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EC News Asia Edition (16th August 2017)

  • Publish Date: Posted almost 7 years ago
  • Author:by Alan Jarque

Round-up of the latest news and developments from the Asian insurance market with stories from Guy Carpenter, Manulife, Willis Towers Watson and more.

Guy Carpenter appoints Gallagher and Jones to helm the Asia Pacific region

Leading global risk and reinsurance specialist, Guy Carpenter has appointed Mr Tony Gallagher as CEO of the Asia Pacific region, effective immediately. He will be based in Hong Kong, reporting to Mr James Nash. Mr Gallagher will be responsible for strengthening the firm’s market position across Asia Pacific and enhancing its client service capabilities.

In addition to Mr Gallagher’s appointment, Mr Richard Jones has been promoted to chairman of the region, working closely with Mr Gallagher to develop the growth strategy for the region.

Commenting on the appointments, Mr Nash said “With more than 22 years of reinsurance market experience, spanning London, Tokyo and Sydney, Tony has been instrumental to our strong growth in the Pacific area, and particularly in Australia, since joining in 2013.

Richard has been part of Guy Carpenter’s Asia Pacific team since 1987, and has been responsible for leading and growing our business activities in South East Asia for the last 16 years. He brings to the role of chairman an incredible insight into all facets of the reinsurance industry in Asia Pacific. Working in tandem, Tony and Richard will drive forward our growth strategy for the region, bolster our capabilities and continue to deliver the exceptional level of service our clients' demand.” 

Manulife promotes Rockson Leung to Financial Chief in Hong Kong

Canadian insurer and wealth planner, Manulife, has promoted long term finance and risk executive, Rockson Leung to financial chief in its Hong Kong arm.

In his new role, Leung will be responsible for finance-related operations such as reporting, control, capital management, asset liability and treasury along with running the office-support.

The Australian executive joined Manulife in 2010 and has taken on the roles of deputy finance chief, adding a risk role 3 years after. Prior to this he ran risk for ING in Asia and finance in China as well as deputy head of finance chief for Bank of China’s life insurance company. 

Argo Group hires Matt Harris to lead Europe and Asia Operations

Argo Group International Holdings LTD, a global specialty insurer and reinsurer, has appointed Mr Matt Harris as head of its Europe and Asia operations, effective immediately.

Bringing with him 25 years experience in the insurance industry, Mr Harris will report to Jose A. Hernandez, Argo’s head of international business.

Mr Harris has previously worked for AIG, leading South East Asia Country operations. His previous positions were CEO of AIG Malaysia Insurance and CEO of AIG New Zealand. Prior to working for AIG, Harris was chief representative for IAG in India. 

Willis Towers Watson hires Fabien Conderanne

Willis Towers Watson, a leading global advisory, broking and solutions company has appointed Fabien Conderanne as deputy head of financial solutions, Asia Pacific, effective 1st August. 

The appointment comes as part of the firm’s process to strengthen its financial services capabilities across the region. 

Fabian will be based in Singapore, reporting to the managing director for financial solutions for Asia Pacific, Stuart Ashworth.

Commenting on the appointment, Ashworth said “In the current complex and volatile economic landscape, Asia continues to offer significant growth opportunities for the application of credit and political risk insurance solutions for financial institutions and corporate and trader clients. Fabien will be a great asset to our global Financial Solutions team in supporting our business' regional expansion."

Fabien has 16 years of extensive financial and regional experience alongside specialist knowledge of trade credit products, structured trade and political risk insurance. Before relocating to Singapore, Fabien worked for Coface in Paris. Prior to joining Willis Towers Watson, his previous roles included regional chief financial officer for Coface Asia Pacific and chief executive officer for Coface Singapore. Fabien holds an electrical engineering degree from Ecole Centrale Lyon, France and an M.Sc. in management from the HEC Paris Business School in France.

Willis Towers Watson’s global chairman of financial solutions, Paul Davidson, said “We are delighted to welcome Fabien to the Financial Solutions business. His recruitment further evidences our commitment to deliver consistently high quality outcomes to our clients by continually building and enhancing the depth and experience of our global team."

