Six years of low interest rates coupled with economic sluggishness is not an economic environment that would breed optimism.
Although low rates can have some advantages, such as lower asset prices and financing costs, the main disadvantage – lower returns on assets – is making it difficult for insurers to maintain profitability and support current and legacy needs.
Even if rates do rise, the effects of these low rates will continue to affect portfolios. And operating costs and competition are rising as markets continue to evolve, pushing insurers in Asia to seek more effective ways to manage their businesses and maintain profitability.
A broad range of sustainable strategies are currently available that can help insurers generate reliable revenue, maintain profitability and manage operating costs. To do
so, however, companies would be well advised to look at ways to: improve capital and asset-liability management; develop, market and distribute products that will meet the needs of growing market segments; and creatively support current and future risk.
Mr Ken Su of RGA Asia Pacific, Mr Marc Sofer and Mr Jerome Matrundola, both from RGA Reinsurance Company Hong Kong and Southeast Asia, suggest strategies insurers can look at to thrive under the current low interest rate environment.