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BESTS SPECIAL REPORT

ASEAN Non-Life & Life

Our Insight, Your Advantage.

Market Review
September 29, 2014

Regulators,
insurers see
incentives for
closer regional
cooperation.

Market Prospects Improve for


Insurers Ahead of ASEAN Integration
Integration of insurance markets among the 10 member states of the Association of Southeast
Asian Nations (ASEAN) has a way to go, though prospects for closer connectivity in a region
presenting vibrant growth give insurers and regulators incentive to focus on boosting
competitive strategies. This report looks at the relative strengths of regulatory systems, new
business and capital attraction, and economic fundamentals, as well as their prospects for
success in terms of market and business competitiveness.
ASEAN is a geopolitical and economic organization comprising Brunei, Cambodia, Myanmar,
the Philippines, Laos, Indonesia, Malaysia, Singapore, Thailand and Vietnam. The proposed
ASEAN Economic Community (AEC) slated for 2015 aims to create a competitive economic
region with a single market and production base by facilitating the free flow of goods,
services, investments, skilled labor and capital.
Regulations, economic conditions and ease of doing business differ greatly among ASEAN
countries. That diversity extends to political systems, cultures, languages and religions,
complicating the AEC project in practice. Complete insurance integration may be difficult in
view of the regions diverse backgrounds and market needs, compared with a developed market
such as Singapore with its sophisticated re/insurance hub and attraction for international
and regional businesses. In the longer term, less-developed countries may benefit from the
accelerated pace of improvement in insurance regulation. Regulatory development leads to a
stronger and more level playing field, which will create market consolidation and capital stress
for some insurers on the way to achieving a well-functioning and standardized system.
With 600 million people, a relatively young population and aggregate gross domestic product
of USD 2.4 trillion in 2013, ASEAN has promising insurance demand supported by persistent
development of the regions diverse economies. Compared with other emerging Asian markets,
India reported GDP of USD 1.88 trillion and had a population of 1.25 billion in 2013. Chinas
GDP was USD 9.24 trillion with a population of 1.36 billion. Countries with stronger economic
fundamentals such as Indonesia see greater attraction for new insurance investment. New frontier
countries such as Cambodia and Myanmar also have drawn new insurance activity, although
development of their markets is at a preliminary stage.

Analytical Contact

Moungmo Lee
+852 2827 3402
Moungmo.Lee@ambest.com

Researcher and Writer:


Iris Lai
+852 2827 3415

Editorial Management
David Pilla

As the ASEAN market looks to be a production base for world markets, the ability to
provide insurance capacity is vital for industry across the region. To this end, the seven
member nations of Brunei, Cambodia, Indonesia, Malaysia, the Philippines, Singapore and
Vietnam plan to further open their non-life and reinsurance markets by 2015, according to
the AEC blueprint.
Insurance companies within ASEAN have limited capacity to write big commercial risks,
impeding their competitiveness in light of market liberalization. To enhance the industrys
competitiveness, regulators have adopted initiatives to scale up measures such as capital
requirements as a way to align industry standards with intra- and inter-regional norms.
With increasing global connectivity in the supply chain for goods and services, insurance
regulations across ASEAN markets are becoming more compatible and standardized in support

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Special Report

ASEAN Non-Life & Life

of such changes. The Thailand floods of 2011, which created a confluence of disruptive
influences on local and international insurance markets, pointed to the connectivity and
ubiquity of commercial risks in both developed and developing markets.
Amid regulatory reforms and continuous economic growth, reinsurers benefit from the
regions growing primary insurance markets as most domestic players still rely on reinsurance
for risk management, particularly on large-scale property and natural catastrophe risks. Longestablished international reinsurers, emerging Asian companies and specialist writers have
expanded their business in ASEAN, with Singapore as their regional hub.

Scaling Up Regulation

Exhibit 1
ASEAN Non-Life & Life Regulatory Matrixes
Country

Regulatory Body

Brunei

Monetary Authority of Brunei


Darussalam (Autoriti Monetari of
Brunei Darussalam),
www.ambd.gov.bn

ASEAN countries have undergone


regulatory transitions toward stricter
requirements for capital and risk
management. The proposed AEC in 2015,
with its free-trade agreement across the
region, has driven regulatory changes to
enhance the markets competitiveness.