With hubs in London, Singapore, Hong Kong, Melbourne, New York, Chicago, Los Angeles Sao Paulo, Buenos Aires, Copenhagen, and Dubai, Willis Towers Watson's financial solutions division is now recognised as a leader in the market, being the largest structured credit and political risk broker.

The business mitigates risk by way of broking credit and political risk insurance in excess of USD 30bn of emerging market exposure annually, with approximately 25 percent of the world market share.

With their global presence, Willis Towers Watson is uniquely positioned to access the entire global insurance market in order to obtain the most comprehensive coverage at the most cost-effective terms.

Economic growth to pick up in Singapore, but rising geopolitical risks a challenge

The International Monetary Fund (IMF) has said that economic growth is set to pick up pace in Singapore into 2018 as the improved global outlook, along with rising public spending, spill over into private consumption.

On the other hand, its small open economy faces mounting global geopolitical risks and higher uncertainty. In a regular forecast statement for Singapore, the IMF noted that Singapore's economic growth momentum has enhanced since late-2016, supported by a recovery in the global electronics trade. "However, the recovery has not yet been broad based and private domestic demand, particularly private investment, remains subdued," the IMF added, noting that the labour market also remains soft.

In addition, the economy continues to battle with an ageing population, tightening of foreign worker inflows and slow productivity growth.

Growth and inflation are likely to recover gradually over the next few months as stronger global demand and ongoing restructuring take effect, said the IMF in its statement.

It expects the economy to expand 2.3 percent this year and 2.5 percent in 2018, up from 2 percent in 2016.

There are risks to this growth outlook. "Notwithstanding the recent trade recovery, economic and geopolitical risks have risen and could affect Singapore's highly open economy," said the IMF.

The main external risks stem from the adverse impact of more inward-looking policies in the United States and a slowdown in major emerging economies.

Tightening in global financial conditions, including faster-than-expected interest rate hikes in the US, could adversely affect households and companies with high levels of debt.

On the domestic front, uncertainty surrounding ongoing restructuring could delay investment, productivity, and undermine improvements in income inequality.

In line with these restructuring efforts, "Singapore has embraced a new growth model for a world of rapidly advancing digital technologies and automation," noted the IMF.

"The strategy is to turn Singapore into a labour-lean economy with less reliance on foreign workers and growth based on innovation, digitalisation, and continuous investment in skills."

To complement this push, the Singapore government has also been spending more on healthcare and other aging-related infrastructure, on transportation infrastructure, innovation, and targeted transfers to promote inclusion, worker retooling and lifelong learning.

The IMF said there is still room for Singapore to ramp up public spending - both to help boost the economy in the short-term as well as to enhance its social insurance schemes.

"Additional near term fiscal stimulus - bringing forward infrastructure investment and expanding existing budget transfers to targeted groups - would boost domestic demand, help close the output gap and address the large external surplus.

"There is also scope to strengthen Singapore's permanent social insurance arrangements, including by introducing time-bound unemployment insurance," noted the IMF.

This is needed to help address the uncertainties created by technological disruption, which has led to rapid shifts in the labour market, creating an environment where job tenures are shorter and more people face the risk of unemployment.

Singapore also continues to face challenges with improving productivity and boosting innovation.

In its response to IMF's report, the Singapore government said its spending policies over the past five years have been providing short-term support to the economy as well as helping firms and workers prepare for longer-term challenges.

Ensuring that government spending remains sustainable is crucial, it noted, especially as demands on the national purse continue to grow amid an ageing population and growing infrastructure needs.

Revenue collection is also tougher due in part to slowing economic growth.

"This makes it even more important to be careful about introducing major new programmes solely for short-term fiscal stimulus," the Government said in its response. For one, withdrawing these programmes subsequently will be difficult when the need for them abates.

On unemployment insurance, the Singapore government said such a scheme could have negative unintended consequences, such as disincentives to work.

"The authorities see merit in providing income and training support to help Singaporeans acquire new skills and prepare for new jobs in different careers and sectors even before they become unemployed."

Should workers lose their jobs, there are schemes available to assist them, including retrenchment benefits, wage support, job matching help and means-tested support.

