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EC News: Asia Edition 2 November 2016

  • Publish Date: Posted over 7 years ago

Insurers' embedded values increases 14% in Asia last year

The embedded value (EV) of 34 major Asian insurance companies, excluding Japan, rose by 13.6% on a constant currency basis last year. A study by Milliman, which is a global provider of actuarial and related products and services, found that the total value reached US$376 billion. The persistent fall in some Asian yield curves last year has put pressure on EV results and raised reserving/capital requirements in several markets. Paul Sinnott, Milliman principal and consulting actuary said, “Companies are being forced into rethinking product and investment strategies, as well as recalibrating economic assumptions. Despite these challenges, new business growth has been strong in several markets.” Insurers in China witnessed the greatest growth in EV at 22%, fuelled by growth in new business and generous yield curves. New sales, however, have been short term and high guarantee resulting in unchanged EV economic assumptions. Hong Kong and China posted the most growth in the value of new business at 54% and 35% respectively, compared to South Korean insurers who posted a fall of 2%. The report looks at EV-related practices followed by major insurance companies and discusses EV reporting issues given the move toward Solvency II in Europe and the global adoption of international financial reporting standards.


Two AXA entities merge into one unit

AXA have revealed plans to join its life and general insurance entities in Asia to create a joint unit in Singapore. The general insurance business, called AXA Insurance Singapore, has been in the region since 1969 while AXA Life Insurance Singapore was established in 1999. Doina Palici-Chehab, who is chief executive of both operations, said that the only reason they operated separately was due to their creation at different times but recently they realised they could achieve greater synergy merging the two areas. A merger means the organisation can be more cost effective which is a benefit for stake holders and it also means employees have a joined up working environment. The insurer started on the consolidation attempt at the beginning of this year, including lodging an application for a composite licence. AXA's 700 or so staff will be retained in the consolidation, which will cost around $1 million to effect.


Insurtech investments in Asia are increasing due to regulations

Asian insurance companies are increasing investments in the insurtech space, especially in areas such as telematics, biometrics and big data, but face a number of regulations according to a new guide by a leading global law firm. The report outlined developments in several markets in Asia, for example, in Singapore in April 2015 the MAS launched a web aggregator called compareFIRST, which gives consumers freedom to compare the premiums and features of life insurance products whilst doubling as a direct purchase channel, allowing people to buy simple life insurance products without commissions and financial advice. Fintech will be a big enabler in constructing better and more efficient work processes and developing new business models that will result in higher growth, cost savings and better services for industry participants. In Japan, the direction and contents of insurtech innovations to be implemented are still under study and discussion by the regulator and market players including insurance companies. Since 2015, some non-life insurance companies have launched new insurance services utilising telematics.


Underinsurance in Singapore to be addressed

Singapore’s small-and-medium sized enterprises (SMEs) are an important section of the economy, but many don’t have any form of insurance. Changing this has become a priority for QBE Singapore. Singapore, despite being faced with a small domestic market, few natural resources and high poverty levels when it became independent in 1965, has become a first-world economy. SMEs have played an integral role in both driving Singapore’s continued growth and creating new jobs. SMEs make up 99% of all businesses in Singapore and provide employment for 70% of its growing workforce. Despite their importance to the economy it seems many SMEs are dangerously underprepared for dealing with common business issues, risks that if continually ignored or underestimated, could threaten their long-term survival.


Cyber-attacks to cause US$2 bln of losses in the energy sector by 2018

Cyber-attacks against oil and gas infrastructure could cost US$2 billion by 2018. Effective insurance cover against cyber risk remains hard to come by and not only in the energy space. Major obstacles to traditional insurability still remain, like the challenge in developing accumulation scenarios or the exposure to wilful acts. So far, the majority of policies issued by the upstream and downstream energy markets contain cyber exclusion as underwriters find it difficult to assess and quantify cyber risk. Another challenge is the notable legislative momentum affecting the operations of energy companies. Environmental law imposes strict liability for clean-up and third party damage from all operational phases. Growing public awareness of environmental matters has put operators under unprecedented scrutiny. Many claims relating to the environment have exceeded US$1 billion in recent years, including clean-up costs and subsequent pure financial losses.


Asia still full of marine opportunities

Asia still offers the marine industry lots of opportunities, despite challenging conditions globally. The marine and insurance industry can work in tandem to strengthen economic growth and contribute to the well-being of the region, said Chairman of the Hong Kong Federation of Insurers, Ronnie Ng. Hong Kong’s Secretary for Transport and Housing, noted that while many older risks for the marine industry like Nat CAT remain a constant, other risks have comparatively higher relevance in the current operating environment and slow global economy. These include risks associated with the collapse of shipping giants which have been more frequent recently. Prof Cheung said, “The government has an important role to play to reduce the business risk level by improving its regulatory efficiency and promoting fair, transparent and predictable governance.” One example is the establishment of new global regulations, such as the recent SOLAS (International Convention for the Safety of Life at Sea) container weighing rule, which would help raise international shipping safety standards. Hong Kong has been one of the very first to publish some local guidance to the shipping industry and it has also established the Maritime and Port Board in Hong Kong designed to strengthen maritime services.


China Oceanwide buys US insurer Genworth for US$2.7 bln

China Oceanwide Holdings Group and Genworth Financial have penned an agreement where China Oceanwide has agreed to buy all of the remaining shares of Genworth for a total transaction value of approximately US$2.7 billion in cash. China Oceanwide has additionally agreed to put forward $600 million of cash to cover the debt maturing in 2018 as well as $525 million of cash to the US life insurance businesses. This injection is in addition to $175 million of cash previously put forward by Genworth Holdings to the US life insurance businesses. The transaction is pending approval by Genworth’s stockholders as well as other closing conditions, including the receipt of required regulatory approvals. The acquisition, which has been accepted by both companies’ boards of directors, is thought to be completed by the middle of 2017. Genworth will be a standalone subsidiary of China Oceanwide and Genworth’s senior management team will continue to lead the business from its current headquarters in Richmond, Virginia.


Demand for cyber insurance grows due to rise in cybercrime

A growing number of companies in Singapore want to insure themselves against data breaches and network disruptions, as greater digitisation makes operations more vulnerable to malicious hacking attempts and network failures. The growing threat of cybercrime has led to increased awareness and interest in cyber insurance. Insurance broker Howden said that its Singapore office has seen inquiries double in the past year, while AIG Singapore reported that it saw a seven-fold increase in inquiries about cyber insurance policies over the past three years. Market players have reminded companies that policies can cover a wide range of cyber incidents, including malicious external activity, the actions of a rogue employee or inadvertent disclosure, such as an error from a well-meaning employee.


JLT Re Indonesia hires Graeme Harley

JLT Re have appointed Graeme Harley as managing director of JLT Re Indonesia, pending regulatory approval. Harley will be based in the company’s Singapore office before relocating to the firm’s Jakarta office once the appointment has been officially approved. He joins from IBS Risk, where he was a technical advisor and has previously worked for JLT Asia in Singapore. Kenny Moyes, CEO of JLT Re Asia, said: “Graeme Harley is a great addition to the team and has been in the industry for over 25 years where he coincidentally started his career with Jardine Insurance Brokers Group in London before transferring to Singapore, where he worked in the wholesale reinsurance broking operation of JLT Asia.”