Solvency
Margin
Year
Requirement Implemented
Solvency
Margin

Cambodia Ministry of Economy and


Finance, www.mef.gov.kh

NA

Indonesia

Financial Services Authority


(Otoritas Jasa Keuangan (OJK)),
www.ojk.go.id

RBC (Risk
Based
Capital)

Laos

Ministry of Finance,
www.mof.gov.la

NA

Malaysia

Bank Negara Malaysia,


www.bnm.gov.my

RBC

Myanmar

Ministry of Finance and Revenue NA

2006

2009

Philippines Insurance Commission,


www.insurance.gov.ph

RBC

2006

Singapore The Monetary Authority of


Singapore, www.mas.gov.sg

RBC

2004

Thailand

Office of Insurance Commission, RBC


www.oic.or.th

2011

Vietnam

Ministry of Finance,
www.mof.gov.vn

2007

Solvency
Margin

Regulatory compatibility and transparency


are prerequisites for liberalizing markets.
Most ASEAN nations have updated their
regulations or are upgrading insurance rules.
The European Unions Solvency II discussion
over the past decade, together with increasing
awareness of enterprise risk management
(ERM), have helped this process.

2005

Internationally, there has been greater


incentive for regulators to work together
to supervise the insurance industry.
Regional alignments such as the AEC have
accelerated this process. Less-developed
markets will benefit from the experiences
of developed markets (see Exhibit 1).

Sources: AON Benfield Asia Pacific Solvency Regulation 2013; Norton Rose
Fulbright; Insurance Regulators

Indonesia, Malaysia, the Philippines,


Singapore and Thailand have adopted a risk-based capital (RBC) framework, and Vietnam
and Brunei adopted the solvency margin standard, while the rest of ASEAN nations having
no particular system in place. Over the past few years, capital requirements have been raised
in a bid to strengthen the industrys capitalization, but this also has led to consolidation
in some markets (see Exhibit 2). Thailand, Indonesia and the Philippines have raised
capital requirements to scale up their regulatory standards and to enhance their markets
competitiveness (see Exhibit 3).
Measures taken in various ASEAN markets include:
In 2005, Singapore was the first regional country to introduce a more complex, risk-based
capital framework. The Monetary Authority of Singapore is reviewing its RBC 2 proposals
by introducing new ERM requirements, including those related to its own risk and solvency
assessment. The new requirements are intended to improve the alignment of capital
standards between banking and insurance.
2

Special Report

ASEAN Non-Life & Life

Exhibit 2
ASEAN Non-Life & Life Number of
Registered Companies in Big 6 Countries

Indonesias Otoritas Jasa Keuangan


(Financial Services Authority)
introduced an integrated supervisory
structure for the bank, nonbank and
capital-market sectors in 2013. The
country introduced regulations in 2008
to require insurers and reinsurers to
increase minimum capital in three
phases. Minimum capital ultimately
increases to IDR 100 billion (USD
8.7 million) for insurance companies
and IDR 200 billion for reinsurers in
December 2014.

Country
Indonesia
Life
Non-life
Total
Malaysia
Life
Non-life
Composite
Total
Philippines
Life
Non-life
Composite
Total
Singapore
Life
Non-life
Total
Thailand
Life
Non-life
Total
Vietnam
Life
Non-life
Total

Thailands risk-based capital framework


was implemented in phases, requiring a
minimum capital adequacy ratio of 125%
as of Sept. 1, 2011, which increased to
140% as of Jan. 1, 2013. The Office of
Insurance Commission plans to roll out
further measures to promote more robust
risk management.
In the Philippines, the amended Insurance
Code was enforced in August 2013, with
new capital requirements focused on
the level of net worth instead of paid-up
capital. A gradual increase in minimum
net worth ultimately will reach PHP 1.3
billion (USD 30 million) by 2022.

2009

2010

2011

2012

2013

46
89
135

46
87
133

45
85
130

41
81
122

NA
NA
NA

10
25
7
42

9
24
6
39

9
22
6
37

9
20
6
35

9
19
5
33

32
84
3
119

30
84
4
118

30
81
4
115

29
76
4
109

25
69
4
98

17
49
66

17
51
68

17
51
68

19
55
74

20
56
76

24
71
95

24
69
93

24
68
92

24
65
89

24
64
88

11
27
38

12
28
40

14
29
43

15
29
44

16
29
45

Source: Indonesia Financial Services Authority, Bank Negara Malaysia,


Philippines Insurance Commission, Monetary Authority of Singapore, Thailand
Office of Insurance Commission, Vietnam Ministry of Finance

In 2013, Bank Negara Malaysia implemented the Financial Services Act 2013 and Islamic
Financial Services Act 2013 to govern the financial sector under a single legislative framework
for the conventional and Islamic financial sectors. The new acts consolidate rules governing
the conduct and supervision of financial institutions, as it is important for the regulatory
systems to adequately and effectively respond to new and emerging risks.
In Myanmar, 12 private domestic companies were granted conditional licenses to offer
insurance services, including life, non-life and composite insurers, in September 2012.
Myanmars Finance Ministry is considering plans to establish a stand-alone, state-owned
reinsurance unit providing capacity to all of the 12 new license holders.
Cambodias Senate passed the draft law on insurance proposed by the Mininstry of
Economy and Finance in July 2014. The draft law is an amendment of the insurance
regulation passed in 2000, with guidelines covering life, non-life and micro-insurance.
Takaful, or Shariah-complaint insurance regulations also have been reformed to
enhance that growing market. Bank Negara Malaysia released final guidelines on riskbased capital for takaful operators, with implementation planned for 2014. Indonesia
is looking to implement a different set of requirements for takaful and to transform
current window operations of takaful units into full-fledged companies.

