ASEAN In­te­gra­tion & Mar­ket Prospects

Mar­ket Prospects Im­prove for In­sur­ers

Insurance - - FORSIDE -

IN­TE­GRA­TION OF IN­SUR­ANCE MAR­KETS AMONG THE 10 MEM­BER STATES OF THE AS­SO­CI­A­TION OF SOUTHEAST ASIAN NA­TIONS (ASEAN) HAS A WAY TO GO, THOUGH PROSPECTS FOR CLOSER CON­NEC­TIV­ITY IN A RE­GION PRE­SENT­ING VI­BRANT GROWTH GIVE IN­SUR­ERS AND REG­U­LA­TORS IN­CEN­TIVE TO FO­CUS ON BOOST­ING COM­PET­I­TIVE STRATE­GIES. THIS RE­PORT LOOKS AT THE REL­A­TIVE STRENGTHS OF REG­U­LA­TORY SYS­TEMS, NEW BUSI­NESS AND CAP­I­TAL AT­TRAC­TION, AND ECO­NOMIC FUN­DA­MEN­TALS, AS WELL AS THEIR PROSPECTS FOR SUC­CESS IN TERMS OF MAR­KET AND BUSI­NESS COM­PET­I­TIVE­NESS.

ASEAN is a geopo­lit­i­cal and eco­nomic or­ga­ni­za­tion com­pris­ing Brunei, Cam­bo­dia, Myan­mar, the Philip­pines, Laos, In­done­sia, Malaysia, Sin­ga­pore, Thai­land and Viet­nam. The pro­posed ASEAN Eco­nomic Com­mu­nity (AEC) slated for 2015 aims to cre­ate a com­pet­i­tive eco­nomic re­gion with a sin­gle mar­ket and pro­duc­tion base by fa­cil­i­tat­ing the free flow of goods, ser­vices, in­vest­ments, skilled la­bor and cap­i­tal. Reg­u­la­tions, eco­nomic con­di­tions and ease of do­ing busi­ness dif­fer greatly among ASEAN coun­tries. That di­ver­sity extends to po­lit­i­cal sys­tems, cul­tures, lan­guages and re­li­gions, com­pli­cat­ing the AEC project in prac­tice. Com­plete in­sur­ance in­te­gra­tion may be dif­fi­cult in view of the re­gion’s di­verse back­grounds and mar­ket needs,

“In­sur­ance com­pa­nies within ASEAN have limited ca­pac­ity to write big com­mer­cial risks, im­ped­ing their com­pet­i­tive­ness in light of mar­ket lib­er­al­iza­tion.

com­pared with a de­vel­oped mar­ket such as Sin­ga­pore with its so­phis­ti­cated re/in­sur­ance hub and at­trac­tion for in­ter­na­tional and re­gional busi­nesses. In the longer term, less-de­vel­oped coun­tries may ben­e­fit from the ac­cel­er­ated pace of im­prove­ment in in­sur­ance reg­u­la­tion. Reg­u­la­tory devel­op­ment leads to a stronger and more level play­ing field, which will cre­ate mar­ket con­sol­i­da­tion and cap­i­tal stress for some in­sur­ers on the way to achiev­ing a well-func­tion­ing and stan­dard­ized sys­tem. With 600 mil­lion peo­ple, a rel­a­tively young pop­u­la­tion and ag­gre­gate gross do­mes­tic prod­uct of USD 2.4 tril­lion in 2013, ASEAN has promis­ing in­sur­ance de­mand sup­ported by per­sis­tent devel­op­ment of the re­gion’s di­verse economies. Com­pared with other emerg­ing Asian mar­kets, In­dia re­ported GDP of USD 1.88 tril­lion and had a pop­u­la­tion of 1.25 bil­lion in 2013. China’s GDP was USD 9.24 tril­lion with a pop­u­la­tion of 1.36 bil­lion. Coun­tries with stronger eco­nomic fun­da­men­tals such as In­done­sia see greater at­trac­tion for new in­sur­ance in­vest­ment. New fron­tier coun­tries such as Cam­bo­dia and Myan­mar also have drawn new in­sur­ance ac­tiv­ity, although devel­op­ment of their mar­kets is at a pre­lim­i­nary stage. As the ASEAN mar­ket looks to be a pro­duc­tion base for world mar­kets, the abil­ity to pro­vide in­sur­ance ca­pac­ity is vi­tal for in­dus­try across the re­gion. To this end, the seven mem­ber na­tions of Brunei, Cam­bo­dia, In­done­sia, Malaysia, the Philip­pines, Sin­ga­pore and Viet­nam plan to fur­ther open their non-life and rein­sur­ance mar­kets by 2015, ac­cord­ing to the AEC blue­print. In­sur­ance com­pa­nies within ASEAN have limited ca­pac­ity to write big com­mer­cial risks, im­ped­ing their com­pet­i­tive­ness in light of mar­ket lib­er­al­iza­tion. To en­hance the in­dus­try’s com­pet­i­tive­ness, reg­u­la­tors have adopted ini­tia­tives to scale up mea­sures such as cap­i­tal re­quire­ments as a way to align in­dus­try stan­dards with in­tra- and in­ter-re­gional norms.

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