Asia Insurance Market Review Report

Asia Insurance
Market Report 2016

Copyright 2016 Willis Towers Watson.
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Contents page
FOREWORD
Simon Weaver, Head of Corporate Risk and Broking (CRB), Asia 5
IS THE MARKET CHANGING?

Cliff Jeyes, Head of Broking, Asia and Head of Facultative, Asia 6
Trends Were Watching 8
Risk and Analytics 10
Affinity 13
COUNTRY FOCUS
China 16
Hong Kong 17
Indonesia 18
Japan 19
Korea 20
Singapore 22
Taiwan 23
Brunei 25
Cambodia 25
India 26
Malaysia 26
Myanmar 27
Philippines 27
Thailand 29
Vietnam 29
PRODUCT FOCUS
Rate Movements - 2016 32
Aerospace 34
Captives 37
Construction 38
Downstream Energy 39
Financial Solutions 40
Financial Lines (FINEX) 41
Marine 42
Property and Casualty 44
Power and Utilities 46
Upstream Energy 47
Terrorism and Political Violence 48
Rate Movements Expectations for 2017 49
Asia Insurance Market Report 2016 3
Foreword
Simon Weaver
Welcome to the first Willis Towers Watson Asia Insurance Market Report. We
are pleased to provide our anticipated 2017 outlook for the Asian insurance
and reinsurance market across the full spectrum of specialty classes.
Combining a retrospective analysis of events over the last perspective. The market is undoubtedly trying to step
12 months with our forward looking thought leadership, this up, with various new product offerings planned for 2017.
comprehensive viewpoint gives insight on the impact of the Different industries face different exposures and our
interconnected risks across physical and human capital industry focus in Natural Resources, Transportation,
assets. Keeping pace with the rapid rate of change in the risk Financial Institutions, Construction and Technology, Media
environment means that companies and their management and Telecommunications enables us to provide specific,
teams must be well advised to make decisions based on tailored solutions for each of them.
strong analytic support and consultative advice.
Looking forward, Asia remains a relatively high economic
Whilst 2016 has seen some dramatic events in the political growth area. One of the challenges facing many Asian
arena and ongoing volatility in the financial markets, there has corporates is the war for talent. This is where the
been a general continuation in rate reductions. Several natural expanded client proposition from our Human Capital &
catastrophic events such as the Kumamoto earthquakes Benefits consulting business adds value. Be it in advising
in Japan, the Kaikoura earthquake in New Zealand, Super on executive compensation, talent attraction and retention,
Typhoon Meranti in Taiwan and Typhoon Chaba in South to designing and providing workforce benefit programmes.
Korea, and the Category 5 Hurricane Matthew in the United
States have caused widespread destruction, but without Having integrated our consultancy and broking businesses,
causing market-changing insured losses. Willis Towers Watson has a client base (both from original
insureds and services to the insurance and reinsurance
The market withstood another difficult year and capital market) that gives us unique perspective to deliver the best
remains readily available, but are signs of stress results and the deep expertise to add real value.
developing? Time will tell, but for now we approach
the December/January renewal season with soft Our broking activities in the region are fully coordinated,
and reducing rates in many classes. However, it is still with Singapore acting as one of our Global Broking
imperative that clients risks are presented in the best light Centres of Excellence, where our regional experts deliver
to the insurance market. Our clients have benefited from services to clients across Asia and also access other
the large Asian-based risk and analytics team Willis Towers international markets where required.
Watson has to provide risk engineering services to their
exposures in the region. This on the ground capability has We see 2017 as a year where our new business differentiates
also helped our brokers develop the most competitive terms. itself from our competitors and delivers truly integrated and
value-added solutions to our clients. We look forward to
From a buyers perspective, emerging risks such as Cyber working with you over the next 12 months and beyond.
threats move higher up the risk management agenda, but
is yet to translate to policy take up. Data Laws are patchy
and often not enforced even when in place, however this
is changing and we are starting to see more public Cyber
losses. Many buyers are looking for benchmarking data Simon Weaver is the
to gauge Cyber loss scenarios such as Cyber extortion,
Head of Corporate Risk and
Reputation risk and fine inducing Privacy breaches.
Going further with these efforts to quantify the severity
Broking (CRB) , Asia.
of the risk, there is an increasing focus on people and
workplace culture from both a quantification and mitigation

