Round-up of the latest news and developments from the Asian insurance market with stories regarding the Chinese market, RMS, the Singapore market and more.
Chinese market responsible for 47% of 2016’s global insurance growth
Allianz research has found that China was responsible for 47% of 2016’s growth in total global premium income. Of the EUR150 billion (US$160 billion) in additional premiums recorded globally in 2016, almost EUR70 billion is attributable to China. The research by Allianz suggests that total global premium income grew to EUR3,650 billion. In a year-on-year comparison the global insurance market grew 4.4%. Without China, the insurance world would have achieved growth of only 2.7%. The Chinese market was particularly pronounced in the life insurance business, where excluding the Chinese contribution from the equation would more than halve the rate of global growth from a respectable 4.7% to 2.3% in 2016. China’s fast development is one of the reasons for their performance; last year saw the Chinese life insurance market post the highest rate of growth seen since 2008, at over 30%. The decline in the life insurance markets elsewhere in the world also helped China record such high figures. In Western Europe, premium income is expected to have dropped by 1.2% overall in 2016, the first negative trend seen since 2012. The markets also contracted in parts of Eastern Europe, Poland and the Czech Republic, for example, have witnessed declines for the fourth year running.
Agriculture risk models unveiled by RMS
RMS announced the addition of agricultural risk models for India and China to its line of emerging risks models with plans to widen coverage across the Asia-Pacific and the Americas. Mohsen Rahnama, chief risk modelling officer and general manager of the RMS Models & Data group said, “RMS is very well positioned to develop agricultural risk models and help ramp the industry’s understanding of the risk. We understand the framework and principles of the models, and will combine our 30-plus years’ experience in climate hazard modelling with the latest data collection and processing technology, and scientific understanding of the risk, to build the next generation of agricultural risk models for the industry. Also important is the modelling work we do that lies outside our long-established analysis of catastrophe risk for the insurance industry; the recent conclusion of our drought stress-testing project for the banking industry has given us dee insight into the drivers of water scarcity, which is a key hazard for agricultural risk.” To compliment RMS’s model development its parent company DMGT has transferred all the model assets from its AgRisk business to RMS. RMS will leverage the capacity of its global model development operations to provide a complete agricultural risk management service for local and global (re)insurers, such as high-touch modelling support, analytical services, training and event response.
2016 general insurance premiums rise to S$3.7b in Singapore
Singapore's general insurance industry recorded a 0.6% rise in total gross premiums to S$3.7 billion in 2016. According to the General Insurance Association (GIA), margins fell amid domestic and external headwinds resulting in a slight drop in underwriting profit from about S$310 million in 2015 to S$257.6 million last year. The motor insurance class, which accounts for 32% of the general market, saw its premiums remain mostly stable last year, with the average motor premium standing at S$1,202. This is due to more choices for motorists as the past year saw several new market entrants. Overall, the motor insurance industry continued to remain profitable, with an underwriting profit of S$87.4 million. GIA said it is predicting that motor premiums will remain flat due to keen competition among existing insurers and from newcomers. Meanwhile, the health insurance class recorded the biggest growth across the board in 2016, with a 16% year-on-year increase in gross premiums to S$503.5 million. This is likely due to growing interest in the population to ensure adequate health coverage, according to GIA.
Steadfast broking group looks to Asia
Australia's biggest insurance broking network, Steadfast, is targeting Asia as its network grows in Australia. Steadfast CEO Robert Kelly said, “We are starting to build a meaningful presence in Asia with affiliated brokers based in China, Hong Kong, Malaysia, Philippines, Singapore, Thailand and Vietnam.” Steadfast controls nearly 350 brokerages across Australia with five new brokers joining it in the last 6 months of 2016. The network now accounts for nearly a third of all gross written premiums placed in Australia. The group is witnessing the first signs of an improvement in the prices small to medium-sized businesses pay for insurance portfolios. Kelly highlighted that the tide is turning on a long period of irrational policy pricing, after globally low interest rates helped drive a price war across the sector. “We are seeing the first signs of underwriters taking action to improve results, although it’s early days. Both the network and underwriting agencies benefited from a small degree of price improvement across our primarily SME customer base.”
