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EC News: Asia Edition 1

  • Publish Date: Posted over 7 years ago

Singapore is right behind London as the world’s top business and financial hub

Singapore is right behind London as the world's top location for business and commerce, according to PwC's "Cities of Opportunity 7" report released last week. The remaining top five are Toronto, Paris and Amsterdam. Cities were examined on data from 2014-2015, with conclusions from the study underscoring a key premise, city success needs balanced social and economic strengths, which finds high scores in the human elements of urban life. Although put together prior to the June 2016 UK referendum vote to leave the EU, information in the report’s wide ranging measurements gives an idea to its competitors of both London's international strengths and areas it may have to strengthen post-Brexit. Meanwhile, Ravi Menon, MAS's managing director, said that London would continue as the major financial centre after Brexit. He said that Brexit would not tarnish London’s appeal as a financial hub. Lloyd's Chairman John Nelson had said that the UK's standing as number one in the global insurance market could be at risk after Lloyd's said it may have to move some of its business to continental Europe as a result of the Brexit vote. He said that the UK government needs to provide “clarity” about the UK's future relationship with the EU. He said: “Lloyd's is Lloyd's, it is not Lloyd's of London. We operate right round the world. We have our biggest hub outside London in Singapore, we have big hubs in Beijing and Shanghai, and we have a hub in Dubai and big businesses in Latin America.”


New Malaysian accounting rule reason for banks selling insurance units

Banks are growing capital ahead of the new accounting standard on loan impairment called MFRS 9 which stipulates higher provisions in anticipation of future potential losses. Analysts have speculated that this could be the reason banks are selling their non-core assets, including their insurance divisions. Recent examples include RHB Bank starting negotiations to sell its insurance business and Hong Leong Financial Group getting the green light from Bank Negara to sell its shares in Hong Leong Assurance (HLA) and Hong Leong MSIG Takaful (HLMT). All banks are required to adopt the new standard from 1 January. Other than growing their capital, the move by banks to divest their insurance units could further bolster their fee-based income through bancassurance tie-ups with the relevant buyers. It has been reported that Japanese insurance giant Tokio Marine Holdings had entered into talks to acquire RHB Insurance, the general insurance business of RHB Bank, at up to 3.5 times book value or some US$500 million. Earlier this year, Hong Leong Financial Group and its unit HLA Holdings (HLAH) got approval from Bank Negara to start negotiations with specified parties to offload HLAH’s equity interest in HLA and HLMT.


Sompo and CIMB pen Singapore agreement to distribute non-life insurance products

CIMB Bank Singapore and Sompo Insurance Singapore confirmed they agreed a deal for the lender to sell the insurer's non-life products including travel and motor insurance. The cooperation was agreed after the long-term regional non-life bancassurance distribution deal between the two in June. Under the deal, CIMB Bank will market and distribute Sompo's non-life insurance solutions to its 300,000 customer base from the lender's retail banking, commercial banking, credit cards, private banking and preferred banking businesses in Singapore. The products will be sold through the bank's two Singapore branches and online. The bank said it anticipates over 70% growth in its bancassurance (life and non-life) sector over the next three years, while Sompo said it predicts the premiums generated from the bancassurance partnership to increase fourfold by 2020. Showing confidence in the Singapore partnership, CIMB Bank Singapore and Sompo have unveiled two new products, PrivateCar and HomeBliss. In July, Sompo launched its flagship product, TravelJoy.


Fall of Hanjin shipping sparks uncertainty for world sea freight industry

The fall of Hanjin shipping line has caused confusion in ports and retailers around the world, with giant container ships stranded and merchants worried if the tonnes of goods being transported by the South Korean company will reach shops. Hanjin filed for bankruptcy protection last week and stopped accepting new cargo. With assets frozen, the company’s ships were barred from offloading or taking containers abroad because there were uncertainties regarding who would pay tugboat pilots or stevedores. Hanjin is the globes seventh biggest container shipper, owning around 3% of the world’s container capacity and the news left cargo destined to and from Asia with an uncertain future. It is believed that 10 of Hanjin’s ships had been seized at Chinese ports. Seeking to limit the damage, a South Korean court said it would undertake measures to revitalise the carrier, which would enable Hanjin to begin legal action abroad to keep its vessels and other assets from being seized. However, the court action has been viewed as largely procedural and a liquidation of assets is thought to be likely. Hanjin’s banks opted to end financial support and many of its ships were denied entry to ports or blocked from docking as container lashing providers worried they would not be paid.


$1.2bn in share sales the target for Indonesian construction companies

Indonesia's top three state-owned construction companies are seeking to make up to $1.2 billion this year by offloading shares, a strategy that will show the extent of investor appetite for exposure to the country's infrastructure sector. The contractors have secured a portion of the revised budget, which shared 44 trillion rupiah to 20 state-owned enterprises. Private investors are thought to make up more than 70% of the target. Waskita Karya, which received an injection of capital from the government in 2015, is expected to generate up to 5.27 trillion rupiah through an initial public offering of its concrete precast arm, Waskita Beton Precast. In total, 10.54 billion shares of WBP, 40% of the entirety, will be offloaded for 400-500 rupiah per share. Meanwhile, Wijaya Karya and Pembangunan Perumahan want to generate 6.15 trillion rupiah and 4.4 trillion rupiah, respectively, through a rights issue. The government is predicted to exercise its rights to buy new shares. This week, shareholders in both companies approved the issues.