Is the Market Changing?
Cliff Jeyes
For many years Hard and Soft have been the prevalent terms used to
describe the current status of the market cycle. Is this now an outdated way
to reflect on market conditions? Rate movements are more marginal than
ever and significant data allows both clients and markets to be tactical in
their buying and underwriting strategies, suggesting that we, as an Industry,
have moved on to a new normal.
As you will see in the rate analysis of 2016 and expectations In addition, distribution models continue to change, and at
for 2017, all lines continue to comment that the rates are a rapid pace. The model between client, broker and insurer
at an unprecedented low. However, the laws of supply and has been disrupted as the role of distribution and capital
demand continue to exist and the abundance of capacity blurs, allowing alternative capital, MGAs and reinsurers to get
drives significant competition for premium volume. None of closer to the client in the battle to gain control of capital flow.
us have a crystal ball to determine what the future will bring We are now seeing the next iteration of this model through
in respect of underwriting results, but it is fair to say that with InsurTech, which challenges us to create the best solutions
top line premium volume difficult to achieve, there has been a delivered in the most efficient way to the buyers, challenging
reliance on reserve releases to meet bottom line targets, as the traditional principles of insurance transactions. The
investment returns no longer exists in its previous guise. What distribution and efficiency of where and how business is
will happen if this well runs dry? traded, we expect, will be an ever present theme as all parties
continue to try and produce adequate margins. Control of
Currently, insurance remains an attractive investment vehicle premium volumes is becoming increasingly important on both
due to a lack of major losses and favourable returns on sides of the fence, with consolidation leading to greater focus
capital. However, there are now a number of factors that on portfolio management and the creation of facilities and
suggest a potential shift in this paradigm. Imagine if reserve panels as efficiency gains and control are sought.
releases run out, market events lead to poor underwriting
results, interest rates remain low and investment returns fall. A lot of the questions being posed are not answerable yet;
There is no question that if all these factors strike, the model nevertheless, what is clear is that the winners will be those
would be ripe for change. For the time being, ongoing M&A who have the ability to adapt to this dynamic and changing
activity coupled with new market entrants are potentially environment and to deliver more comprehensive solutions to
diluting the effect of this shift, and are giving new variations to their clients.
the market cycle.
Cliff Jeyes is the Head of

Broking, Asia and the Head of
Facultative, Asia.
Trends Were Vietnam : Thailand :
Watching Tien Phong Bank foiled an

attempt to steal more than
Coordinated malware attack
used to extract money from
USD 1 million Government Savings Bank
ATMs across the country,
Cyber resulting in a loss of USD
350,000
In 2015, companies in Asia lost USD
81 billion in revenues to cyber-crime Singapore :
more than in the United States or Taiwan :
Europe. A dangerous combination of A private company which offers
lack of awareness and investment has karaoke entertainment suffered Malware attack netted thieves
resulted in companies being poorly a serious data security breach, in USD 2.5 million from 40 cash
protected. According to the Financial which the personal data of over machines
Times, up to 90% of Asia-Pacific 300,000 customers was leaked
banks and companies reported some
form of cyber-attack in 2016.
520
Japan :
Singapore :
In a synchronized attack in
May, hundreds of thieves with A student accessed forms
fake credit cards withdrew showing personal data from
days
USD 18 million from 1700 customers, prompting a
Seven Bank cash machines telecom service provider to shut
down its web page for 12 hours
the average time that Singapore :

