automation efforts are poised to accelerate, driven by low- or no-code tools, agentic AI, GenAI foundations, and democratised access to self-service automation capabilities. Technology teams will play a pivotal role in enabling this transformation. This era of hyper-automation and AI augmentation will bring significant productivity gains over a multi-year period, impacting every aspect of insurance operations.

New roles will emerge as AI inference becomes embedded in every enterprise application, product and function, prompting the industry to rethink the skills needed to thrive in this new era. Companies that embrace workforce transformation faster will enjoy a sustained period of competitive advantage.

ESG and technology bring a higher purpose. With ESG influencing every aspect of business, industry participants are exploring ways to embed ESG principles in their products and operations. Many organisations have already showcased good practices in key focus areas such as reducing carbon emissions, improving supply chain controls, promoting ethical investments, and reducing waste.

Technology advancements are making it easier to integrate ESG capabilities into insurance and protection offerings – for instance, carbon-neutral products, which are supported by real-time data that can accurately calculate emissions.

Organisations can leverage embedded analytics and real-time dashboards to enhance transparency and accountability in sustainability practices.

Reimagining insurance

As the insurance industry continues its journey into 2025, it stands at the crossroads of innovation and purpose. AI and automation are not just tools for efficiency but catalysts for reimagining what insurance can achieve – driving hyper-personalised experiences, better risk management, and operational excellence.

Beyond financial protection, insurance is evolving to improve lives, enhance well-being and proactively prevent risks. Those who embrace this transformation with agility and foresight will lead the way into a new era of impact and opportunity.

This article is written by David Lynch, Group Chief Technology & Operating Officer, bolttech.  Lynch is based in Melbourne. 

The post Tech predictions for the insurance sector in 2025 appeared first on InsuranceAsia News.

I was in Australia at the time. It was a warm summer’s day, with many people starting to watch the Boxing Day test cricket match between Australia and Pakistan in Melbourne, when the news first hit.

Like all of us, I was in a state of shock that could only be compared to 9/11, except this time the event was in my own “backyard” of Asia.

Memories of the tsunami are painful; they prompt us to reflect on the steps we have taken – and how far we must go – to build the region’s resilience to disasters of this scale in future.

We have made a lot of progress, which is commendable, to reduce risks – but there is so much more to be done. The Indian Ocean Tsunami Warning System, established in 2005, has enhanced the region’s ability to detect and respond to tsunamis earlier – giving extra assurance to communities who are at risk of these types of events.

Many governments have also introduced measures to improve evacuation readiness, and coastal defenses.

A strong earthquake on the Indonesian island of Sulawesi in 2018 damaged the sensors and networks that underpin the early warning system, leading to delays and errors. And as Japan experienced with the tsunami that struck its east coast in 2011, local communities may remain unsure about what to do even when warnings are issued.

Adding to the challenge, the rapid pace of growth and development continues to concentrate exposure in coastal areas. In Chennai, India, for example, where the 2004 tsunami inundated the entire coastline, the population has swelled by 70% since.

The island of Phuket, Thailand, also hit hard in 2004, has seen its population triple with its emergence as a major tourist destination.

And these trends must be viewed in the context of changing weather patterns, which are making the kinds of natural catastrophes that challenge coastal areas more frequent, and more costly.

Readiness lies in partnership
Governments can advance the region’s readiness by stepping up proactive risk reduction measures, such as restrictions on building in vulnerable areas, tightening construction standards and educating the public on how to respond to tsunamis.

But the reinsurance industry also has an important, and multi-faceted role to play, making collaboration crucial.

We can channel our investment capital into building more sustainable and disaster-ready infrastructure. Our solutions can reduce costs incurred by the public sector when it comes to covering losses and can rapidly deliver financing for reconstruction – but only if protection is already in place. By working closely with the governments and local communities, we can heighten awareness of risk.

In the Asia-Pacific region, initiatives such as the Southeast Asia Disaster Risk Insurance Facility (SEADRIF) and the Pacific Catastrophe Risk Insurance Company (PCRIC) highlight the transformative potential of public-private partnerships in enhancing disaster resilience.

These collaborative frameworks combine governmental leadership with the risk management expertise of the private sector, enabling faster recovery and reducing the economic strain on vulnerable communities.

SEADRIF’s parametric insurance solutions and PCRIC’s regional risk pools have played a pivotal role in addressing the immediate financial needs following natural disasters, providing timely resources to those affected.

These partnerships go beyond financial relief, fostering long-term behavioural and structural changes that strengthen resilience at a community level. By embedding risk transfer mechanisms into national and regional strategies, they create a culture of preparedness and innovation.