Special Report

ASEAN Non-Life & Life

Exhibit 3
ASEAN Non-Life & Life Minimum Capital
Requirements
Country
Brunei
Cambodia
Indonesia

Laos
Malaysia
Myanmar

Philippines

Singapore

Thailand
Vietnam

Regulatory transition in ASEAN markets is


leading to stronger systems that close the
gap with neighboring countries and create
a more leveled playing field. The raising
of regulatory standards inevitably has
stressed some companies, with new capital
requirements and market consolidation
in some countries. Variation in insurance
development among ASEAN countries makes
an integration of insurance regulations
unrealistic in the near term. Markets with
more sophisticated regulatory frameworks
can lay down an essential foundation to fuel
growth and competition. In this regard,
Singapore is likely to benefit in attracting
more niche and regional insurance business,
as its regulatory system is ahead of others.

Minimum Capital Requirement


Life and Non-life: BND 1 million (USD 789,270)
Life and Non-life: SDR 5 million* (USD 7.7 million)
Composite Insurer: SDR 10 million* (USD 15.4 million)
Life and Non-life: IDR 100 billion (USD 8.65 million) by Dec.
31, 2014
Sharia Insurer: IDR 50 billion (USD 4.32 million)
Reinsurer: IDR 200 billion (USD 17.3 million) by Dec. 31, 2014
Sharia Reinsurer: IDR 100 billion (USD 8.65 million)
N.A.
Life and Non-life: RM 100 million (USD 30.9 million)
Life: MMK 6 billion (USD 6.1 million)
Non-life: MMK 40 billion (USD 40.9 million)
Composite: MMK 46 billion (USD 47 million)
Existing Life & Non-Life:
PHP 250 million (USD 5.7 million) by June 30, 2013
PHP 550 million (USD 12.6 million) by Dec. 31, 2016
PHP 900 million (USD 20.6 million) by Dec. 31, 2019
PHP 1.3 billion (USD 29.7 million) by Dec. 31, 2022
New Life and Non-life: PHP 1 billion (USD 22.8 million)
Insurers with investment-linked policies or short-term
accident & health policies: SGD 5 million (USD 4 million)
Other direct insurers: SGD 10 million (USD 8 million)
Reinsurers: SGD 25 million (USD 20 million)
Captive insurer: SGD 400,000 (USD 320,000)
Life Insurer/Reinsurer: THB 500 million (USD 15.3 million)
General Insurer/Reinsurer: THB 300 million (USD 9.1 million)
General and Health Insurers: VND 300 billion (USD 14.2 million)
Life Insurers: VND 600 billion (USD 28.4 million)
Reinsurers (General and Health): VND 400 billion (USD 18.9
million)
Reinsurers (Life and Health): VND 700 billion (USD 33.1 million)
Reinsurers (Multiline): VND 1,100 billion (USD 52.1 million)
Branches of Foreign Insurers: VND 200 billion (USD 9.5 million)

Attractive Economic Fundamentals


The AEC is an initiative of the 10 ASEAN
members to create a competitive economic
region to reduce economic disparities and
foster integration into the global economy.
Reaching full economic integration will still
require a reality check, given the practical
difficulties of attaining a single economic
bloc comprising mature economies such as
Singapore and newly emerging markets such
as Myanmar and Cambodia.
Whether or not the AEC happens, the
regions macroeconomic stability remains
attractive for new investments, and its profile
is rising in the global economy on the back
of vibrant industry growth and trade flows.

*SDR = International Monetary Fund special drawing rights. As of Jan. 1, 2014,


SDR 1 = USD 1.54.
Source: AON Benfield Asia Pacific Solvency Regulation 2013, Norton Rose
Fulbright; Insurance Regulators

Exhibit 4a
ASEAN Countries Economic Indicators
Country
Brunei

Land
2013
Area Population
(sq. km.) (Millions)

GDP at Current Prices


(USD Millions)
2011

2012

GDP Growth (%)

Inflation Rate
(%)

2013 2011 2012 2013 2011 2012 2013

Exports* (USD Millions)

Imports* (USD Millions)

2011

2012

2013

2011

2012

2013

5,765

0.4

16,693

16,952

16,214

3.4

0.9

-1.2

0.1

0.1

0.4

12,362.3

13,182.2

11,288.7

2,460.0

3,674.1

3,566.4

Cambodia

181,035

15.4

7,079

7,292

7,015

7.1

7.3

7.0

5.5

2.9

3.0

6,710.6

7,434.9

N.A.