The increasing vulnerability of
Asian companies allow business operations to a failure
A telecom provider suffered
malware to sit on their intentional and malicious
in technology or a data breach
systems three times distributed denial-of-service
has pushed a number of clients to
the global median. (DDoS) attacks on its Domain
purchase cyber coverage.
Name Servers (DNS)
Rising
Occurrence and Typhoon Meranti
Economic Loss = USD 3 billion
The huge global gap between
disaster-related insured and
Underinsurance
economic losses presents a growth
Insured Loss = USD 650million to USD 1 billion
opportunity for insurers. Swiss Re
estimates that uninsured losses
of Natural Japanese Kumamoto Earthquakes
Economic Loss = USD 30-42 billion
from natural disasters are USD
153 billion annually, with the US,
Catastrophes Insured Loss = USD 5 billion Japan and China accounting for
most of the global gap (USD 81
Natural disasters are unpreventable Flooding of Yangtze Basin billion). Furthermore, 5 of the top ten
occurrences that take place, ranging Economic Loss = USD 43 billion countries with the largest uninsured
from mild to absolutely destructive. Insured loss = USD 1 billion losses are in Asia. Closing the
The number of natural and underinsurance gap requires specific
geophysical disasters taking place Taiwan Meinong Earthquake measures by the insurance industry
each year is noticeably skyrocketing. towards creating incentives for risk
Economic Loss = USD 780 million
A number of disasters have struck mitigation through risk-based pricing
Insured Loss = USD 8 million
Asia in 2016: of its products.
InsurTech MetLife launched <<Collab>>, an
Investment into
InsurTech accelerator to support
InsurTech, the insurance arm of start-ups that tackle real business Chinese FinTech
FinTech, has been gaining importance needs. companies increased
in the industry. InsurTech players
67%
are reshaping the market landscape
by designing new products that Singapore-based insurance
meet changing customer needs provider NTUC Income created an
and are establishing greater levels accelerator called Income Future
Starter that aims to hone and
1b
of transparency and underwriting
accuracy. Clients are increasingly invest in InsurTech start-ups
adapting to this change as traditional
to
InsurTech players are emerging
relationships between the broker
USD
in countries across Asia, from
and client begin to be disrupted by
China to the Philippines. There is
technology and aggregators.
a big opportunity to form strategic
partnerships with InsurTech firms
Allianz announced the launch to gain access to some of these in Q3 2016
of its Digital Arena innovation new capabilities.
platform to encourage start-ups
and entrepreneurs to reinvent
the insurance experience for
consumers in Asia.
Terrorism The Philippines raised its terror

alert to the highest level after the
biological agents, to name a few.
The insurance market has grown
substantially and adjusted to these
The rise of extremist groups in the discovery of a plot by Islamic State- new risks. There has been an
Middle East and the proliferation of linked militants to attack a park. increase in the number of enquiries
preachers who advocate intolerance about the types of terrorism coverage
and violence in certain countries have Terror cell in Batam, Indonesia that available. Following recent events
created conditions favourable for the was planning a rocket attack on in Asia, C-suite executives and risk
expansion of terrorism in Asia. Marina Bay Sands, Singapore managers have begun to take the
threat of terrorism more seriously
2016 Jakarta attacks - linked to ISIS The number of terrorist attacks on and question their exposures. The
developed countries has shown existence of a cover has always been
a significant increase in recent known, but given the frequency and
A number of foiled ISIS-inspired
years. Modes of attacks have unpredictability of these events, there
attacks in Malaysia
been evolving - remote detonation has been movement up the corporate
devices, lone wolf gunmen, cyber chain in terms of understanding
network penetration and weaponized terrorism products.

Risk And Analytics
Organizations today are facing a rapidly evolving set of risks that require
dynamic and innovative tools to diagnose exposures in real time and
alternative solutions to manage emerging risks. Clients are turning to
solutions that enable them to make decisions in order to improve certainty,
build resilience and more effectively manage the cost of risk.
In 2016, clients expressed increased interest in the SRC enables clients to:
following risk solutions:

Align their risk financing strategy with stakeholders,
Alternative Risk Transfer (ART) Solutions that enable business objectives and risk appetite.
clients to improve profitability, productivity and other financial
Determine the value of money being offered by insurers.
ratios by transferring risks for which traditional insurance
markets do not provide efficient solutions.

