Most of the Asia-Pacific region’s largest insurers have enough capital to withstand a one in 250-year natural catastrophe, according to S&P Global Ratings.

The ratings agency says insurers face significantly higher natural catastrophe losses, driven by a triple threat: inflation, rapid urbanisation and the escalating impacts of climate change.

Yet they have a resilience to natural disasters, and the associated high costs “remain manageable”.

About 80% of the region’s 30 most exposed insurers and reinsurers would remain above their target capital levels following a one in 250-year catastrophe, although capital redundancy would fall from almost 20% to about 15%, the ratings agency says.

S&P estimates about half of the top 30 could withstand a one in 500-year catastrophe, supported by an average reinsurance recovery rate of 52%.

The report finds pressure comes from a range of factors: regulatory reform; investment volatility; cyber risk; persistent inflation; geopolitical uncertainty; changing capital and solvency regimes including the IFRS 17 accounting standard; and the growing impact of artificial intelligence.

These are pushing up costs and have led insurers to change tack on investment and asset liability management, S&P says.

The agency expects that to address rapid regulatory change in Asia-Pacific, insurers will maintain capital strength by using more adaptive management strategies and increase their use of debt and hybrid instruments.

Reinsurance remains a highly valued risk mitigant, S&P says.

“Intensifying threats from AI adoption and emerging cyber risks are also necessitating stronger governance and digital investment," S&P analyst Craig Bennett said.

“Sound risk and capital management support our view that most insurers in the region would be resilient to natural disasters.”