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EC News Asia Edition (21st February 2018)

  • Publish Date: Posted about 6 years ago
  • Author:by Alan Jarque

Round-up of the latest news and developments from the Asian insurance market with stories from XL Catlin, FWD Group, Aviva and more.

XL Catlin names Phil Xue as CEO of XL Insurance China

XL Catlin has appointed Phil Xue as CEO of its XL Insurance (China) Company Ltd.

The appointment is pending regulatory approval.

Xue will also act as country manager for XL Catlin in China, responsible for coordinating all in-country activities.

Prior to joining XL Catlin, Xue spent over a decade at Guy Carpenter & Company, LLC where he was most recently head of South China market and head of its Shanghai operation.

He worked in Guy Carpenter’s Hong Kong office for five years, before helping to set up the firms  Shanghai office in 2012.

Before this, Xue was with Royal Sun Alliance plc, Shanghai branch and China Pacific Insurance (Group) Co. Ltd.

FWD Group appoints Arthur Lee as South East Asia chairman

FWD Group has named Arthur Lee as EVP, new markets & corporate governance, and South East Asia chairman.

In his new role, Lee will be responsible for overseeing FWD’s expansion in the region, as well as leading corporate governance across the Group, including risk, compliance, audit, and legal functions.

Before joining FWD Group, Lee was most recently at Tokio Marine Asia, where he was the chief executive and member of the board, as well as executive officer of Tokio Marine Holdings. Lee was also a member of a number of boards within the Tokio Marine Group.

Prior to Tokio Marine, Lee was executive director of The Asia Life Assurance Society for several years where he managed the Singapore and Malaysia P&C, and later, life businesses.

Commenting on the appointment, Huynh Thanh Phong, Group CEO at FWD Group, said: “We are excited to boost our leadership with a seasoned professional of Arthur’s calibre. He will work closely with myself and the Group executive team to expand FWD in Asia geographically, as well as to deepen our presence in our current operating countries. His extensive knowledge of the South East Asian markets and his long term relationships with key partners in the region will be extremely valuable assets for FWD.”

Lee remarked: “I am delighted to be a part of the FWD team. I have been inspired by the dynamic culture here and the heartfelt dedication of everyone across the Group behind our ambitious vision of changing the way people feel about insurance. As one of the newest and fastest-growing pan-Asian insurance brands, we have an opportunity to do things differently, and I look forward to helping make our vision a reality.”

Aviva, Tencent Holdings & Hillhouse Capital develop online life insurer

Aviva, Tencent Holdings and Hillhouse Capital have agreed to develop an insurance company in Hong Kong, which will focus on digital insurance.

As part of the agreement, Hillhouse and Tencent will acquire shares in Aviva Life Insurance Company Limited (Aviva Hong Kong).

Following completion of the transaction, Aviva and Hillhouse will hold a combined 60 percent shareholding in Aviva Hong Kong.

As part of the transaction, the shareholders’ agreement between the parties contains options which may require Aviva to purchase or dispose of its shareholding in certain circumstances.

The move also marks Tencent’s foray into Hong Kong’s digital insurance market, after it moved into mainland China’s insurance market.

Aviva said: “The joint venture has been approved by Hong Kong’s Insurance Authority and is expected to start operating under its new corporate structure during the first half of 2018.”

The transaction is subject to customary closing conditions, including regulatory approval.

Merger of 3 state-owned non-life insurers expected to be completed in 2019

The proposed merger of the three government-owned general insurance companies (National Insurance, United India Insurance and Oriental Insurance) is likely to be completed by early next year.

The merger of the non-life insurers was announced at the beginning of February in the Budget for 2018-19.

The merged entity will subsequently be listed on stock exchanges.

MN Sarma, chairman and managing director of United India Insurance, recently said that the heads of the three general insurers will meet to discuss the merger, reported Press Trust of India.

The profitability and solvency ratio of some general insurance companies including the state-owned ones, have been under pressure owing to underwriting losses.

S&P Global Ratings said in a report that the merger proposal should reduce competition and facilitate improved underwriting discipline in the domestic market.

The three insurers together contribute around 30 percent of the non-life-insurance market in India, with a premium book of more than INR400bn (US$6.2bn).

Commenting on the meeting, MN Sarma said: "We hope to have some roadmap on merger and health insurance scheme in the meeting. We expect the merger to be completed before the next vote on accounts."