Explore potentially more efficient risk retention and
insurance structures.
Some examples of solutions include: Captive Solutions, Risk Quantification Tools that combine advanced
Portfolio Solutions, Structured Insurance Solutions, algorithms, strong data and the clever use of technology
Weather Solutions (Index-based, Parametric-based) to provide a better understanding of risk and improved
and Capital Solutions. decision making. The tools access global claims
databases to not only predict loss potential but benchmark
each organisation against global peer performance.
Strategic Risk Consulting (SRC) provides bespoke advisory
services by combining industry knowledge, risk management
analytical expertise, and insurance broking excellence.
Complete View of Risk

Likelihood of Risk
Business as usual risks...

Risk appetite Stressed scenarios:
Potential failure to thrive
Catastrophic scenarios:
Potential failure to survive
Cost of Risk
Determine risk appetite and risk tolerances Dene and quantify Quantify catastrophic risks
Dene and prioritize key risks stressed risk scenarios Customise risk nancing solutions
Quantify risk severity and frequency Place optimal insurance
Dene root causes of risks
Recommend programs to reduce risks
In line with global trends and the occurrence of events, we have seen the enhanced
usage of the following:
D&O Quantified to evaluate a firms Cyber Quantified Modeling to predict Dynamic Casualty Forecast to provide
loss potential related to Directors & cyber risk severity and likelihood of an immediate view of an organizations
Officers (D&O) Liability exposures exposure based on an organizations casualty loss potential and the
and to provide decision support for specific profile including revenue, resultant impact on a firms financials.
optimal insurance structures. industry, past incidents, security
ratings and several additional factors
unique to the organization.
Global Peril Diagnostic to evaluate

and score an entire portfolio for the
most vulnerable properties across all
major natural catastrophe perils.

Forensic Accounting and Complex Forensic accountants work across all geographic locations,
Claims (FACC): industries and specialties in the quantification of economic
damages by using consistent and proven protocols to
Businesses today operate in an increasingly dynamic, present information to insurers credibly and receive
complex and interconnected world. In this business satisfactory and timely payment of claims.
environment, the insurance claim process can be lengthy
and fraught with complications if it is not handled correctly. In August 2015, an explosion in the port of Tianjin caused
As Business Interruption insurance penetration increases widespread damage and disruption to the worlds fourth
in Asia, so does the demand for the skills of specialist largest port. Though the anniversary of the incident has
forensic accountants, both in claims quantification and passed, losses in hundreds of millions of dollars take
in ensuring that the correct pre-loss product is provided. time to resolve given the complexity of the business.
Furthermore, natural catastrophes are prevalent in this part Furthermore, there are numerous claims for property
of the world and pose a significant threat to businesses. damage due to the destruction of vehicles stored at
The lessons learnt from the Thailand floods and the port, diminution in value of repair vehicles, business
Japanese Earthquake in 2012, amongst others, were that interruption and extra expenses. Tens of thousands of
businesses need assistance through the claim process vehicles stored at the port were scrapped or repaired and
after catastrophic events to help them get back on their sold at a discount. A number of WTW FACC consultants
feet. There is a need to simplify the claim process in order from Singapore and New York have been working with
to speed up the process of returning to normal business the insured to calculate and support all losses suffered,
activities as well as quantify loss amounts and obtain cash liaising with the loss adjusters and their consultants and
advances to minimise overall business disruption. responding to numerous requests for information.
Commercial
Insurance
Claims
Fidelity/Bond/
Environmental Crime/Cyber
Issues
Subrogation
Claims/ Forensic Commercial
Damage/
Uninsured Business
Losses Services Disputes
3rd Party & Product Recall/