New India Assurance wins biggest single contract with sum assured of US$38-bln
State-owned insurer New India Assurance has won a contract with the single largest insurance cover taken out by any corporation in the country to date. The premium is reportedly fixed for the mega combined insurance cover at INR5 billion (US$76 million) with a sum assured of over INR2.5 trillion (US$38 billion). The insurance policy has been taken out by Reliance Industries (RIL) for its onshore and offshore assets. More than 30 corporations have purchased similar covers since 2000. But it is the first time that New India is offering a combined cover for both RIL’s onshore and offshore assets. The cover includes RIL’s two 60 metric ton refineries in Jamnagar and its offshore assets in the Krishna, Godavari Basin. Reports have said that the combined mega policy has been reinsured by around 90%. The mega combined insurance policy cover includes fire, breakdown and loss of profit bundled together. Last year, RIL had two insurers, New India for the offshore cover and one of the Jamnagar refineries, while ICICI Lombard covered the other refinery.
Asia fuels record operating profit for UK's Prudential
Prudential has reported record group IFRS operating profit of £4.2bn supported by double-digit growth in Asia. Prudential recorded these figures in a year that has seen continued low interest rates, market volatility and dramatic political change. Prudential Group CEO Mike Wells said in a statement, “Our performance has been driven by Asia, which has delivered a seventh consecutive year of double-digit growth in new business profit, IFRS operating profit and capital generation. In the fourth quarter of 2016, quarterly APE sales in Asia exceeded GBP1 billion for the first time, with eight of our markets in the region growing by more than 20%. For the full year, our new business profit in this region increased by 22% to GBP2,030 million, IFRS operating profit was 15% higher at GBP1,644 million and free surplus generation 15% to GBP859 million.” The US life insurance market contributed the most IFRS operating profit of £2bn, an increase of 8% at constant exchange rates. Wells added that in Asia, increasing numbers of middle-class consumers require the group's health and protection products with ageing populations in the UK and the US seeking ways to invest their savings to produce secure income for retirement. Wells said of the growing Asian market, “Three-quarters of China’s total population is forecast to be defined as middle income by 2030. The growing purchasing power of this section of the society is evident today. To illustrate, 60 million people left China for leisure travel purposes in 2011, but by last year this had doubled to 120 million and by 2020 is expected to top 200 million. Similarly last year Asian consumers bought around half of all the cars sold in the world, up from an average of less than 20% during the 1990s.”
Indonesian Non-life insurance premiums could jump 7.5% this year
Non-life insurance premiums in Indonesia could grow by 7.5% this year if Indonesia's economic growth in 2017 reaches 5.2%, according to Julian Noor, executive director of the general insurance association of Indonesia (AAUI). The non-life market expanded 5.1% last year to IDR61.9 trillion (US$4.6 billion) in terms of premiums compared to 2015, reflecting the lowest growth rate over the last five years. GDP growth in Indonesia last year was 5.02% which was lower than had been forecast. Property insurance was the largest contributor to the growth of industry premiums with a premium income of IDR19.07 trillion in 2016, an increase of 7.9% compared to the previous year. This represented 30.8% of total non-life premiums. Motor insurance contributed 26.5% of the total general insurance premium income, representing the second largest class of business. AAUI data show that motor vehicle insurance premiums in 2016 reached IDR16.37 trillion which reflected stagnant growth compared to the IDR16.30 trillion reported for 2015. Julian indicated that this was due to sluggish sales of motor vehicles last year.
Insurers upbeat for 2017 following disappointing 2016
Analysts say that insurers are likely to see improving fortunes during 2017 following a disappointing 2016 for some. Leon Qi, head of Greater China financial research with Daiwa said, “Life insurance sector headwinds in 2016 have been turning into tail winds since late 2016. The trajectory of market interest rates in China should help prevent further declines in new money investment yield. Ultimately, interest-rate normalisation would likely help normalise their stock valuations relative to the current super-bearish levels.” Many have suggested that higher interest rates would benefit insurance companies by boosting investment yields. In another positive development, life insurance products continue to be a driver of new business. The industry is expecting continued strong demand for life insurance, particularly protection-type policies, in 2017. Sales forecasts of life insurance products have predicted a surge of 29% in 2017.