6,133.6

11,228.8

N.A.

Indonesia

1,904,569

248.0 845,573 877,801 870,275

6.5

6.3

5.8

5.3

4.0

6.4 203,496.7 190,031.8 182,551.8 177,435.6 191,689.5 186,628.7

Laos

236,800

10,002

8.0

7.9

8.2

7.6

4.3

6.4

Malaysia

329,000

29.6 289,047 304,726 312,433

5.1

5.6

4.7

3.2

1.7

2.1 228,086.0 227,537.8 223,580.0 187,473.1 196,392.6 201,642.0

Myanmar

676,578

64.9

56,408

5.9

7.3

7.5

2.8

2.8

5.8

8,119.2

9,314.9

N.A.

6,805.9

9,188.4

N.A.

Philippines

299,764

97.5 224,095 250,182 272,018

3.6

6.8

7.1

4.7

3.2

2.9

48,042.2

51,995.2

56,698.0

63,709.4

65,386.4

62,411.0

Singapore

6.8

8,162
56,170

9,169
55,759

1,746.5

2,655.2

N.A.

2,209.4

3,503.5

N.A.

710

5.4 272,316 284,299 295,744

6.0

1.9

4.1

5.2

4.6

2.4 409,449.2 408,393.6 411,019.0 365,718.0 379,723.3 373,688.0

Thailand

513,120

68.2 345,672 365,966 387,156

0.1

6.5

2.8

3.8

3.0

2.2 228,820.7 229,524.2

N.A. 230,083.6 247,777.7

N.A.

Vietnam

331,210

89.7 134,598 155,565 170,565

6.2

5.2

5.4 18.7

9.1

6.6

N.A. 104,216.5 113,282.5

N.A.

*Exports and imports 2013 data from countries statistics offices.


Source: International Monetary Fund, World Economic Outlook Database; ASEAN Statistics

95,365.6 114,510.7

Special Report

ASEAN Non-Life & Life

Exhibit 4b
ASEAN Foreign Direct Investment Net Inflows

ASEAN countries are at vastly different


stages of development, presenting attractive
prospects for a variety of life and non-life
insurance business. Growing investment
inflows, increasing infrastructure and
manufacturing investments, rising affluence,
favorable demographics and fast-growing
consumer markets are fueling demand for
insurance in both commercial and personal
insurance segments. Correlated with these
favorable economic fundamentals are
opportunities to foster consumer markets for
personal insurance in life, health, automobile
and household property protection.

(USD Millions)**

2011

2012

Country

IntraASEAN

ExtraASEAN

Total

IntraASEAN

ExtraASEAN

Total

Brunei
Cambodia
Indonesia
Laos
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam

67.5
223.8
8,334.5
54.0
2,664.3
210.7
-74.1
4,311.8
564.9
1,517.3

1,140.8
667.9
10,907.2
246.8
9,336.6
1,846.3
1890.0
50,973.4
8,434.6
6,001.7

1,208.3
891.7
19,241.6
300.7
12,000.9
2,057.0
1,815.9
55,285.2
8,999.4
7,519.0

N.A.
523.0
8,027.0
73.6
2,813.9
118.0
145.2
7,286.6
-89.7
1,262.5

N.A.
1,034.1
11,826.4
220.7
6,586.1
1,034.3
2,651.8
48,885.4
10,786.7
7,105.5

N.A.
1,557.1
19,853.4
294.4
9,400.0
1,152.3
2,797.0
56,172.0
10,697.0
8,368.0

** Foreign direct investment net inflow data not available for 2013.
Source: International Monetary Fund, World Economic Outlook Database;