Liability Product Liabillity
Damages
Construction
Related
Damages
Affinity
Generating Ancillary Revenue and Increasing
Customer Loyalty
Businesses are increasingly being faced with a number customer base through bespoke insurance programmes -
of challenges to their traditional business models and supported by marketing services and technology.
are now looking for innovative ways to remain relevant to
their customers and generate ancillary revenue. Coupled Affinity programs are linked to clients strategic objectives,
with the prevalence of mobile technology and widespread often taking a sustainable and long-term view that benefits
connectivity, businesses now have the ability to provide various stakeholders. An Affinity program is rightly
their customers with access to the benefits of insurance positioned to benefit clients because it:
programs made available in a convenient manner.

Provides access to insurance programs that may
In order to differentiate themselves from their competitors generate ancillary revenue streams
in the marketplace, some businesses are focusing on
Requires little capital investment
enhancing their value proposition and gaining insights
on customer behaviour in order to build relevant product

Creates innovative programs that may help retain clients
and increase loyalty
offerings. The past few years have witnessed an increasing
number of clients looking to differentiate their offer,
Provides access to best-practice distribution strategies
increase customer loyalty and retention and monetise their
Enhances a clients brand
Alternative Looking
Source of Beyond
Ancillary Traditional
Revenue Products
Service Increase
Differentiation Customer
Loyalty
Many clients that have chosen to implement Affinity

programs have been able to provide their customers with
value-added offerings and access to insurance products
that are relevant for their customers. We expect the
demand for Affinity programs to grow in the coming years.

Country Focus

China
Though many Belt & Road construction activities will be
In 2016, the Chinese insurance market saw a marginal
in foreign countries, insurance decisions will be taken in
increase in the total premium written. This increase
China by investors situated locally. With ample capacity
was brought about by the implementation of pricing
in the market, insurers are beginning to leverage their
regulations for compulsory Auto Liability insurance,
domestic and international networks in order to harvest
coupled with the rising ownership of automobiles in
opportunities arising from this massive project. With USD
China. Due to stiff competition in the auto insurance
16 billion in additional premiums expected to be generated
market, auto insurance policies have become
by projects from now to 2030, China is definitely the
increasingly unprofitable, as a result of which some
market to watch for both insurers and brokers alike.
insurers have begun to shift their focus to non-auto
insurance products. Most industries are facing higher
7b
competition for accounts with clean loss ratios except
in the Hi-Tech, Printed Circuit Board (PCB) and
Chemical industries. 80% of which will
Tough competition is driving companies to cut