Taiwanese insurance industry set for heavy losses
Taiwan's insurance industry is bracing for heavy losses due to the appreciation of the New Taiwan Dollar, according to legislator William Tseng, who is a former chairman of the Financial Supervisory Commission (FSC). He predicts that the country’s insurance industry is set to lose between NT$120 billion (US$3.93 billion) and NT$150 billion in the first quarter of the year. Tseng said that the local currency has appreciated 5% against the US dollar so far this year. As Taiwanese insurance companies are exposed to overseas investments, the repatriation of that income would significantly decrease after the currency exchange. The FSC has reported overseas investments held by Taiwan's financial sector total US$900 billion (NT$27.4 trillion), of which NT$11.5 trillion are held by the insurance industry and NT$161.9 billion are held by securities firms. FSC insurance bureau director-general, Grace Lee, said that 74% of insurance industry investments are hedged to reduce risk and there are currency exchange mechanisms in place to further reduce losses in case of currency fluctuations. Tseng, however, believes that the 26% of investments that are not hedged pose a serious risk to the industry.
Ng Keng Hooi appointed new AIA CEO
AIA Group has revealed that Ng Keng Hooi, AIA regional chief executive, has been appointed group CEO and president designate. He will replace Mark Tucker as group CEO and president from 1 September 2017. Tucker has informed the board of directors of his intention to retire from his executive positions with the group and take up the role of non-executive group chairman of HSBC Holdings. Ng brings more than 37 years’ experience in the Asian life insurance industry and as AIA regional chief executive. He was responsible for many of the group’s largest businesses as well as Group Agency Distribution. He is also a director of various companies within the group including its two largest operating entities, AIA Company and AIA International. Edmund Tse, AIA group chairman said, “Keng Hooi is a proven leader with an impressive track record and I am delighted that he will succeed Mark as group chief executive and president of AIA. This appointment follows a rigorous and extensive succession process, which included consideration of internal and external candidates. For the last six and a half years, Keng Hooi has excelled in the role of regional chief executive for AIA displaying first-class leadership and strategic vision while consistently delivering strong results. He is ideally qualified to build on AIA’s success to-date. On behalf of the entire Board, I would like to express my sincere thanks to Mark who has made a huge and lasting contribution to AIA as group chief executive and president, having led the company from its IPO in 2010.”
Cigna appoints two senior executives
Cigna revealed the hire of two senior executives to new roles in regional distribution to complement its ongoing growth across the Asia Pacific region. Ray Bond is named regional head of distribution, individual health and Raymond Ng has been appointed regional head of distribution, global health benefits. Based in Hong Kong, Bond and Ng have joined Cigna’s Asia Pacific Leadership team led by Patrick Graham, chief executive officer, Asia Pacific, Cigna international markets.
Michael Ho appointed as Chubb’s country president in Hong Kong
Chubb announced the appointment of Michael Ho to position of country president for Chubb Life in Hong Kong. Ho will be responsible for leading the Hong Kong operations for Chubb Life, the life insurance division of Chubb, which provides a broad range of life insurance and wealth management solutions for customers at different stages of life. Ho will report to Chubb Life's regional president in Asia Pacific, Kevin Goulding. Goulding said of the appointment, "It is my pleasure to appoint Michael to lead our important Hong Kong business. With more than 16 years of life insurance industry experience specifically in growing agency capabilities, Michael has a proven track record in leading winning teams and delivering outstanding results." Ho joins Chubb from Prudential Asia, where he most recently held the role of regional chief agency officer, responsible for building and developing the regional agency capabilities in Asia.
Swiss Re strengthens Life & Health business
Swiss Re Life & Health Asia has enhanced its Solutions Groups augmenting the existing leadership team, announcing new hires and incorporating a more dynamic structure to position Life & Health Asia for further growth and innovation. As head of solutions groups, Raquel Gonzalez will lead the division. Before joining Swiss Re, Gonzalez was group executive consultant for FWD Group, where she was responsible for driving major strategic initiatives. In her new role, she will oversee the four Solutions Groups and report into Robert Burr, head of Life & Health, reinsurance client markets Asia at Swiss Re. Yannick Even will lead InsurTech Solutions, driving the ideation, design and delivery of technology, digital and data driven solutions. Even previously lead the digital innovation and Fintech solutions delivery at KPMG China Advisory. Sherry Du will lead the Accelerator Group, delivering fast, innovative and sustainable solutions for clients through a controlled test and learn environment, ensuring Life & Health Asia remains future-ready. Previously Du was the regional director and senior consulting actuary at Willis Towers Watson. Sohila Kwan leads the Health & Medical Solutions, driving innovation in the life and health business to support the industry to improve future health protection. Doan Le leads Inforce Solutions, by evaluating, managing and leveraging client inforce portfolios to increase both inforce and new business value and profitability.