Foreign investment has focused on the


ASEAN Statistics
manufacturing sector for cost benefits
provided by a mixed supply of natural and
human resources across ASEAN. Countries such as Cambodia and Vietnam, with ample and
relatively cost-effective labor forces, have attracted production infrastructure for low-value
goods such as garments. Myanmar has just begun to open its market but already is drawing
substantial interest in its abundant natural resources and labor supplies. Established industrial
countries such as Thailand and Malaysia remain competitive as global production sites for
automobile, electronic and computer goods and parts. Vietnam also has started the production
of high-end products such as mobile phones.
Among ASEAN countries economic factors (see Exhibits 4a and 4b), Indonesia appears
to have a balanced pool of comparative advantages, delivering an attractive market size,
substantial economies of scale, diversified commercial and personal business portfolios,
promising foreign investments and robust trading activities.
As the largest ASEAN economy, Indonesia represents almost 40% of the ASEAN regions
economic output. It is the worlds largest exporter of natural resources such as palm oil and
coal, and it takes an active role in global trade flows. Indonesia is projected to be the secondhighest growth market in non-life premium in the world, with an estimated compound
annual growth rate (CAGR) of 9.5% between 2014 and 2020, according to Munich Re. For life
premium, Indonesia is forecasted to post a CAGR of 14.9% between 2014 and 2020.
ASEAN countries present distinctive comparative advantages correlated with their economic,
political and social circumstances. Indonesia, Thailand and Malaysia are expected to benefit
more from the AEC in terms of insurance growth, supported by compelling drivers in
manufacturing and industrial growth, rising affluence and big consumer markets. Newly
emerging markets such as Cambodia and Myanmar have drawn considerable interest in their
gradual market liberalization and immense potential as they start from a low base.

In ASEAN, the nature of insurance companies varies from state-owned or captive insurers
of government corporations in Vietnam, to family-controlled companies in Thailand,
conglomerates in Indonesia and banking groups in Singapore and Malaysia. Multinationals tend
to have a more diverse presence across the region in life, non-life and reinsurance businesses.
International groups with established operations across different markets will benefit more
from existing resources, networks and regional connections. Relatively, domestic players may
find it more difficult to take advantage of closer economic integration.
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Exhibit 5
ASEAN Life Premiums for 'Big 6' Countries
16,000

Indonesia
Malaysia

Philippines
Singapore

Increasing intra- and inter-regional trade


has driven demand for insurance in marine,
aviation, transportation and specialty
businesses. Developed insurance markets
such as Singapore stand out for competitive
advantages in niche, specialized and a
broad range of insurance and reinsurance
businesses. Singapores offshore insurance
fund for non-life businesses reported
gross premiums of SGD 7.4 billion (USD
5.9 billion), compared with the domestic
Singapore insurance funds premiums of SGD
3.7 billion in 2013, according to the Monetary
Authority of Singapore. The countrys
non-life offshore business jumped nearly
threefold in gross premiums since 2000.

Thailand
Vietnam

USD Millions

14,000
12,000
10,000
8,000
6,000
4,000
2,000
0

2008

2009

2010

2011

2012

2013

Source: Swiss Re sigma report

Exhibit 6
ASEAN Non-Life Premiums for 'Big 6' Countries
7,000

Indonesia
Malaysia

Philippines
Singapore*

Reinsurers Benefit From Dynamic Risk


Management Needs

Thailand
Vietnam

ASEANs dynamic risk landscape and


evolving regulations create favorable
5,000
prospects for reinsurance business. Primary
4,000
insurers increasingly have used reinsurance
as a form of risk transfer, as well as part of
3,000
their capital management on balance sheets,
2,000
in solvency transactions and loss-portfolio
1,000
transfers. Property is the biggest line of
reinsurance by premium in ASEAN markets.
0
2008
2009
2010
2011
2012
2013
It is still compulsory in some countries to
*Premium for domestic business
Source: Swiss Re sigma report
cede certain amounts of reinsurance to local
reinsurers. But many non-life companies
have sought more diversified reinsurance placements, particularly in the wake of the Thailand
flooding in 2011, which created concerns about potential recoverable risk due to overly
concentrated reinsurance purchases.

USD Millions

6,000

Expanding trading and manufacturing activities enhance complexity in business and


investment risks, highlighting the need to manage risks not just for property and facilities, but
also for business interruption, liability and credit risk internationally. Natural catastrophes,
business interruption and fire were ranked as the top three risks for companies in Asia,
according to Allianz Global Risk Surveys.
Both developed and developing markets are exposed to similar commercial risks, and therefore
insurance demands. Risk management has to cover a multitude of levels, from physical
security, environment and health, trade credit, property and safety to wider considerations of
enterprise risk, business continuity and supply chain management on an international basis.
Specialist underwriters and companies with diversified portfolios and capacity will benefit
from increasingly complex risk management.
ASEAN countries have high exposures to natural catastrophes such as typhoon, earthquake
and flood. This highlights a leading role for reinsurers in managing large-scale disaster risks. A
scale of potential damage similar to the 2011 Thailand floods may happen in countries such as
Indonesia and Vietnam. Indonesias capital city of Jakarta is highly exposed to natural disasters,
6