USD be placed with
costs, often through reductions in brokerage fees in premiums will be Chinese insurers.
and commissions, and also to seek new business
opportunities for additional sources of profit. For
generated, close to
example, China Pacific Property and Casualty
Company Ltd. (CPIC), the second largest non-life
Growth of Domestic Reinsurance Capacity
insurance company changed their strategy of focusing
on market share to one that was focused on profits. China Re and Taiping Re were the only domestic
reinsurance companies in China prior to 2016. However,
In September 2016, Typhoon Meranti hit the the number of local reinsurers doubled in 2016 as PICC
Fujian Province, causing direct economic loss of Re and Qianhai Re were granted approval from the
approximately USD 3.2 billion. Typhoon exposure China Insurance Regulatory Commission (CIRC). The
coverage in China is expected to be reviewed and registered capital of the two new reinsurers is USD 153
underwriting guidelines for typhoon risks may become million and USD 461 million respectively. It is believed
stricter as a result of this catastrophe. that at least three other applications to set up local
reinsurers are currently in the pipeline, with another 20
companies planning to start the application process in
the coming years. This would position China to be the
The market for Typhoon Exposure largest reinsurance market by 2022. The drivers behind
the growth include the implementation of Chinas Risk
insurance is expected to harden Orientated Solvency System (C-ROSS), continuous
growth of direct insurance market and State Councils
in 2017 following large-scale 2014 10-point strategy.
destruction by Typhoon Meranti
Mergers and Acquisitions
The number of outbound insurance M&A deals by Chinese
insurers reached USD 10.2 billion, up from USD 6.6 billion in
One Belt, One Road Initiative 2015. A major deal in 2016 was the acquisition of Genworth
Financial Inc., a dominant player in the US long-term care
Comprising of six international economic corridors and one
insurance sector by China Oceanwide Holdings Group for
maritime Silk Road, the B&R initiative will span 65 countries
USD 2.7 billion. Chinese insurers are increasingly looking
accounting for 62% of the worlds total population and 30%
at acquiring foreign targets as these can absorb foreign
of global GDP. This initiative is expected to create a wave
currency denominated premiums and provide long-
of construction activities and trade liberalisation, driving
term cash pools that support investments. This trend is
insurance premium growth in the local Chinese market and
expected to strengthen in the coming years.
abroad. Property, Engineering and Marine insurance stand
to benefit the most.
Hong Kong
Guidance Note 16 (GN 16)
All lines of business softened at an exceptional speed in
2016, leaving the market the softest it has ever been in The Office of the Commissioner of Insurance in Hong Kong
the past 12 years. The saturated insurance market (161 (OCI) issued a Guidance Note on Underwriting Long Term
authorised insurers serving a population of 7.3 million Insurance business in order to strengthen policyholder
people) contained a substantial amount of capacity due to protection for all long term business sold in the region.
fierce competition. In addition, the lack of significant losses Effective 1 April 2016 for new products and 1 January
added to the softness of the market. The consolidation of 2017 for new and existing policies of current products,
ACE and Chubb and the acquisition of RSAs Hong Kong the purpose of the GN 16 is to promote high standards of
and Singapore operations by AWAC in 2015 created a conduct and sound business practices among insurers, as
further influx of funds into the market. The pretext for the well as to remove information asymmetry for customers
latest round of competitive rate-cutting was in response making purchasing decisions. As this covers a number
to the pricing strategy adopted by Berkshire Hathaway of aspects of an insurance products lifecycle, such as
Specialty Insurance, which gained its operating licence pre-sale, sale and post-sale activities, the remuneration of
in Hong Kong in 2015. Competition is particularly intense insurers is likely to be impacted.
in the motor and employees compensation lines, both
of which are chronically loss-making. One source of Increasing Competition in Health Insurance
downward pressure on the market is the uncertain state
of the economy, which has led many clients to insist on As companies invest more in the area of employee health
a reduction in their insurance overheads. Another is the and benefits and as consumers display greater interest in
simultaneous drying up of construction business in both health and life insurance, the area of health insurance is
Hong Kong and Macao, which has left CAR underwriters seeing steady growth. Given the vast options consumers
desperate to meet their budget targets. have in the marketplace, insurers are finding it increasingly
difficult to gain a strong foothold over their competition. We
Hong Kongs insurance sector is dominated by a have seen a number of insurers increasing their investment
massive and dynamic life segment, which accounts in operations and claims support in order to differentiate
for nearly 90% of all premiums written. The growth themselves in terms of quality and speed of service.
in life insurance premiums is driven by a number of
factors, such as the countrys persistent surplus of
Changes in the Regulatory Environment
savings, the central role played by life insurance in
organised savings and the increasing demand for Over the next three to four years, the regulatory
retirement income solutions in an ageing population. environment is expected to experience the biggest
Accident and health insurance, which are important shake-up since the 1990s. The Insurance Authority
business to life and non-life insurers alike, are likely to (IA) will undergo a change in status to an independent
see near double-digit rate expansion owing to inflation supervisory authority with enhanced powers. Apart from
in the healthcare sector. As one of the most open this, major developments such as the introduction of a
and established insurance centres in the world, Hong statutory licensing regime and new conduct standards
Kong is also well positioned to seize opportunities for intermediaries, the establishment of a policyholders
arising from the adoption of FinTech and the trade and protection fund and the introduction of a risk-based capital
investment flows from the One Belt, One Road initiative system are expected. These changes will not only increase
in the region. the operating costs of insurers, but also the need for
more sophisticated modelling, actuarial and management
capabilities. This increased cost burden might drive
some smaller domestic companies out of the market and
The cost of regulation for insurers is may also challenge the viability of some multinational
expected to increase as Hong Kong branch operations.
moves from a self-regulatory to a