This collective effort is essential in transforming how societies anticipate, respond to, and recover from disasters, ensuring that future challenges are met with greater confidence and sustainability.

We can also contribute significantly to knowledge and capacity-building by continually enhancing our risk modelling and data capabilities.

The post Loss, and lessons: reckoning with the Indian Ocean tsunami 20 years on appeared first on InsuranceAsia News.

The first discussions about the need for a new accounting standard for insurance contract liabilities were initiated by the main standard setters IASC and FASB way back in 1997. Due to the complexity of the task and competing priorities, a “temporary” GAAP standard for insurers called IFRS 4 was implemented in 2004, which ended up lasting almost 20 years.

So here we are, with the new IFRS 17 standard implemented since 2023 in many jurisdictions across the world. It has been a very long ride and one year (and counting) since the new accounting standard has gone into effect.  Everybody would agree that this is the most complex and only industry-specific standard of all the IFRS standards, including IFRS 9 (for financial instruments on the asset side of the balance sheet).

However, what we probably did not know back then, is that it would not only be very difficult to implement the new standard but also to do it in such a way to make financial reporting under the new standard sustainable as part of the “business as usual” duties of the combined finance and actuarial function of insurers.

If, for example, an insurer used to have a financial closing time of T+10 working days, now they may at best be able to do T+15 or even T+20. As a result, many insurers are struggling to close their books on a timely basis. Even with the help of extra contractors, they are looking for more sustainable ways to improve the efficiency of their financial close cycle.

However, rather than looking for temporary workarounds and tactical solutions, the efficiency of the whole end-to-end (E2E) financial reporting chain, from source to report, will need to be reengineered to achieve this.

This E2E financial close process can be subdivided into two main parts, from “record to close” and from “close to report.” The longer it takes to close the books (the first part), the less time you have to report and analyse the results (the second part).

So, it’s important to spend less time on the data preparation, calculation and reconciliation processes so you have more time to spend on the financial reporting and data analytics processes.

If you look at the entire financial close process, there can be many different data sources and sub-processes involved, covering multiple departments, from underwriting, distribution and operations to IT, finance and actuarial.

These all need to work together seamlessly, like an orchestra, to make it work well, playing to the same tune. If you try to do all these subprocesses manually, you can imagine how much work and time it takes to produce reliable and insightful financial results every time you close the books. When we looked at the main inefficiencies of the financial close process, we found that many of the controls are still done manually.

Large insurers can literally have thousands of internal financial controls to execute for each closing cycle, many of which are unique to each reporting entity due to different legacy source systems and local statutory/regulatory reporting requirements. However, when we looked at the nature of these controls, we found that there are roughly 20 different types of controls being used. More importantly, we found that when the control is very repeatable in nature and follows a specific pattern, it’s most likely a good candidate for control automation.

Keeping in mind this need to incorporate more financial controls automation, several solutions have emerged over the years to enhance efficiency for insurers. Current market solutions offer great insights into what your current versus potential level of automation for each control step is.

Some look specifically at the potential efficiency gain per control and where you can get the biggest “bang for your buck” when automating your internal finance controls framework. By implementing suggested changes, insurers can further automate their financial end cycle processes.

Future reporting requirements might require the weighing up of even more data that impacts company performance, such as climate change and other ESG metrics. Shifting towards a more automated and streamlined workstream can free up time for insurers to critically analyse results that inform future financial planning and significantly reduce the delay in the “record to close” process.

The views reflected in this article are the views of the authors and do not necessarily reflect the views of the global EY organisation or its member firms.

Martyn van Wensveen                  EY Asia-Pacific IFRS 17 Implementation and Finance Transformation Leader

Narayan Devanathan                  EY GDS, Senior Manager AI Enabled Automation, Tech Consulting

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Asia, home to many rapidly growing economies, has made significant strides in reducing poverty, improving health and education, and raising living standards for millions of people. Advances in forecasting, early warning systems, and flood defence have drastically lowered deaths from floods and typhoons compared to a century ago.

However, significant disparities and vulnerabilities remain, especially concerning natural catastrophes, particularly floods.

According to the Intergovernmental Panel on Climate Change, the UN’s climate body, human-induced climate change is expected to cause heavy rainfall events to become more frequent and intense across most regions globally. This trend is anticipated to persist with continued warming.

Acts of God or man?
In his 1942 dissertation, an American hydrologist and geographer, Gilbert F. White, said “Floods are acts of God, but flood losses are largely acts of man”.