AIG sees cyber insurance requests rise 87% in Asia

AIG reported an 87% year-on-year rise in requests for cyber insurance policies in Asia. This comes in the aftermath of the WannaCry malware attack, which hit hundreds of thousands of devices across 150 countries. Globally, requests for cyber cover have also increased by 38%.

According to Jason Kelly, AIG’s head of liabilities and financial lines for Greater China, Australasia and South Korea, the sudden increase in demand from Asia reflects how organisations in this region are behind their global counterparts with regards to awareness of the risks associated with cyber-attacks.

“A lot of companies outside of Asia have already bought this coverage,” Kelly told the Financial Times, noting how many Asian companies have just begun taking steps to secure cyber insurance.

The WannaCry malware attack in May, which ended up bringing hospitals in the UK to a standstill, stalled transport systems and caused damage to numerous businesses meant around 1.3 million computers were vulnerable to the attack.

Since the attack, the insurance industry has focused its learning on exposures to cyber-attacks. Last month, the Financial Times reported Sompo International’s chief strategy officer’s warning that insurers are at risk because of relaxed wordings in their cyber policies, which provide greater coverage without increasing premiums.

It is estimated that 80% of large-scale businesses are hit by a cyber breach annually, and total damage from cyber-crime to the global economy could exceed US$400bn, putting insurers in a insecure place regarding their exposures.

Clyde & Co says insurance deals are down 40% in Asia Pacific

Global law firm, Clyde & Co have recently analysed a drop in insurance industry M&A activity worldwide.

In the first 6 months of this year, there were 170 deals compared to 186 in the preceding period with deals in Asia Pacific decreasing by almost 40 percent to 22 (from 36). This is mainly due to monetary controls in China.

Brexit has had a major impact on European insurance M&A with deals down 28 percent in the first half of 2017 while the Americas increased its deals from 81 to 86 along with the Middle East and Africa region that also increased from just 2 to 8 deals.

The outlook is more positive with Chinese regulatory challenges expected to ease along with other political and economic uncertainties also set to balance out.

“While insurers continue to consider all the tools at their disposal in the quest for growth, there is good reason to expect that more M&A will get over the line in the coming six months,” commented Andrew Holderness, global head of Clyde & Co’s corporate insurance group.

Bond issuances to support business ambitions of Asian reinsurers

Debt as a capital source has become more popular among many Asian reinsurers which are predominantly equity-funded, says Fitch Ratings.

The issuance market is still in the early stages, however Fitch expects it to gain traction in the near to medium term, due to the low interest rates and sustained demand from yield-seeking investors.

The larger players are leading the way, says Fitch. For example, China Re executed two issuances of US$800mn and US$700mn in March and June this year, respectively, backed by strong investor demand. Proceeds will be used for overseas acquisitions as the company moves to diversify its business and capture opportunities beyond the domestic market. In October 2014, Korean Re issued a US$200mn hybrid and has expressed an intention to increase usage of non-equity capital – including catastrophe bonds in order to optimise its capital structure as it seeks to establish itself as a global player.

In its report on Asia's reinsurance market, Fitch says that steady economic expansion and insurance market growth will remain the fundamental reinsurance driver in Asia-Pacific. Knowledge transfer and human capital build-up will sustain the sector’s development momentum and spur reinsurance premium growth as globally established reinsurers continue to scale up in the region. Foreign counterparts recognise Asia’s business potential and have increased their focus and commitment to the region. After opening an office in Kuala Lumpur, Malaysia, in March, Swiss Re is setting up its general reinsurance business regional headquarters in Singapore in 2018. In September 2016, Munich Re began a restructure of its Asian operation to strengthen its presence in key hubs, including Tokyo, Beijing and Singapore, with the potential of expanding to India. In April 2017, Lloyd’s of London’s Indian reinsurance branch commenced operations to tap into excelling onshore market growth opportunities.

Higher government infrastructure spending and the emergence of cyber insurance offering will support the reinsurance demand.