Special Report

ASEAN Non-Life & Life

but a large part of the citys economy remains uninsured. The protection gap between the
economic and insured losses could amount to USD 10 billion if a major flood or earthquake
hits Jakarta. The gap may triple to USD 28 billion by 2023 unless the city improves its disaster
preparedness, according to a survey by Swiss Re.
In many ASEAN countries, the capital size of insurers, particularly in nations with similar
concentrations of medium to small, local non-life players, is still not enough to retain largescale risks such as natural catastrophe, commercial property and industry. This is also
a factor driving demand for reinsurance as capital replacement or risk management for
primary insurers. Most ASEAN non-life companies maintain low retention rates, particularly
for higher risk exposures. For instance, Thailands worst class of flood-hit non-life business
industrial all risks ceded more than 90% of its risk to reinsurers, which absorbed
significant flood losses in international markets. The high use of reinsurance in most
ASEAN countries has contributed to most non-life insurers stable underwriting results. On
average, non-life insurers ceded about half of gross premium to reinsurance, particularly for
commercial risks, divided among local and international markets and regional reinsurers.
Rising primary insurance premiums and direct insurers increasing appetite for alternative
capital and risk management all amid regulatory changes, natural catastrophe threats and
the growing complexity of risks present substantial prospects for reinsurance business
in ASEAN. This is demonstrated by the influx of reinsurance capacity from international
markets and the emergence of Asian reinsurers in the past few years. ASEAN economies
growing connectivity and vigorous economic activity have attracted new reinsurance
establishments in line with their global diversification strategies.

Malaysias Takaful Lead


Takaful, or Islam-compliant insurance, is also a business prospect raised by both local
and international insurers following increased regulatory and market integration. ASEAN
countries represented one-quarter of global gross takaful contributions, with USD 3.5
billion in 2013. Malaysia has led in takaful business, accounting for 70.4% of ASEANs total
gross takaful contributions, followed by Indonesia with 22.6% of takaful market share. The
two countries large Muslim populations, along with initiatives on regulatory reform, have
driven growth.
Malaysia is the second-largest takaful market in the world, with industry growth of
24.2% in 2013, and it is also the worlds largest family takaful market. The countrys low
insurance penetration and young population present significant potential for growth,
supported by favorable regulation to promote overall Islamic finance and more active
participation of local and international players. Malaysia continues to lead as a regional
center for global takaful in terms of business and regulatory development.
Indonesias attraction is its large Muslim population and current low insurance
penetration. The industry grew 23.4% in 2013, with good prospects in the medium to long
term as 80% of Indonesians are underinsured.

Market Prospects
The AEC blueprint states that the process of liberalization should occur with due respect
for national policy objectives and the levels of economic and financial development of
individual members. It also identifies member countries with respect to specified progress in
liberalizing financial services, including insurance sectors, by 2015. However, it is doubted
that some members will be ready for liberalization by next year. A.M. Best believes it is
premature to predict insurance integration, as market liberalization within ASEAN is in an
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Exhibit 7
ASEAN Life & Non-Life Insurance Penetration for Big 6 Countries
Premiums as % of gross domestic product

