Kathmandu. Natural disaster insurance is expected to be profitable in the long run. However, both economic and insured deficits will outweigh countries’ GDP growth in the medium to long term.
International rating agency Fitch Ratings said Asia-Pacific’s insurance sector’s profit growth will likely be driven by innovative products backed by strong public sector schemes and constructive regulation. The rating agency has also identified wealth creation, urbanization and climate change as key drivers behind the growing demand for disaster coverage.
However, the Fitch report warned that issues such as affordability concerns, capacity constraints, data shortages and weak legal framework could lead to long-term franchise losses for the insurance industry. To mitigate these risks and prevent the insurance coverage gap from widening, Fitch Ratings recommends that policymakers, supervisors and insurers work together to implement other solutions.
This includes microinsurance, parametric cover and insurance-linked securities, as well as climate adaptation measures, risk-sharing mechanisms and government-backed reinsurance plans. –Agency