Fitch expects China’s large-scale Asian infrastructure projects to be a source of reinsurance demand. Indonesia plans to increase its budgeted infrastructure spending by 22 percent YOY in 2017, to more than IDR350trn ($26bn). Comparably, Thailand has increased infrastructure spending to up to THB896bn ($25bn) for the year. Direct insurers are unlikely to have the capacity to underwrite such exposures alone and reinsurers will have opportunities to step in and cover this gap.

At the same time, Asia is identified as the world’s most vulnerable region to cyber threats, yet its share of cyber insurance premiums is less than 6 percent of the global total. Asian insurers have small cyber insurance books of business. Fitch expects the segment’s reinsurance arrangements to gain importance as it expands and insurers tap on reinsurers for capacity and diversification, to glean underwriting expertise and plug coverage gaps – especially from global players with experience and insight from European and US markets.

Another area of interest to reinsurers is that catastrophe losses remain a key concern in Asia from the increased loss amounts and frequency of weather-related events.

Sinosure provides US$1.5 bln guarantee in Iranian rail project

The China export & credit insurance corporation, Sinosure, is guaranteeing a US$1.5bn loan that will be provided by Iran's bank of industry and mine to finance the electrification of a 926km railroad from Tehran to the eastern city of Mashhad in Khorasan Razavi Province.

The electrification project, carried out by China national machinery import and export corporation, is estimated to take four years and when completed will raise the speed of the line from the current 160 kph to 200 kph, significantly reducing the duration of a trip between the two cities.

For Iran, the electrification of Tehran-Mashhad line is part of its wider rail development plan to electrify all railroads by 2025, reported Financial Tribune.

Mr Asghar Fakhrieh-Kashan, Iran’s deputy minister of roads and urban development, said the project was worth EUR2.2bn (US$2.56 bn) and two-thirds of the cost would be financed by the Chinese government at a very low interest rate. He added that the remaining one-third would be covered by Sinosure.

Sinosure, the state-owned Chinese credit insurer is involved in other projects in Iran. In January this year it opened a line of credit of up to $1.3bn to finance the development of Abadan Oil Refinery, Iran's oldest refinery in the southern Khuzestan Province.

In May 2017, Sinosure signed a MoU under which it will insure state-owned and private Chinese companies that intend to invest in Iranian projects.

Sinosure also covers political, commercial and credit risks with their services including short-, medium- and long-term export credit insurance, investment insurance, bond and guarantee insurance, debt and capital retrieval business and credit assessment.

Insurance premiums in Nepal surge by 23% to US$561mn in FY17

Nepal insurance market saw premiums surge by 22.74 percent to NPR57.53bn (US$561mn) in the last fiscal year (FY2017) ended 15 July.

According to data from the Insurance Board (IB), life insurance premiums increased by 20 percent to NPR38.40bn while on the other hand non-life premiums rose faster at 27.75 percent to NPR19.03bn in FY2017.

First-year premiums received by the country's nine life insurers totalled NPR10.56bn, an 11 percent increase from the previous year. Premiums from foreign employment policies that Nepalese bound for working stints overseas are required to purchase, jumped by 41.7 percent to NPR2.58bn in FY2017.

From the nine life insurers, Nepal Life Insurance remained at the top of the list in terms of premium with INR12bn in FY2017, 17.1 percent higher than in FY2016.

However, National Life Insurance grew at the fastest pace of 29 percent with premiums reaching NPR4.95bn, reported The Himalayan Times.

Among non-life insurance firms, Shikhar Insurance Company was the largest with NPR2.77bn in premiums in FY2017, representing growth of 38.4 percent.

From the 17 non-life insurers in the country, Neco and NB Insurance were the two fastest growing with their premiums surged by 50.4 percent to NPR1.36bn and 98.5 percent to NPR694mn respectively.

Singapore life sector reports 10% growth in new business for 1H2017

Since 2016, the life insurance industry has continued its strong growth momentum, achieving a total of S$1,682mn (US$1,234mn) in weighted new business premiums for the first half of 2017, the Life Insurance Association of Singapore (LIA) announced yesterday.

This represented a 10 percent increase in weighted new premiums from the S$1,522.6mn posted for the corresponding half of last year. There was an increase in uptake across both single and annual premium products, with a 10 percent increase in weighted single premiums to S$547.3mn and an 11 percent increase in weighted annual premiums to S$1,134.7mn.