Country
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam

Life
0.92
2.80
0.89
5.56
2.06
0.70

2008

2009

2010

2011

2012

NonLife
0.43
1.52
0.51
1.56
1.56
0.74

NonLife
0.48
1.63
0.43
1.62
1.64
0.74

NonLife
0.54
1.60
0.43
1.57
1.66
0.86

NonLife
0.55
1.70
0.47
1.60
1.79
0.81

NonLife
0.53
1.74
0.50
1.62
2.07
0.79

Total
1.34
4.32
1.41
7.13
3.62
1.44

Life
0.85
3.21
0.69
4.62
2.43
0.64

Total
1.33
4.84
1.12
6.23
4.07
1.38

Life
1.10
3.04
0.75
4.57
2.51
0.70

Total
1.64
4.64
1.18
6.14
4.17
1.56

Life
1.23
3.02
0.84
4.46
2.67
0.63

Total
1.78
4.72
1.31
6.06
4.45
1.44

Life
1.42
3.11
1.08
4.48
2.95
0.63

2013
Total
1.94
4.85
1.58
6.10
5.01
1.42

Life
1.60
3.20
1.50
4.40
3.80
0.60

Source: Swiss Re sigma report

early stage. In reality, it is difficult for some ASEAN members to liberalize within a definite
time frame as early as 2015, as the insurance sector plays a vital role in the economies of
developing nations.
In the long run, A.M. Best expects liberalization to generate greater efficiency and supply of
insurance capacity. This will subsequently benefit policyholders, as affordability is an issue in
some ASEAN markets. The attraction of new entrants driven by liberalization will encourage
efficient and alternative distribution to enhance market penetration and product development.
ASEAN countries continue to be attractive for insurance and reinsurance businesses, supported
by buoyant industry growth, expanding urbanization and consumer markets, and dynamic risk
management needs. There is a wide range of opportunities for insurers with scale, as well as
niches for consumer, commercial and specialist businesses.
Newer insurance markets in the Indochina region such as Vietnam are attractive, with
higher potential for growth and good profitability in the long term. Relatively, markets
with longer histories, such as the Philippines and Indonesia, need to undergo structural
changes to improve profitability for further potential growth. Key factors for success
include efficient distribution and claims management, along with substantial economies of
scale for cost-effective operations. Singapore stands out as a hub for regional and specialist
business, drawing an increasing number of reinsurers and underwriters to write risks for
the region.
Foreign capital continues to flow into the region as part of ASEAN markets diversification and
overseas expansion strategies. They also will be able to offer competitive pricing, because
the risks will be spread globally. In recent years, multinationals have created a more diverse
presence across the region for life, non-life and reinsurance businesses.
Recent merger and acquisition activities highlight substantial interest from Japanese groups
targeting big, high-potential markets such as Indonesia. Nippon Life, Sumitomo Life, Dai-ichi
Life, Mitsui Sumitomo Insurance and Nipponkoa all entered or expanded in Indonesia in the
past few years, with aggregate deal values of nearly USD 2 billion.
Against impressive growth, ASEAN markets are facing issues of both capital and qualified
human resources. The relative size of insurance companies in some ASEAN markets is small,
making it difficult for them to achieve economies of scale. Expense ratios in some ASEAN
countries are much higher than those in East Asia, meaning ASEAN companies may face higher
costs for expansion within ASEAN due to insufficient scale. A lack of compatible and stable
human resources for multiple markets is also an issue for intra-regional expansion, particularly
8

NonLife
0.50
1.70
0.50
1.60
1.70
0.70

Total
2.10
4.80
1.90
5.90
5.50
1.40

Special Report

ASEAN Non-Life & Life

with the diverse nature of ASEAN nations. Currently, not many ASEAN companies actively
venture out of their local markets.
With the AEC accession in mind, A.M. Best expects the region may see the emergence
of strong players buoyed by increasing connectivity and strengthening standards.
Interconnectivity of insurance business is likely greater with the relatively closer ties among
companies in Malaysia and Singapore. In the future, there may be increasing connectivity
among companies within the Mekong region countries of Vietnam, Cambodia, Laos and
Myanmar, given their similarity in pace of development.

Exhibit 8
ASEAN A.M. Best Rated Companies
Ratings as of Aug. 29, 2014.

Company

AMB #

Bests
Financial
Strength
Rating (FSR)

PT Asuransi Jasa Indonesia (Persero)


PT Asuransi Samsung Tugu
ACR ReTakaful Berhad
Asia Capital Reinsurance Malaysia Sdn Bhd
Energas Insurance (L) Ltd.
General Insurance Corp. of India (Labuan Branch)
Labuan Reinsurance (L) Ltd.
Lonpac Insurance Bhd.
Malaysian Reinsurance Berhad
Singapore Reinsurance Corp. Limited (Labuan Branch)
Wentworth Insurance Co. Ltd. (Labuan Branch)
Malayan Insurance Co., Inc.
National Reinsurance Corp. of the Philippines
Starr International Insurance (Philippines Branch)
AIG Asia Pacific Insurance Pte. Ltd.
Asia Capital Reinsurance Group Pte. Ltd.
China Taiping Insurance (Singapore) Pte. Ltd.
ECICS Ltd.
Federal Insurance Co. (Singapore Branch)
First Capital Insurance Ltd.
Korean Reinsurance Co. (Singapore Branch)
Samsung Reinsurance Pte. Ltd.
SCOR Reinsurance Asia-Pacific Pte Ltd
SHC Insurance Pte. Ltd.
Singapore Reinsurance Corp. Ltd.
Starr International Insurance (Singapore) Pte. Ltd.
United Overseas Insurance Ltd.
Asian Reinsurance Corp.
Bangkok Insurance Public Co. Ltd.
BIDV Insurance Corp.
PVI Insurance Corp.
PVI Reinsurance Joint-stock Corp.
Samsung Vina Insurance Co., Ltd.
Vietnam National Reinsurance Corp.

078591
091075
090060
090756
091269
093387
086913
089132
078303
93253
093446
077617
086771
093230
091421
078461
088853
091957
093151
089433
093162
091577
088684
091559
085224
091708
086781
085568
086195
092245
091542
091541
091397
091508

B++
AAAA
AAAAAAB++
B++
A
A
AAAA++
A
A
A
A
AAA
A+
B
AB+
B++
B+
AB++

Source:

Bests Statement File Global

Bests Issuer
Credit Rating
(ICR)

Bests FSR &


ICR Outlook

Country

AMB Rating
Effective
Date

bbb+
aaaa
aaaaaabbb+
bbb
a
a
aaaaa+
a
a
a
a+
aaa
aabb
abbbbbb
bbbabbb

Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Positive
Stable
Stable
Stable
Stable
Stable
Stable/Positive
Stable
Positive
Stable
Stable/Positive
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Positive
Stable
Stable
Stable
Positive
Stable
Stable

