Round-up of the latest news and developments from the Asian insurance market with stories from Allianz Taiwan, Toa Re, Ironshore and more.
Allianz Taiwan to sell part of life insurance portfolio
Allianz Taiwan Life Insurance has announced that it has reached an agreement to sell a part of its traditional life insurance portfolio to China Life Insurance, headquartered in Taipei.
In a statement the company said that the sale supports Allianz’s strategy to actively manage its life portfolio in Taiwan towards more capital-efficient solutions.
The transaction is subject to China Life’s shareholder meeting and regulatory approval, and is expected to complete in mid-2018.
It includes a portfolio of approximately 78,000 policies with a guaranteed interest rate of 4 percent or higher, with a combined IFRS policy reserves of EUR1.2bn (USD$1.42bn).
Upon closing, the transaction is expected to have a positive impact on the group’s Solvency II capital position. Allianz Taiwan Life employees will not be affected by the deal.
Under the agreement, all related assets and liabilities of the respective portfolio will be transferred to China Life, with full protection of customer interests and rights.
Regional CEO for Asia Pacific, Allianz Mr George Sartorel said: “With its strong balance sheet and track record in acquiring and integrating policies and policyholders, we believe China Life is the ideal candidate to take over this portfolio. Allianz remains fully committed to Taiwan, and this transaction is consistent with our priorities to serve customers with our core unit-linked and protection solutions.”
Allianz Taiwan Life is the largest multinational life insurance company in Taiwan by gross written premiums in 2016. Since entering the market in 1995, Allianz Taiwan Life has maintained a leading market position with an agency force of over 2,500 and a network of strategic bank partnerships.
The Allianz-China Life deal follows an announcement that UK-based insurer Aviva is withdrawing from the Taiwanese market after agreeing to dispose of its stake in a joint venture with First Financial Holding. Aviva will sell its 49 percent stake in First-Aviva Life Insurance for a token consideration of USD$1, the Taiwanese financial holding company said recently.
Insurers in India encouraged to step up IT & cyber security
Several insurers have failed to apply IT and cyber security measures, six months after the industry regulator, the IRDAI, provided guidelines on the matter.
In a statement the IRDAI said: “From the feedback/updates received from insurers, it is observed that many of the insurers still have not finalised their Gap Analysis report, Cyber Crisis Management Plan and board approved Information & Cyber Security Policy.”
The regulator said: “Insurers are advised to take immediate steps to conduct a security audit of their ICT infrastructures including Vulnerability Assessment and Penetration Tests (VAPT) through Cert-in empanelled auditors, identify the gaps and ensure that audit findings are rectified swiftly.”
Insurers are also asked to firm up their Cyber Crisis Management Plan (CCMP) for handling cyber incidents more effectively.
For those insurers who have not abided by the timelines issued in April this year, the IRDAI has advised them to scale up their activities in order to follow them.
The regulator said that any vulnerabilities to ICT systems might compromise policyholder related information resulting in exposure of sensitive information of the insurance sector and the financial markets which would in turn have serious consequences for “not only for the insurance sector but for the financial system of the country as a whole.’’
Toa Re receives Lloyd's in-principle approval for platform
The Toa Reinsurance Company (Toa Re) and Barbican Insurance Group have received in-principle approval from the Lloyd's Franchise Board to establish Toa Re Special Purpose Arrangement (SPA 6132) to be backed exclusively by Toa Re.
Subject to formal approval, SPA 6132 will commence underwriting on 1 January 2018.
Managed by Barbican Managing Agency (BMAL), Toa Re has an initial capacity of £31.4mn (USD$41mn).
The SPA will support the expansion of Toa Re’s international portfolio of business, serve to introduce new business into the London market and also expand Lloyd’s reach amongst the Japanese market.
Toa Re is the sole domestic professional reinsurer in Japan providing both life and non-life coverage. Over the last 77 years, the company has established a leading market position, and secured a highly diversified, well-balanced and stable portfolio of business.
BMAL has extensive experience in the establishment and management of special purpose arrangements, as well as a full syndicate application for Arcus 1856.
Mr Tomoatsu Noguchi, President and Chief Executive of Toa Re, said: “Establishing a strong platform within the Lloyd’s market is a key strategic step in our ongoing efforts to grow and diversify our international portfolio. Sponsored by Barbican with a successful track record in this area, we are confident that through SPA 6132 we will build a long-term, secure presence in the London Market.”
Group CEO of Barbican Insurance Group, David Reeves added: “Barbican is committed to building mutually beneficial relationships with like-minded and forward-thinking corporate partners. We are delighted to be working with Toa Re to support their ambitions, while also looking to expand our footprint in Asia where we see significant opportunities to develop strategic business relationships and gain more in-depth market knowledge.”