"A merger of three big public insurers in India will improve the sector's overall profitability by reducing competition. In our view, less competition will facilitate improved underwriting discipline, enhanced risk retention, and better managed solvency levels in the Indian insurance market," S&P Global Ratings credit analyst Trupti Kulkarni said.

CIRC to continue close supervision of the insurance industry

In 2017 non-life premiums hit CNY1.05trn (US$166bn), representing a 13.8 percent increase over 2016.

Chen Wenhui, China Insurance Regulatory Commission (CIRC) vice chairman, speaking at a national conference on supervision of the P&C sector, said: “In 2018, we will take product supervision as a starting point to guard against risks. We will treat the disorder in the property insurance market as a top priority and impose the highest penalties on those organisations and personnel that have an adverse impact on the market and that are repeated violators.”

The CIRC explained that many of the problems in the non-life sector stem from products which deviate from the principles of insurance. The regulator pointed out that some insurance policies are designed as wealth management rather than protection products. Some products resemble gambling and contain elements of speculation in the underwriting. Other shortcomings include product pricing which is not based on actuarial calculations. In addition, there are many homogenous products in the market.

The other major issues in the non-life sector are; aggressive operations, disorderly market competition, false data, corporate governance failure, lack of awareness of the need for compliance, weak internal control and a distorted incentive system.

The tight supervision of the insurance industry will continue this year, and "double penalties" will be the norm for those found in violation of rules, said the CIRC.

Adding: “In 2018, the 'teeth' of regulators are bound to be more 'sharp' and violations of regulations and illegal acts committed by insurance organisations across the country will continue to be exposed."

More clients seek to expand war and terrorism policy wordings

The significant risk exposure represented by the increasingly tense stand-off between the US and North Korea has been recognised by a number of clients with operations in North and East Asia which are seeking to transfer a portion of this risk, says Geoffrey Lambrou, CEO, Specialty Broking & Operational Excellence, Asia, at Aon.

In an introduction to the Aon publication, Asia Market Review 2018, Lambrou says that the devastation that would be caused by any conflict between North Korea, the US, and other regional and global powers, raises a very real challenge to the insurance market in terms of the level of risk the insurance market is able to bear. This acute issue of insurability has also raised wider questions around policy wordings.

“We have seen, and can continue to expect to see, underwriters seeking to clarify what is covered under traditional products, so as to prevent losses being picked up which were not intended to be covered but must be paid due to ambiguous policy language. In this environment, the technical ability of the broker and its consultancy skills are paramount. Clients must be cognisant of this change in tack and confident in the advice they are receiving,” Lambrou said.

As a response to the escalating tensions on the Korean Peninsula, Aon says that it has fielded a number of requests from clients regarding their war and terrorism coverage.

A number of clients, particularly foreign organisations operating within South Korea, have sought to expand policy wordings to transfer as much of their risk as possible.

Whilst nuclear war is uninsurable, events such as a North Korean test missile accidentally landing in a populated area, some form of military miscalculation, or minor retaliation following a targeted surgical strike against North Korea would still be counted as an insurable loss.

SoftBank seeking board seats at Swiss Re: reports

Ongoing discussions between SoftBank and Swiss Re include Softbank taking “multiple” board seats in the Swiss reinsurer, the FT has reported.

It was recently revealed that Swiss Re is in advanced talks to sell SoftBank as much as a $10bn stake in the reinsurer, almost a third of its near $34bn market capitalisation.

Swiss Re confirmed that it has been in “preliminary discussions with SoftBank Group Corp. regarding a potential minority investment in Swiss Re,” but said at the time that the talks are at a very early stage and that there is no guarantee that any investment will be agreed upon.

The FT recently reported the discussions between the two are ongoing, with a meeting between Swiss Re chairman Walter Kielholz and SoftBank founder and CEO Masayoshi Son likely to occur in the next few weeks.

One of the items said to be up for discussion is “multiple” board seats, as SoftBank seeks an element of control from such a major investment.

The FT states that SoftBank wants board seats to “influence how the reinsurer manages its $161bn in investments.”

The FT says that the discussions are focused on SoftBank taking a 20 percent to 30 percent stake, with multiple board seats, becoming an anchor investor in Swiss Re. The deal would be funded by the company, not SoftBank’s investment fund.

UBS is said to be working on the deal, facilitating the discussions for SoftBank, whilst Credit Suisse is assisting Swiss Re.