Singapore 2017 growth outlook cut by economists

Economists have cut their economic growth forecasts for Singapore in the third and fourth quarters of this year, as well as in 2017, due to continued concerns over Brexit and China’s economy. They have, however, kept their 2016 growth projections. Gross Domestic Product (GDP) is now thought to grow 1.8% next year, compared with 2.1% predicted by analysts in June. For Q3 of this year, the economists think GDP will now reach 1.7%, down from the 1.8% expected previously. Fourth quarter increases could hit 1.5%, a revision from the 1.7% estimated previously. The growth forecast for 2016 stands unchanged at 1.8%. Credit Suisse economist, Michael Wan said, “This outlook is rather optimistic, the pressure will remain, in fact, will intensify next year given structural risks like increasing costs and declining productivity around Singapore’s economy, which has led to several companies relocating operations at more cost effective locations.” 



FWD Insurance to sell its products directly to consumers

FWD Insurance launched its direct- to-consumer business last week, starting with its travel and car insurance solutions. There are plans to bring in direct purchase insurance soon, beginning with term policies. Abhishek Bhatia, FWD Singapore chief executive said, "The model we've chosen is not to recruit tied agents, which is what most of the players in the industry are doing." The company, which is looking to invest $500 million in Singapore over the next five years, is selling travel and car insurance directly online, without the requirement for an agent to call back with a quote. Long forms will be replaced with short website applications where individuals can get a quote for car insurance in less than 60 seconds and one for travel insurance in fewer than 10. The firm is also bringing in a term in its motor insurance policies, where drivers who have a 50% no-claim discount will have the discount enshrined for life, even if they have a number accidents in the same year. Bhatia said: "As soon as you make the payment, you get an e-mail with the policy, and you get an SMS reminding you that you've got the e-mail. The customer experience is at the centre of the whole thing, from product features to how policies will be bought online."


Reinsurance demand growing with P&C cession ratio up

Demand for reinsurance has grown over the past 18 months, with the cession ratio in the global P&C sector achieving a small rise. This trend is predicted to continue for the remainder of the year, according to Aon's reinsurance market outlook report. CEO of Aon Benfield, Eric Andersen said: “The catalysts for this increased demand for property and casualty reinsurance include factors such as the emergence of poor underwriting results in certain casualty classes, out-sized losses from regional exposures, and the introduction of the Solvency II regulatory regime across the European Union.” The report identified four key areas of growth for the (re)insurance industry, cyber, property catastrophe, crop and mortgage. On crop, the report said “while a more mature market, crop (re)insurance has returned to profitability in the US. Growth has mainly emanated from Asia with the Indian market seeing five times the insurance premiums for the 2016/2017 season compared to the year prior”.


Asia’s agriculture insurance market intensifies with backing by governments

Governments in a number of countries across Asia are marketing agriculture insurance by developing index-based insurance solutions to safeguard the incomes of farmers as well as new technology to speed up claim settlements. The Indian government unveiled the Prime Minister's Crop Insurance scheme while in Indonesia the government owned PT Jasa Asuransi Indonesia started a farm insurance programme with an allocated budget of IDR150 billion (US$11.25 million) with a target coverage of 1 million hectares. In China, Swiss Re has begun the first parametric insurance project protecting Chinese farmers against risks of natural disaster in a reinsurance protection scheme encompassing the government of Heilongjiang Province and the Sunlight Agriculture Mutual Insurance Company of China. In the Philippines, plans are in place to bolster the capital of the government-run Philippine Crop Insurance Corp (PCIC), to allow it to offer index-based insurance coverage and allow it to engage in reinsurance. Arthur Yap, former agriculture secretary said that Philippine farmers suffer crop losses of PHP30 billion (US$631 million) every year but the PCIC, which operates the government's agricultural insurance programme, pays around PHP1.3 billion in claims. “That is why it’s so impossible for farmers to get out of poverty.”


Pablo Diago named as HDI Global SE Singapore's new claims manager

Pablo Diago has been named as the new claims manager at HDI Global SE. Diago brings ten years of experience working in claims as a forensic accountant, claims preparer and litigation support expert globally. Before joining HDI, Diago served as a forensic accountant at the Forensic Advisory Service in Singapore, Cunningham Lindsey's specialist division in investigative accounting, where he worked on the quantification of economic losses for insurance purposes, financial investigations, business disputes and preparation of financial expert reports for court, mediation and arbitration proceedings. He has also served at Marsh Singapore as a forensic accountant looking at preparation of claims quantifying economic losses.


James Beedle appointed head of Asia-Pacific by PartnerRe

PartnerRe Ltd. revealed that James Beedle will join as head of Asia-Pacific & CEO of Partner Reinsurance Asia Pte. Ltd. to lead PartnerRe’s business operations. He starts his new role on 1 January taking over from Alain Flandrin, who will part the Company after a short transition period to pursue other personal and professional interests. Beedle will oversee development of PartnerRe’s business in Asia-Pacific, responding to the needs of clients and advancing the company’s strategic goals. He will report to Tad Walker, CEO of PartnerRe’s Property and Casualty segment and Group Executive Committee member.