Emerging markets in Asia propel health reinsurance growth

In smaller SEA markets, reinsurers continue to support the growth of health insurance.

The global health reinsurance market has experienced continuous growth, with premiums increasing at a moderated pace over the last three years, revealed AM Best.

In 2023, the US market saw a significant rise in health reinsurance, driven by the commercial and stop-loss segments. Meanwhile, Asian markets emerged as the fastest-growing segment in health insurance, pushing the demand for reinsurance support.

Whilst the direct impact of COVID-19 on health insurance utilisation and claims has subsided, the pandemic's aftermath has led to increased utilisation of medical services globally. 

The postponement of diagnostic tests during the pandemic resulted in a higher-than-normal number of cancer and heart disease cases being identified. Additionally, heightened awareness of health and physical well-being has driven more people to seek preventive care.

In emerging markets, particularly in Asia, the demand for health reinsurance continues to grow, driven by the rapid expansion of health insurance premiums. 

Fixed-benefit products, such as critical illness and personal accident insurance, have seen substantial growth in these markets. However, as markets mature, the demand for basic health products has moderated, while more sophisticated products remain too expensive for mass consumption. 

Reinsurers are increasingly involved in supporting new product development in partnership with local primary carriers.

China, in particular, has seen significant developments in the health reinsurance market. The popularity of multi-year critical illness products, which had high penetration levels over the past decade, has led to increased medical costs due to more frequent screenings and a rise in cancer diagnoses. 

In response to market demand, Chinese primary carriers are introducing new products targeting specific demographic segments, such as seniors, youth, and women. The accumulation of vast amounts of data is enhancing underwriting and pricing capabilities. 

Additionally, the Chinese government is providing private insurance carriers with access to population health data and supporting their operational capabilities.

Health reinsurers tend to be local or regional carriers, but global players remain active in the market. The formation of new reinsurers has been limited due to regulatory challenges and a lack of interest from capital markets. 

Overall, health products remain profitable, reducing the need for reinsurance support. However, reinsurance cessions for health products in China have been around 10%, which, given the market's vast size, still presents a significant opportunity for reinsurers.

In smaller Southeast Asian markets, reinsurers continue to support the growth of health insurance products. Although the level of cessions is relatively small, reinsurers play a crucial role in product development, data analytics, underwriting, and claims management. 

Medical inflation and higher frequency of health insurance claims in these markets have led primary carriers to implement substantial rate increases, potentially driving additional demand for reinsurance to provide capital relief and support further product expansion.