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THE ASIAN INSURANCE MARKET. Roger Wilkinson Chairman & CEO, Asia Pacific, Middle East and Africa Willis International. DEMOGRAPHIC OVERVIEW. It’s bigger than Texas!. 30% of the Earth’s Land Area. 60% of the Earth’s Human Population. ASIA MARKET OVERVIEW.

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The asian insurance market l.jpg
THE ASIAN INSURANCE MARKET

Roger Wilkinson

Chairman & CEO, Asia Pacific, Middle East and Africa

Willis International


Demographic overview l.jpg
DEMOGRAPHIC OVERVIEW

It’s bigger than Texas!

30% of the Earth’s

Land Area

60% of the Earth’s

Human Population


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ASIA MARKET OVERVIEW

Asian market has grown over the last decade

  • Protected Marketplaces

  • Markets and regulations differ across Territories

  • Significant levels of underwriting autonomy

  • Accelerating Inflation levels a threat to insurance profitability

  • Big capacity in all classes in Asia – the brakes are on since the Cat losses in 2011

  • Not very litigious…Yet!

  • Market growth in all classes but predominantly P&C Market

  • All major players represented (Ins / RE)

    • Ace

    • Allianz

    • Chartis

    • Zurich are some of the Global players

Full Range of products on offer

Singapore is a hub, with large markets in China, Japan, South Korea & India


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SINGAPORE

A well established business hub for SE Asia

  • Big Reinsurance presence – 28 Reinsurers - US $2.6 bn

  • Growth of Lloyds Asia Platform (Currently 22 Syndicates and US $250-$300 m of written premium) – employing ~ 200 people

  • 61 Captive insurance companies

  • GWP US $7 bn (Singapore and regional risks – direct markets)

  • A US $5 bn Property Risk (Full Value) 100 % was recently placed


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CHINA

China is there for China!

Highly Protected

  • Fastest premium growth (28%)

  • A full pipeline of infrastructure projects

  • Foreign Companies still only make up 1.8% of the non life market

  • Increasing interest in D&O – Mostly related to US IPOs


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JAPAN

Very much their own market

  • # 1 in Asia for Total premium, # 2 in the world behind the US

  • # 1 in Asia for Non Life premium, # 3 in the world behind the US & Germany

  • Market share of the top 3 Insurance Groups = 80%

  • Insurance losses were modest pre March 2011 Tohoku Earthquake – Household EQ & Nuclear Losses will be largely covered by Japanese Government, Private Insurers face billions on Property and Business interruption claims.

  • Reconstruction will aid economic growth

  • Insurers taking stock and reviewing insurance coverage in light of CAT events

*Excluding Flood Earthquake, Tsunami & Special Risk


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SOUTH KOREA

Very much their own market

Dominated by large domestic insurers

  • Market share of top 5 insurers: 78% ( Samsung 25.8%, Hyundai: 15.7%, Dongbu: 15.3%, LIG: 13.7%, Meritz: 7.5%)

  • GWP US $50 bn

  • Recently introduced revised motor pricing scheme to reign in claims escalation

  • Increasing demand for long term products has driven growth, in concert with growing industrial and commercial construction markets, a positive outlook for GDP growth and increased penetration of insurance products.

  • The South Korean insurance regulatory authority introduced a new risk-based capital (RBC) solvency regime in April 2011 designed to increase insurance companies’ capital requirements, allowing them to assume higher risk and improve their financial stability.


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INDIA

Highly regulated – Future government divesting of public insurers

  • 4 State owned Insurers – US 5 bn GWP

  • Private Insurers – US 3.5 bn GWP

  • Foreign ownership cap of 26%

  • Solid year on year premium growth led by the strong performing motor and property businesses

  • Foreign insurers reviewing market entry

  • Slight hardening due to RI terms and regulatory measures


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MARKET TRENDS & CAPACITY

By 2015, approximately 39% of the world's economy is predicted to be in the Asia-Pacific region1

  • Huge capacity in the region

  • Increased interest in liability coverage

  • Improvements in domestic markets & increased sophistication in regulation

  • Expect expansion of some of the larger Chinese players (already amongst the worlds largest) both in Asia Pac and globally

1 Source: Ernst & Young Analysis – International Monetary Fund, United Nations Statistics Division, World Wealth Fund, Swiss RE Sigma 2005


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MARKET COMPETITIVENESS

  • During the growth of the regional market in Asia it has often offered more competitive solutions than the international markets

  • Asian clients like a quick turn-around in the same time-zone

  • By being based in the region (Re)insurers can benefit from lower acquisition costs on some business

  • Building local knowledge of risk profiles and business practice in the region can allow adaption of underwriting models to fit Asia


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ECONOMIC LOSSES

  • 2/3 of US $380 bn1 Economic Loss in 2010 attributed to Japan Earthquake / Tsunami & NZ Earthquake

  • Japan may cost Insurers as much as US $35 bn2– Huge amount of reinsurance protection – high losses to property market

  • Thailand Floods may cost as much as US $12 bn3 – This was a loss that was neither modelled nor anticipated – Thailand was previously considered a Non CAT zone

  • Zenkyoren – the ‘Farmers Mutual’ of Japan – estimated losses US $7.9 bn4

1 Source: Munich RE

2 & 3 Swiss RE – Sigma #2 / 2012

4 Towers Watson – Insights, Insurance Industry Impact and Risk Management Lessons


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