Scientists assess the impact of climate change on extreme weather by examining natural and human factors. Hydrometeorological (e.g., floods and storms) and climatological disasters (e.g., droughts) have been trending upwards in recent decades, unlike geophysical disasters (e.g., earthquakes and volcanic eruptions). Prolonged periods of increased rainfall primarily result in fluvial (river) flooding, while short, intense cloudbursts can lead to pluvial flood or localised flooding without any large water bodies overflowing.

In addition to climate change, the impact of increased flood frequency is compounded by rising population exposure, increased personal wealth and greater population vulnerability. According to a report by a reinsurance broker, economic losses in the Asia Pacific region due to natural disasters soared to US$65 billion in 2023, primarily driven by floods in China and droughts in India. Of these total losses, only 9%, or US$6 billion were covered by insurance.

The report highlights that floods have been the costliest threat in Asia Pacific for the fourth consecutive year, accounting for over 64% of total losses in 2023. Annual flood losses have exceeded US$30 billion since 2010. This situation underscores the “climate injustice” where the largest greenhouse gas-emitting countries and the world’s most vulnerable economies are not the same, leading to significant global costs.

Source: Aon’s report on climate-and-catastrophe-insights-report.pdf (aon.com)

Exhibit A highlights the countries that are most vulnerable to climate change. The Notre Dame Global Adaptation Initiative index gauges countries’ vulnerability based on their exposure, sensitivity and ability to adapt to the negative impacts of climate change.

Source : Country Index // Notre Dame Global Adaptation Initiative // University of Notre Dame

Exhibit B: Annual carbon dioxide emissions per capita

Source: Per capita CO₂ emissions, 2022 (ourworldindata.org)

The blame game – is climate change really at fault?
Across Asia and the Pacific, millions of people face multiple threats to their security, including economic, social, political and environmental. While it is common to blame climate change for these issues, the reality is that any of these dangers are self-inflicted, with climate change being more of a consequence than the cause.

Flooding, a natural part of ecosystems, is worsened by human activities. Jakarta, Indonesia, with 10 million residents, is one of the fastest-sinking megacities with 40% already below sea level. Its flooding issues are exacerbated by rapid, unplanned urbanisation, land use changes, and population growth. The narrowing of river channels and canals, combined with periodic clogging from sediment and trash, intensifies the problem. Blaming climate change alone overlooks significant sociopolitical factors.

Similar situations are seen in emerging cities like Bangkok, Thailand; Ho Chi Minh City, Vietnam; and Manila, the Philippines. A recent study revealed that 37 of 82 major cities in China are experiencing subsidence, which means the land is gradually sinking, affecting 70 million people with rate of 10mm a year or more. Though seemingly minor, this cumulative effect damages infrastructure and worsens flooding.

Mitigating subsidence is complex, as it is often caused by groundwater extraction for drinking water. Simply stopping extraction is not viable without finding an alternative water source first.

Urban planning often overlooks poverty, despite clear evidence that migration to cities is driven more by the need for employment and survival than by the allure of urban amenities. To reduce the impact of floods on impoverished populations, informal settlements should be strategically planned and encouraged to develop outside of floodplains or wetlands.

A fractured governance system can exacerbate urban problems. Cities often focus on creating new infrastructure but may lack the funding or public interest to maintain or upgrade existing facilities. Over time, this neglect leads to infrastructure deterioration, turning assets into liabilities and endangering lives. To minimise damage and protect human life, it is crucial that urban local bodies have integrated functions.

During a crisis, disjointed management – where water, transport, fire services and planning are handled by separate departments – can create significant challenges.

Asia is not alone
Paris shined this summer showcasing its best during the 2024 Summer Olympic Games. However, more than a century ago, the city was devastated by the Great Flood of 1910. Large parts of Paris were submerged for two months, including the famed metro subway system and over 20,000 buildings. Although Paris now has a chief resilience officer to mitigate the impact of future floods, it is estimated that rebuilding the infrastructure after a similar flood today would cost over EUR30 billion.

Europe is dotted with historical flood markers on its buildings, serving as a reminder. Both the public and politicians should heed these warnings from the past and prepare for the next flood.

3Ds: damage, disruption, disease
Floods have economic, social and environmental impacts. Economically, they cause damage and disruption to property, manufacturing, businesses and the daily activities of residents.

For instance, the 2011 Thai floods severely impacted the manufacturing sector forcing over 14,000 businesses to close nationwide. Approximately 1,300 factories in central Thailand were affected, disrupting both local and global supply chains.

Production of cars, electronics and other goods was halted for months as factories were submerged. This disruption had a ripple effect on global manufacturing, with Japanese car manufacturers suspending production for several weeks.

