Fitch Ratings believes that the emerging trend of catastrophe bond issuance will catch on in the Asia-Pacific region, particularly for catastrophe-prone markets such as Japan and China.

It said this was likely as the region steps up efforts to strengthen resilience to disasters, coupled with the fact that insurers are looking for alternative sources of funding to reduce their dependence on reinsurers.

In a special report, Fitch said the high catastrophe exposure and significant gap between insured losses and economic losses mean the region is in need of reliable insurance and reinsurance protection for its catastrophe losses.

And Fitch said another trend of catastrophe funds and pools has emerged in certain Asian markets. These initiatives are typically led by the governments or industry associations. Thailand and China have started the process of implementing such initiatives as part of their national disaster-management schemes, which would help the local insurers and reinsurers manage their catastrophe losses.

Although this year has, to date, been relatively free of major catastrophes, the chemical warehouse explosion in the city of Tianjin, in China, on August 12, has potentially caused insured losses of between $1 billion and $1.5 billion, according to industry estimates.

Fitch expects the Asian reinsurance landscape to be shaped by a combination of three factors — new operations established by foreign reinsurers in Asia; start-ups by Asian insurers themselves; and ongoing merger and acquisition activities in specific Asian reinsurance markets.

The full report, titled “Asian Reinsurance Markets: Playing Catch-up to Strengthen Asia's Resilience to Catastrophes” is available from www.fitchratings.com