statutory mode of regulation

Indonesia
In line with global trends, the local insurance market The commodities-based Indonesian
across many segments was soft in 2016, with general
economy has all but collapsed, with
insurance business particularly afflicted. The imposition
of the statutory tariff on Property and Motor Insurance GDP re-forecasted to be lower than
by the Indonesia Financial Services Authority in 2014
has had some unforeseen repercussions as insureds previous estimates
sought ways to alleviate significant premium increases
2.1%
that the tariff brought. Many businesses have opted
to not insure, or only partially insure their assets.
Insurance
Others knowingly under-insure and perhaps, even penetration
more significantly and of concern, is the number of
companies that are opting out of Earthquake cover, remains at
which used to be automatically included in the past. the lowest in South-East Asia
Given Indonesias geological composition, this is not a
good idea.
50% by 2019. The implication of the creation of IndoRe and
Indonesia has seen its fiscal deficit rising due to its impact on existing reinsurers is unknown at this stage,
the impact of low global demand for and weakening but it is clear from recent discussions that compulsory
of commodity prices. The mining and oil and gas cession to IndoRe will be mandated. This cession will vary
industries have been impacted by the continued by line of business, but it is assumed that the primary lines
economic slowdown and many companies within of property and auto will see a requirement of 100% local
these industries have shut down. In a bid to improve retention for all but the very largest of risks.
its budget position, the Indonesian government
has proposed a plan for a tax amnesty, aimed at Digitization of the Insurance Industry
encouraging wealthy Indonesians who have been
remiss in their tax affairs to disclose and optionally Indonesia has one of the biggest online markets worldwide,
repatriate their undeclared assets by paying only a with access to mobile internet undergoing approximately
modest clearance levy on the assets declared. As of 15% growth annually. Insurers are looking to invest in
October 2016, only 14% of assets (135 trillion out of technology to enable digital distribution and marketing,
937 trillion rupiah) declared were repatriated from as well as leveraging data and analytics to deliver
overseas. The failure of the Indonesian government personalised insurance solutions to their clients. Though
to follow through on its tax amnesty declaration has the FinTech and mobile payment practices are reshaping
further impacted the Indonesian stock market and the way insurers think about payment, a path forward may
the larger economy as reality sets in. Furthermore, not be visible at the moment in a country where only 11% of
the president and his party do not have majority of the population has a bank account. Current restrictions on
house and are struggling to push forward bills and telecom companies acting as a payment gateways are also
reforms that might benefit the insurance industry and the significantly hindering growth is this sector.
economy as a whole.
High Potential for Growth in the Health and
Benefits Sector
Changes in the Reinsurance Industry Despite the quality of healthcare and distribution in
Indonesia being far behind other countries, the healthcare
In December 2015, the Indonesias Ministry of State sector is receiving vast amounts of local and foreign
Owned Enterprises announced, as part of its commitment investment. Furthermore, the Universal Health Coverage
to establish a strong reinsurance industry, that it would system supported by the Indonesian government (BPJS)
be merging three reinsurance companies to create aims to provide all citizens with access to basic medical
Indonesia Re (IndoRe). This is being done because most coverage by end 2018. Hence, there is a large potential for
of the countrys domestic needs have always been met by growth in the health and benefits sector in Indonesia.
insurers from abroad and the Ministry of Finance and the
OJK believe that this has negatively impacted Indonesias
balance of payments. Officials have said that their aim is
to inject capital into IndoRe and boost its market share to
Japan
D&O Coverage
With the exception of earthquake insurance, the
insurance market in 2016 was characterised by In 2016, a large corporation became embroiled in a high-
depressed rates across all lines of business. Due to profile accounting scandal in which attempts were made
global warming and changes in the temperature of the to understate project costs and to overstate profits. In a