Philippine businesses advised to protect against cyber risk
AIG Philippines has advised that more businesses, especially the data driven ones, should consider cyber insurance cover in order to bolster the protection of sensitive customer data.
Across the various industry sectors, there are only a small number of businesses who have taken the time to acquire risk cover against cyber security breakdowns and breaches that could harm individuals, enterprises and also entire industries or even the broad economy, reported Business Mirror.
Mark Lwin, president and CEO at AIG Philippines said that data-driven industries, such as the business-process outsourcing (BPO) sector, as well as financial institutions, should consider cyber insurance cover to limit the disruptive impact of hacking, among other ills.
“Industries and companies that are highly reliant on server network connections and handle sensitive customer data on a daily basis should consider taking out a cyber insurance policy," he said.
Insurance Commissioner Dennis Funa recently appealed to non-life insurance companies to develop products that would help to mitigate financial losses should a cyber breach take place.
Under the Philippine Data Privacy law, companies are held accountable for the handling of sensitive customer data that further underscores the relevance of cyber insurance cover to businesses.
Ironshore Insurance increases capacity for political risk lines with new hire
Ironshore Insurance Ltd., Singapore branch has announced it is increasing its capacity for political risk business lines within the political risk & trade credit unit.
Currently the available capacity stands at USD$50mn, an increase from USD$15mn, effective immediately.
In addition to this, the company has announced the appointment of Mr Sam Lim as underwriter within its political risk & trade credit at Asia Pacific.
Mr Lim joins the company from AIG. In his new role he will report to managing director, Mr Boo Hui Yun.
Ironshore’s political risk unit offers structured, international policy protection for in-country or cross-border exposure to government actions and political risk events. Trade credit coverages provides obligor default risk mitigation for corporate and financial institutional clients.
Ironshore International underwrites these lines of business in the Asia-Pacific region through its Ironshore Insurance Ltd., Singapore branch and the Pembroke Lloyd’s Syndicate as well as third party paper in Australia, Hong Kong and Japan.
Hong Kong catching up in insurance regulation
This year, Hong Kong has seen a watershed year in insurance regulatory changes.
According to Mr Peter Shelford, Country Managing Partner in Thailand of the law firm DLA Piper, Hong Kong is working extremely hard to "play catch-up, as Singapore has been ahead of the game."
Shelford was speaking in a panel session at the inaugural Asia Pacific Insurance Conference. The conference examined recent regulatory developments in the region where global and regional insurance stakeholders face a multi-faceted regulatory landscape, marked by frontier markets and developed insurance hubs.
Ms Jaya Taylor, regional head of legal & compliance, Asia Pac for Allianz Global Corporate & Specialty SE (AGCS), spoke about the similar directions in which outsourcing rules in Singapore and Hong Kong are heading. She noted that in Singapore, where a few outsourcing requirements have been lifted, due diligence expected of the insurer has become more inconvenient which could be expected of Hong Kong in the future.
Taylor said in Hong Kong there was fit and proper criteria being looked at. While Singapore has always had them, there is some flexibility, with distinctions between tier 1 and 2 insurers. Requirements for key control functions are also as wide as in Hong Kong, where prior approvals are more precise. The implication is that recruitment may be a slightly more tedious process for those coming onboard such as compliance officers, CFOs and in-house actuaries.
In contrast with Hong Kong, Taylor said that increasing protectionism has been observed in markets such as Indonesia, India and China which means global or regional players will need to streamline processes to navigate the complexity in these different regimes.
Despite the progress made in harmonisation in the Asean Economic Community at a thought leadership level, Mr Shelford noted that significant hurdles remain on the ground.
While countries like Myanmar are seeing discouraging levels of development, there has been considerable regulatory progress in Thailand, which now allows up to 49 percent foreign ownership of insurers. Currently there are only three countries in Asean who have restrictions on ownership; Malaysia, Indonesia and Thailand.
Sharing the Taiwanese perspective, Mr CY Huang, Senior Partner, Tsar & Tsar Law Firm, Taipei, said that Taiwan is very liberal in terms of foreign participation in insurance, allowing up to 100 percent ownership.
However, foreign ownership has been limited due to factors like negative spreads. As Taiwan's market is highly regulated like its North Asian counterparts in Japan, Korea and China, the legal and compliance staff in insurance firms usually experience enormous workloads.
Providing an insider perspective of the changes in the Hong Kong regulatory arena was Ms Winnie Wong, CEO of composite insurer Asia Insurance and a member of the Financial Services Development Council (FSDC).