Indonesia
Indonesia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Philippines
Philippines
Philippines
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Thailand
Thailand
Vietnam
Vietnam
Vietnam
Vietnam
Vietnam

3/21/14
1/16/14
12/20/13
12/20/13
3/28/14
2/14/14
12/12/13
10/10/13
12/11/13
11/7/13
5/30/14
3/28/14
4/4/14
10/18/13
2/20/14
12/20/13
5/30/14
2/12/14
3/20/14
9/26/13
11/22/13
11/14/13
10/10/13
1/16/14
11/7/13
10/18/13
4/29/14
2/26/14
5/30/14
8/29/14
4/17/14
4/17/14
2/20/14
11/1/13

Special Report

ASEAN Non-Life & Life

10

Special Report

ASEAN Non-Life & Life

11

Special Report

ASEAN Non-Life & Life

Published by A.M. Best Company

Special Report
CHAIRMAN & PRESIDENT Arthur Snyder III
EXECUTIVE VICE PRESIDENT Larry G. Mayewski
EXECUTIVE VICE PRESIDENT Paul C. Tinnirello
SENIOR VICE PRESIDENTS Douglas A. Collett, Karen B. Heine,
Matthew C. Mosher, Rita L. Tedesco
A.M. BEST COMPANY
WORLD HEADQUARTERS
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Phone: +1 (908) 439-2200
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Phone: +44 (0)20 7626-6264
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Phone: +852 2827-3400
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Office 102, Tower 2
Currency House, DIFC
PO Box 506617, Dubai, UAE
Phone: +971 43 752 780

A Bests Financial Strength Rating is an independent opinion of an insurers financial strength


and ability to meet its ongoing insurance policy and contract obligations. It is based on a comprehensive quantitative and qualitative evaluation of a companys balance sheet strength, operating performance and business profile. The Financial Strength Rating opinion addresses the
relative ability of an insurer to meet its ongoing insurance policy and contract obligations. These
ratings are not a warranty of an insurers current or future ability to meet contractual obligations.
The rating is not assigned to specific insurance policies or contracts and does not address any
other risk, including, but not limited to, an insurers claims-payment policies or procedures; the
ability of the insurer to dispute or deny claims payment on grounds of misrepresentation or
fraud; or any specific liability contractually borne by the policy or contract holder. A Financial
Strength Rating is not a recommendation to purchase, hold or terminate any insurance policy,
contract or any other financial obligation issued by an insurer, nor does it address the suitability
of any particular policy or contract for a specific purpose or purchaser.
A Bests Debt/Issuer Credit Rating is an opinion regarding the relative future credit risk of
an entity, a credit commitment or a debt or debt-like security. It is based on a comprehensive
quantitative and qualitative evaluation of a companys balance sheet strength, operating
performance and business profile and, where appropriate, the specific nature and details of a
rated debt security. Credit risk is the risk that an entity may not meet its contractual, financial
obligations as they come due. These credit ratings do not address any other risk, including
but not limited to liquidity risk, market value risk or price volatility of rated securities. The rating is not a recommendation to buy, sell or hold any securities, insurance policies, contracts
or any other financial obligations, nor does it address the suitability of any particular financial
obligation for a specific purpose or purchaser.
Any and all ratings, opinions and information contained herein are provided as is, without
any expressed or implied warranty. A rating may be changed, suspended or withdrawn at any
time for any reason at the sole discretion of A.M. Best.
In arriving at a rating decision, A.M. Best relies on third-party audited financial data and/or
other information provided to it. While this information is believed to be reliable, A.M. Best
does not independently verify the accuracy or reliability of the information.
A.M. Best does not offer consulting or advisory services. A.M. Best is not an Investment
Adviser and does not offer investment advice of any kind, nor does the company or its Rating
Analysts offer any form of structuring or financial advice. A.M. Best does not sell securities.
A.M. Best is compensated for its interactive rating services. These rating fees can vary from
US$ 5,000 to US$ 500,000. In addition, A.M. Best may receive compensation from rated entities for non-rating related services or products offered.
A.M. Bests Special Reports and any associated spreadsheet data are available, free of
charge, to all Bests Insurance News & Analysis subscribers. Nonsubscribers can purchase
the full report and spreadsheet data. Special Reports are available through our Web site at
www.ambest.com/research or by calling Customer Service at (908) 439-2200, ext. 5742.
Briefings and some Special Reports are offered to the general public at no cost.
For press inquiries or to contact the authors, please contact James Peavy at (908) 439-2200,
ext. 5644.
SR-2014-513