Asia

Written by Rebecca Wong (Partner) and Macca Anderson-Brown (Associate)

Key Developments in 2025 

A challenging macroeconomic environment

From the Trump Administration's protectionist tilt to geopolitical conflicts in major trade corridors such as Europe and the Middle East, Asia has been forced to adjust to a rapidly shifting macroeconomic landscape.

These global pressures translated into a complex storm of softer trade demand, subdued economic growth, persistent inflation and heightened market volatility, all of which created a more difficult operating backdrop for insurers across the region.

Asia's position as a global manufacturing hub meant it felt the effect of supply chain strain more acutely, with disruptions in cross-border production networks feeding directly into corporate balance sheet pressure across key markets. As regional growth softened and financing costs climbed, more Asian businesses struggled with cash flow stress and insolvency risk, a trend that did not go unnoticed by trade credit insurers, many of whom reported rising late payment activity and an uptick in claims across trade exposed sectors.

Taken together, 2025 was a year in which macroeconomic and geopolitical volatility materially shaped insurer behaviour across Asia, influencing pricing, capacity decisions and overall risk appetite.

Increased regulatory enforcement in emerging areas

2025 saw a marked escalation in regulatory enforcement across Asia, with regulators sharpening their focus on key areas such as financial services, cybersecurity, data and privacy, climate and ESG, and general corporate governance. Coverage for regulatory costs and insurable fines continue to feature, particularly across financial lines insurance offerings.

In Hong Kong, the introduction of HKEX's mandatory climate-related disclosures, signalled a decisive shift towards stricter sustainability governance and board-level accountability. Furthermore, the SFC has also ramped up enforcement activity, targeting fund-manager misconduct, instances of the misuse of client assets, and disclosure failures in market communications. The horrific fire on 26 November 2025 at Wang Fuk Court in Tai Po, caused mass casualties and property damage estimated at US$334 million. The incident has shone a spotlight on the Hong Kong construction industry, with experts calling for stricter rules around oversight of building material safety, site management and inspections.  The ICAC has since launched an investigation into suspected corruption for the renovation project at the premises and a judge-led committee into the cause of the incident has been announced. 

Singapore has followed a similar trajectory, with the PDPC, its regulator responsible for enforcing Singapore's data protection and privacy laws, significantly stepping up enforcement in 2025, issuing a financial penalty against a SaaS provider following a major ransomware related breach and maintaining a firm stance generally on organisations that fail to meet required security and accountability standards under the PDPA. Separately, the MAS has continued to mount a strong display against financial services firms, prioritising enforcement action centred on governance failures, weak AML/CFT controls and deficiencies in technology and operational-risk management.

Lastly, amid the rapid rise of AI-generated content and increasingly sophisticated deepfakes, China has expanded its cybersecurity and data-governance framework by introducing a comprehensive regulatory regime for generative AI. The new rules, which came into effect in September, require AI-generated text, images, audio and video to be clearly labelled as such, and sit alongside existing obligations requiring providers of large scale or publicly facing AI models to file underlying algorithms with the CAC prior to deployment.

As the world evolves, bringing with it new frontiers of risk, regulators across Asia remain as determined and vigilante as ever to ensure adequate protections are in place to safeguard markets.

Climate change and catastrophe insurance

Climate change driven weather events continue to place pressure on the industry.

Asia remains the global epicentre of climate-related catastrophe risk, with an estimated 40% of the world's natural disasters striking the region, yet it continues to suffer from one of the widest protection gaps globally, with an estimated 82.8% of losses remaining uninsured.

This year, property damage as a result of the region's natural catastrophe events remained relatively manageable with an outlier being the 7.7 magnitude earthquake that hit Myanmar in March, the effects of which extended into Thailand. Early assessments placed insured losses in Thailand at around US$1.5B, with around 150,000 claims filed.

What is also becoming clearer is that the role of insurers is no longer confined to absorbing the financial fallout of natural catastrophes; rather, there is now a growing expectation across Asia that insurers will take proactive steps towards bridging the protection gap, both indirectly by integrating ESG frameworks into underwriting to influence real world behaviours (for example, offering more favourable policy terms for buildings with stronger flood defences, renewable-energy infrastructure, or climate resilient construction) and directly, through the development of more accessible catastrophe products such as parametric covers and community-based microinsurance. While microinsurance has historically played a limited role in insurers' portfolios due to low premium volumes and high administrative costs, it is poised for significant growth across Asia as governments and individuals become increasingly cognisant of its role in bridging the protection gap for lower-income demographics, who disproportionately feel the effects of climate related losses.

What to look out for in 2026

Emerging growth in Asia as a whole

Despite facing significant economic headwinds, Asia has emerged as a rare engine of expansion throughout 2025, a trend that is expected to carry into 2026. An indicator of the region's resilience has been the sharp rebound in M&A activity, with deal volume and value rising across key markets despite a challenging macroeconomic backdrop.

Among others, this presents a meaningful opportunity to capitalise on the growing demand for transactional risk solutions. On this, we note that 2025 has already seen a noticeable uptick in W&I placements across Asia, underscoring both the rebound in deal activity across the region but also the growing adoption of W&I insurance as an effective way to transfer risks in transactions.

Insurance for digital asset service providers is also expected to be a growth area, with regulators in the region recognising the significance of its role from a consumer protection standpoint. The Hong Kong SFC, for example, requires licensed virtual asset service platforms to maintain insurance covering client assets held in both hot and cold wallets. This requirement has been subject to industry feedback regarding the difficulties in compliance given, among others, the lack of capacity provided by insurers in the region to cover such risks. The SFC is, therefore, considering modifications to the same – while local capacity for such insurance is gradually increasing.

Rising demand for AI liability insurance

While AI-driven losses may be silently covered under existing policies (for example, professional indemnity and cyber insurance policies), the industry is wising up. We are seeing insurers excluding exposure to such risks under existing policies, with a new focus on developing coverages that respond to the unique risks created by AI adoption such as AI failures / limitations, including hallucinations, biased outputs and autonomous decision-making errors.  For example, Munich Re, AXA XL, Armilla AI, Chaucer, and PICC are reportedly developing specialised, standalone AI liability products and/or adding AI-specific endorsements to existing technology, cyber or professional lines policies

Insurance for AI liability is a promising growth area for insurers and indeed, Deloitte has estimated that by 2032, AI liability premiums globally will be upward of USD$4 billion.  Underwriting AI liability will no doubt be challenging for insurers given the lack of (if any) tested wordings in the market and the fast pace at which AI (and, therefore, its associated risks and regulations) are evolving.

Going forward, trends in this area are worth monitoring, as regulatory scrutiny intensifies, particularly around responsible AI governance. It is therefore not inconceivable that AI liability insurance could become an expectation, or even a mandated requirement, for businesses operating at scale with AI systems sometime in the future.