Social impacts include health risks from exposure to contaminated floodwaters, increased waterborne diseases and mental health issues stemming from loss and displacement. Long-term effects such financial strain, loss of education and damage to cultural heritage are challenging to quantify.

Environmentally, floods cause soil and bank erosion, bed erosion, siltation and landslides. They damage vegetation, and pollutants carried by floodwater can degrade water quality, habitats and flora and fauna.

Playing catch-up
Mitigating and adapting to urban flooding requires a comprehensive approach that combines structural solutions such as storm surge barriers and retention areas along with non-structural solutions, which are urban planning adjustments, response capabilities and aligning institutional frameworks.

Outlined below are key strategies to address urban flooding – integrating immediate actions with long term nature-based solutions to mitigate disaster:

Urban planning. Adapting urban planning and zoning practices to consider flood risk can help guide development away from flood-prone areas and ensure that new construction incorporates flood-resilient design principles. Integrating floodplain management regulations into urban planning and zoning can reduce exposure to flood risk. Additionally, improving capacity and ensuring regular maintenance of drainage and sewer systems can better manage stormwater and reduce overflow during heavy precipitation events.

Improving resilience at the community level. Educating the public about flood risk and tailoring solutions on each community’s risk and flood profile are essential. This may include encouraging the use of traditional construction techniques that ensure all floors are raised above typical flood heights.

Sponge cities. Following the model adopted in China, the concept of sponge cities involves maximising open land and green spaces to absorb and manage rainfall. By integrating parks and green infrastructure, these cities can significantly reduce the risk of flooding. This can also use rainwater harvesting techniques to recharge groundwater.

Using modernised flood protection. Structural elements such as dams, levees, and retention basins can significantly reduce flood risk for communities. In addition to traditional methods like manually filled sandbags, there are now more innovative flood protection systems available for individual homeowners or businesses.

Conserving water bodies and mangroves: Preserving and restoring natural water bodies such as lakes and wetlands, play a crucial role in flood management by acting as reservoirs for excess rainwater, preventing its accumulation in urban areas. Strict regulations are necessary to prevent encroachments and pollution of these vital ecosystems.

These solutions are not new, and many countries have attempted to implement them in various ways. Thailand’s 2011 floods were devasting but led to significant improvements in flood management. Since then, the country has invested heavily in flood mitigation, introducing a strategic water management plan and funding flood risk reduction infrastructure in vulnerable areas.

Similarly in India, the 2024 amendment to the Disaster Management Act of 2005 proposes establishing an Urban Disaster Management Authority (UDMA) in each state capital and all cities with municipal corporations. The bill also mandates the creation of a disaster database at both state and national levels.

The role of (re)insurance
Floods are one of the most complex natural perils, with highly localised impacts, making them more challenging to insure compared to other perils. The varying risk characteristics of different types of floods – river, flash, storm surge – add to this complexity. Affordable insurance is often unavailable for poor communities.

A fundamental principle of insurability is “assess ability”. Risk exposures, variation in vulnerability, and local geographic complexities make it difficult for insurers to design an ideal product. Another crucial principle is mutuality or diversification. If only the high-risk customers, such as those who have previously experienced a flood claim, seek flood coverage, it becomes prohibitively expensive without sufficient diversification.

Effective product design starts with data. However, detailed, accurate information on flooding hazards is often hard to obtain at national and local levels due to the lack of high-quality, high-resolution topography, complicating risk assessment and modelling.

For over a decade, Allianz Re has utilised flood maps from a major external provider. These flood hazard maps, combined with internal and external portfolios, help build a comprehensive risk picture. The availability of flood catastrophe models in Asia has gradually expanded, aiding in estimating capital requirements and reinsurance costs.

Geocoding of insured assets is vital for flood risk assessment because flood events are so geographically specific. For instance, a property located at the bottom of a hill is at greater risk than one slightly elevated nearby. Geocoding enhances pricing accuracy, risk knowledge, and portfolio diversification, avoiding risk accumulation in hotspots.

However, geocoding assets in Asia can be challenging due to imprecise addresses. Street names and numbers are not as strictly defined in some regions, often leaving models with only a postal code. Additionally, information such as construction year, building materials and design can also be difficult to obtain, reducing the effectiveness of flood risk mitigation tools.

(Re)insurers have improved their understanding of supply chain vulnerabilities and their ability to accurately price flood risk. Governmental efforts to boost insurance penetration are crucial to closing the flood protection gap. At Allianz, we leverage our global expertise to assists our clients in developing solutions for their local markets.

Sonia Rawal                   P&C and Agriculture Client Manager, Allianz Re

Katherine Wenigmann                Flood Expert, Allianz Re

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