Ms Wong said that the difficulty faced by the four-month old Insurance Authority (IA) in placing a new CEO resulted in the appointment of the former Insurance Commissioner as acting CEO for a year while the headhunting continued. While this is not an ideal arrangement, she acknowledged it was important in providing a smooth transition to new leadership. She said that there is a good balance and mix in the experience levels of the IA's current senior executives, who come from both government and the insurance industry.
The IA was set up as an independent supervisory agency, replacing a government department, the erstwhile Office of the Commissioner of Insurance. The establishment of the IA is among the most significant regulatory reforms to the insurance industry in Hong Kong for 20 years.
She added that with market development as an important new mandate (as opposed to a purely regulatory one in the past), the IA is more pro-active and has to focus more on outreach and listening to the industry. With staff strength now of about 170, the IA will recruit up to about 300, with its work cut out in issuing new guidelines and introducing initiatives, such as the recently launched InsurTech Sandbox and fast-track licensing for online-only insurers.
On a cautious note, Ms Wong said that the IA’s approach to regulation remained to be tested, with new guidelines for intermediaries in the pipeline expected to be controversial. When that happens, the IA would expand its remit to include parties which have been used to self-regulation for several decades.
The panel was moderated by Mr Peter J Gregoire, AIG General Counsel, Hong Kong. The Asia Pacific Insurance Conference, which took place in Singapore, ends today. It is the first Asian regional conference organised by a collection of major insurance related organisations, affiliated under the auspices of the International Insurance Law Association (AIDA), and drew a lively audience of about 250 comprising legal eagles and insurance executives. Asia Insurance Review is a media partner for the conference.
More people need to subscribe to pension schemes in India
A large segment of Indian society continues to lack access to pensions which is a cause of concern for the Pension Fund Regulatory and Development Authority (PFRDA) and the government, said PFRDA Chairman Hemant Contractor at a recent conference on the Atal Pension Yojana (APY).
APY is a government-backed pension scheme targeted at the unorganised sector. The Ministry of Finance revealed that the APY currently has over 6.9 million subscribers, with total contribution of INR26.9bn (US$414mn).
"APY has made progress in covering the intended subscribers, but much remains to be done. On an average, a little less than 2 percent of the eligible population is covered under APY and hence a lot has to be done to provide people regular access to old age income," said Mr Contractor.
He also touched on the issue of persistence in APY accounts and asserted that the objective of the scheme is to provide a pension and this will only happen if the contributions to the accounts are regularly paid.
About 110 million or 9 percent of India's population is over 60 years, with this figure expected to go over 180 million by 2030. The 60 plus age groups is the fastest growing demographic in the country.
APY, introduced in 2015 by the government, is a self-contributory savings pension scheme.
MENA region needs cross-border reinsurance to distribute risks
Emerging EMEA insurance markets are at different stages of development, with some open to further market liberalisation and others moving towards greater protectionist measures, notes A.M. Best in its Special Report, titled "The Role of Protectionism in Emerging EMEA Insurance Markets".
The report focuses on the impact of measures particularly in the insurance markets of the Commonwealth of Independent States, the Middle East and North Africa, and Sub-Saharan Africa.
For most of these markets, a key consideration is the level of restrictions on foreign participation within these economies, in addition to minimising the outflow of income generated in the country.
Mr Salman Siddiqui, A.M. Best associate director, said: “Excessive protectionism, such as the discouragement of cross-border reinsurance placements, may have major negative implications as it creates an unnecessary exposure of national assets and government funds to claims from catastrophes or man-made disasters, as well as to an accumulation of losses. On the other hand, the availability of reinsurance capital from a diversified international panel brings down risk-transfer costs and helps to disperse risk.”
According to the research, protectionist measures have been taken by regulators in emerging markets to safeguard local policyholders and insurers. Other protectionist steps include the expansion of domestic insurance capacity and the retention of premium income and capital flows within national borders.
To develop local insurance markets, some insurance regulators in emerging economies have urged measures such as compulsory domestic cessions to a state reinsurer, restrictions on foreign ownership, limits on foreign investment, the introduction of minimum net premium retention levels and higher capital requirements for reinsurance cessions overseas.
Ms Valeria Ermakova, senior financial analyst, said: “Placing risks primarily within national borders creates a problem of potentially weaker reinsurance security, given that participants in the emerging markets generally have lower levels of financial strength by international standards.
“This issue is amplified by premium funds being invested in devaluing local assets, considering the challenging economic conditions and volatile financial markets that some of the countries experience. Furthermore, isolation of insurance markets may lead to a lack of consumer choice and inadequate service levels as national players are not able to benefit from the expertise of their peers in the global market, where technology and innovation are drivers of the industry.”
A.M. Best said that it expects oil-producing countries to seek a balance in the coming years by opening up their economies while also ensuring “adequate levels of insurance domestication”.