Health insurance premiums totalled S$154mn for 1H2017, of which Integrated Shield Plans (IPs) premiums and IP riders accounted for 90 percent (S$139mn). IPs are plans which provide enhanced coverage by private insurers on top of the benefits of the basic government-run MediShield health insurance scheme. The remaining 10 percent (S$15mn) came from other medical plans and riders.

LIA also reported that over 550,000 new policies were signed in 1H2017 (compared to 517,000 in the same period last year), meaning approximately 2.92mn Singaporeans were insured, roughly 50 percent of the population, at 30 June 2017.

Agency forces continued to lead sales, accounting for 55 percent of the number of new policies sold while bancassurance accounted for 13 percent with the financial advisors selling 17 percent of the new policies. On the other hand, bancassurance accounted for 43 percent of weighted new premiums followed by agency forces at 35 percent and financial advisors at 18 percent.

There was an uptake of nearly 11,000 policies designed to provide regular pay-outs to policyholders during retirement years, with approximately S$84mn of weighted new premiums recorded over the half year. Such plans accounted for approximately 5 percent of the total weighted premiums for 1H2017.

Mr Patrick Teow, President of LIA, said: “We are encouraged that the industry continues to grow from strength to strength. While we tirelessly work towards narrowing Singapore’s protection gap, helping Singaporeans to be better prepared for retirement is also a priority. We see a steady take-up of products designed to provide regular payouts from retirement age. This shows that people are appreciating the importance of preparing ahead for their future years.

“Retirement planning is an ongoing concern for both pre-retirees and their children because by 2030, there will only be two working adults supporting one retiree, as compared to about five per retiree last year. The younger generation will be shouldering a greater financial burden of supporting the ageing population and ensuring that they have enough for other milestones, such as marriage and setting up their own families.”

Mr Teow also reported that a new protection gap study is currently underway and is expected to be released before 2018. “The last one we did was five years ago, and we’ll be using that as a reference point, to ensure that we are moving in the right direction and proper growth has been happening in Singapore.”

New business surge leads to embedded value growth in Asia

In a study that shows reported year-end 2016 EV results for several major insurance companies operating in Asia, excluding Japan, Milliman, the global provider of actuarial and related products and services said the total reported Asian embedded value (EV) grew by 15.3 percent on a comparable basis to US$339bn in 2016 from US$294bn in 2015.

Among 18 companies which had reported EV by the time of the report, China Life at US$94bn, Ping An Life at $52bn and AIA at $42bn were posting the largest Asian EV at the 2016 year-end.

By insurer, Zurich, Prudential and New China Life reported the largest growth in EV during 2016.

Zurich reported a 36 percent increase which was driven by favourable operating assumption changes as well as capital injections. Prudential reported a 35 percent increase which came from strong growth in VNB as well as favourable exchange rate movements from the depreciation of sterling in 2016. New Life China also reported an increase of 25 percent.

In 2016, growth in value of in-force business (VIF) was positive for all countries, underpinned primarily by strong value of new business (VNB) results and, in some cases, increasing long-term investment return assumptions.

The largest VIF growth of 31 percent was from South Korea, mainly from strong margin-driven growth in VNB across all companies, despite a fall in new business annualised premium equivalent (APE). Hong Kong also posted strong VIF growth of 20%, mainly from significant VNB contributions, in particular large volumes of new business sold to mainland Chinese visitors.

Total reported VNB for Asia stood at $35.0bn in 2016, compared with $25.0bn in 2015, representing a 40 percent growth.

By market, Hong Kong and China reported the highest growth in VNB on a constant currency basis, largely driven by significantly higher new business premiums (India’s 62 percent VNB growth is purely based on ICICI Prudential, which was the only company to disclose FY2016-17 EV results by the report data cut-off date). The strong growth in VNB was mainly driven by large volumes of new business and increased margins associated with a shift away from savings to protection products. The Hong Kong results reflect AIA’s growth in VNB, with about half the new business sales being to mainland Chinese visitors.

