ASEAN Integration & Market Prospects
Market Prospects Improve for Insurers
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.