PARIMA 2021: Institutional capital an alternative to traditional capacity

There is a greater need for public-private partnerships (PPPs) when it comes to renewable energy projects, panelists at the Pan-Asia Risk & Insurance Management Association’s (Parima) 2021 Resilience Week conference said yesterday.

If the world is to avoid an energy crisis and transition to green energy, greater government support in the form of subsidies is necessary because the renewable energy market has not been profitable for the insurance industry for “many, many years”, said Willem van Wyk, HDI Global’s regional market manager for Asean and Australasia.

While 65% of insurers insure oil and gas projects, only about 35%  insure green energy projects, van Wyk said during an October 26 panel discussion titled “Brace for impact: managing the risks behind mega trends”.

Renewable energy often involves new technology and green energy projects are often set up in harsh environments with high heat and/or high winds which are “not models that we like”, van Wyk said. Therefore, PPPs are often necessary to successfully navigate the high exposure especially, van Wyk added.

Last November, Asean market leaders and regulators met and discussed various priorities and the need for greater collaboration.

The need to transition from conventional energy projects to renewable energy was identified as one of the four major megatrends in the region. A rising population coupled with economic growth is giving rise to an increasing demand for energy, said Edward Ler, Chubb’s head of South-East Asia, during the same panel discussion.

Many European countries are no longer financing coal projects for want of insurance coverage, said van Wyk, adding that there are a few insurance companies in Asia that insure coal power projects. The insurance sector has a critical role to play because energy projects cannot secure financing without insurance, he noted.

As reported, Tokio Marine Holdings recently announced that it will no longer underwrite or invest in thermal coal mining projects in Japan or overseas. This makes Tokio Marine the first Japanese insurer to back out of underwriting or investing thermal coal mining. Last September, the insurer announced that it would not underwrite or finance any coal-fired power generation projects.


The world is in a transition period and the insurance industry has “not adapted fast enough”, added van Wyk. “We will need to adapt quickly in the next few years.” The danger lies in insurance companies moving away from coal-based energy projects but not moving fast enough to insure renewable energy projects, he added.

Urging for a greater degree of collaboration between governments and insurance companies, Ler said that working with governments is necessary to resolve some of the most pressing issues.

Parima chairman Franck Baron addressed the issue of climate change during the opening plenary session where he urged risk managers to ensure that companies act with haste while investing more in resilience.

“Businesses are operating in a world where it is not enough to talk the talk where the climate crisis is concerned,” Baron said, adding that failing to act would have grave legal, regulatory, reputational and ultimately existential consequences.

Pension funds and sovereign wealth funds can help create additional capacity in the market, Aon’s newly appointed APAC chief executive officer told the audience during the Pan-Asia Risk & Insurance Management Association’s (Parima) 2021 Resilience Week conference yesterday.

Highlighting the challenges the insurance industry faces in terms of limited capacity, Anne Corona suggested new structures including catastrophe bonds or the boosting capacity by bringing in pension funds and sovereign wealth funds.

Commenting on how cyber insurance risk is very close to her heart, Corona said during an October 27 fireside chat with Franck Baron, chairman of Parima, that the industry should work together to create more innovative alternatives to traditional insurance. This could include the use of captives and long-term policies with no claims bonuses, she suggested.

With demand for cyber insurance continuing to increase, there is a need to come up with new creative solutions to increase insurance capacity given the current limitations.

Commenting on Aon’s failed acquisition of rival Willis Towers Watson, Corona said that the focus of the proposed combination would have been to accelerate innovation to meet the “unmet needs of our clients, and how to create solutions to help our clients.”

With risk — as a percentage of gross domestic product (GDP) — continuing to fall over the past 30 years, Aon wants to make sure that it continues to be relevant, which was the reason for the proposed combination, Corona said.

“Unfortunately we needed to make a difficult decision to part ways … as we were asked to make decisions, which we felt would not be in the best interest of our clients and our colleagues,” she said.

In her first impression of the Asia Pacific region, Corona highlighted how many international insurers are investing in talent and bringing in talent from around the world, which is a good indication of the importance of the region for all insurers.

Corona has been with Aon from the very beginning of her insurance career back in 2000 and has held various positions based in the UK and the US. She took over as head of the APAC region in July and will be moving to Singapore.

BI ranked topmost risk in Asia 

Cyber-attacks and data breaches were identified as the topmost globla risk in Aon’s 2021 Global Risk Management Survey, released on October 26. This was largely on account of the greater emphasis and reliance on technology.

In Asia, however, business interruption risk ranked number one. According to Aon’s survey, this is because tourism contributes up to 10% of the region’s GDP and thus business interruption and economic recovery were the two highest-ranked risks.

Jane Drummond, Aon APAC’s chief commercial officer, speaking during an afternoon panel on the top risk concerns in Asia Pacific, pointed out that with Asia being a leading manufacturing hub in the world, it is only natural that business interruption risk would be ranked number one.

Franck Baron, chairman of Parima and a group deputy director at International SOS, said he was “shocked” that climate change was only ranked 23 in Aon’s survey of global risks. He added that many of the top 20 risks, are linked to climate change, citing the example of business interruption.

Aon’s survey said that while climate change is ranked 23 today, it is expected to rise to number 11 in three years.

“Extreme weather events are occurring regularly in Asia… and the region still relies heavily on coal, but the potential of the energy transition to address climate change isn’t garnering significant attention,” the survey said.