Indonesia and Thailand reported reductions in VNB; the former was mainly due to Prudential Indonesia experiencing reduced new business sales because of ‘systemic challenges in the economy’, while the latter was mainly driven by AIA Thailand seeing “lower new business volumes including reduced activity… during the mourning period following the passing of the Thai king”.

Ping An and ICICI Prudential reported the largest growth in VNB, at 65 percent and 62 percent, respectively, driven by increased new business sales for both, a change in capital requirements for Ping An, and improvements in persistency for ICICI Prudential.

Based on the various EV disclosures, the most profitable life insurance new business in 2016 appeared to be sold in Thailand, Indonesia and Hong Kong. Thailand’s increased margin is surprising in the context of the very low yield curve over the last year but it does reflect AIA Thailand’s success in refocusing sales efforts into higher-margin long-term protection business and capital-efficient unit linked products. The VNB data for Thailand is based on one AIA data point, however, with a margin that is unlikely to be replicated across the whole industry. Meanwhile, Indonesia and Hong Kong saw lower margins than in 2015, reflecting lower reported profitability of new business for Prudential Indonesia, and material falls in margins for AIA Hong Kong and Manulife Hong Kong.

Life insurance sales continued to rise strongly in Asia during 2016, with gross written premium (GWP) estimated to have increased by 28 percent, with China’s 43 percent growth being a major contributor.

EV methodologies used in the region remain varied, including Traditional Embedded Value (TEV), European Embedded Value (EEV), Market-Consistent Embedded Value (MCEV4 ) and Indian Embedded Value (IEV).

The report examines the EV results published by MNCs and domestic insurers within Asia, excluding Japan. The scope of the report is limited to EV results directly related to solely, or predominantly, Asian operations. Insurers with a presence in Asia that do not provide separate results for the region are not included in this report.

In 2016, the number of multinational corporations (MNCs) reporting EV in Asia declined. The increased focus on Solvency II reporting in Europe has resulted in diminished embedded value reporting for some insurers. Ageas no longer discloses its Asia EV results separately and Aviva has stopped disclosing group MCEV results, although 2016 market consistent value of new business figures have been published, including separate Asian results. AXA also discontinued the disclosure of its Asia EV in 2016, although it did produce 2016 Asia VNB on a market-consistent EEV basis. On the other hand, three Indian insurers, Exide Life, Reliance Life and SBI Life, published their EV results for the first time for the financial year ended 31 March 2016.

SCOR Global Life addresses growing demand for life reinsurance in Asia-Pacific

SCOR, a leading global reinsurer dedicated to providing transformative ideas, insights and knowledge from around the world to propel the industry forward, has said that maintaining their long-term, mutually beneficial partnerships that support client growth and success has been the cornerstone of the their journey across more than 30 years of operation in the Asia-Pacific life reinsurance market.

Craig Ford, CEO of SCOR Global Life Asia-Pacific said “We’re well positioned to help life insurance companies succeed in the attractive Asia-Pacific markets. We are agile, ambitious and committed to supporting our clients and providing them long-term value, our clients are in the business of changing and protecting lives. We’re in the business of empowering them. We therefore put our clients at the centre of everything we do.”

SCOR has built a strong presence in the markets of Australia, New Zealand and South Korea and now sees great opportunity in China, Southeast Asia and Japan, where it will be opening a branch to build on its previous success. A branch will also be opening up in India following recent changes to local regulations with its “Vision in Action” strategic plan launched for implementation until 2019 includes significant investments and growth in Asia-Pacific.

SCOR ranks among the top five life reinsurers in the world based on in-force portfolio and recurring new business production. With a focus on progress, renewal, improvement and forward thinking, the reinsurer is assisting life insurance companies with embracing innovation and sourcing new growth avenues.

SCOR significantly invests in digital technologies and forges strategic partnerships with industry players and thought leaders to unveil locally tailored products and better distribution solutions. Many of the latter are provided through its global distribution solutions arm that includes global alternative distribution company Remark.

“Our success is determined by the success of our clients,” Ford says. “If they grow, we grow with them. This is the nature of the aligned partnerships that we have with our clients.”