sea, a number of typhoons such as Typhoon Chaba separate event, a manufacturer came under scrutiny in the
and Typhoon Lionrock have hit Japan since August, USA due to the defective installation of air bag inflators
almost once every week. Property insurance, which in cars, prompting the largest auto safety recall in history.
covers damage from typhoons, has a large market in These two scandals have shown light on the importance of
Japan so the impact of these losses has not been Directors and Officers Coverage. Previously, multinationals
visible in the market yet. However, it is expected did not consider covering liability arising from the actions
that the first quarter of 2017 could see the property of their executives. As news of these scandals broke and
market harden. the monetary impact became evident, a number of clients
have expressed interest in covering executive risks and are
In April 2016, two earthquakes on the southern preparing to purchase D&O coverage.
Japanese island of Kumamoto brought the biggest
losses of the first half of 2016. Within a span of 2 days,
M&A Activity
the earthquakes (6.2 and 7.0 Magnitude respectively)
destroyed countless buildings and resulted in the In 2016, the insurance industry saw a continuing trend
death of 69 people. Tens of thousands of people had of mergers and acquisitions by Japanese insurers. This
to be temporarily housed in emergency shelters. As of trend is mostly driven by the search for larger markets
end June 2016, USD 3 billion had been paid in claims. in countries such as the US and well as the ambition of
This amount is expected to rise further as more cases Asian insurers to make a mark in the global insurance
are resolved. arena. In 2016, Sompo Holdings announced that it would
be acquiring property and casualty insurer Endurance
A number of manufacturing facilities in the region Specialty Holdings Ltd for USD 6.3 billion. Following its
were also damaged and had to suspend operations acquisition of Amlin Plc, MS&AD announced that it is still
for several weeks. Certain car manufacturers were on the lookout for international acquisitions in China, India,
severely impacted as the production of important Southeast Asia or the US in order to boost earnings. Tokio
components took place at Kumamoto. A large-scale Marine Holdings is also in exclusive talks to buy RHB
manufacturer of smartphone camera modules also Banks general insurance unit in a deal that also includes
had to halt production. The overall loss from the two an agreement to distribute Tokio Marines products through
quakes amounted to USD 25 billion, of which only USD the Malaysian bank, and could potentially be one of the
5.9 billion was insured due to the low insurance density most expensive non-life insurance deals in Southeast Asia.
for earthquake risks. Continued international investment by Asian institutions
can be expected in 2017. If there is a deterrent to M&A
activity, it is unlikely that there is a lack of ready buyers, but
The Property Insurance market, rather a lack of suitable targets.
despite being flooded with capacity,

is expected to harden in 2017 owing
to the impact of losses from frequent
typhoons

Republic of Korea
Reinsuring International Risks
The insurance market in 2016 was soft due to excess
capacity leading to rate deterioration across most The economic slowdown has impacted Korea and its
lines of business. Due to the economic slowdown, effects are expected to continue on for a few years. Due
local insurance companies were scrambling for to the lack of new business opportunities in Korea, there
sparse new business, especially in the construction has been an increase in interest to reinsure international
sector. There was also intense competition between risks in Korea. Though this boosts business for insurers,
insurers for renewal accounts, evident from the a number of local insurers lack experience in handling
fact that most renewal accounts received price international risks and this could affect their risk portfolio
reductions of close to 20%. The rates for Credit negatively in the long term.
Insurance also decreased in 2016. KEXIM Bank was
the sole provider of export credit insurance in the
Failure of Samsung Galaxy Note 7
market before the government allowed a few local
insurers to sell short-term export credit insurance to Samsung accounts for 20% of the Koreas GDP. On August
private companies in 2016. 2 2016, Samsung Electronics unveiled the Galaxy Note 7.
Twenty days later, reports of a Note 7 explosion surfaced,
On September 12 2016, a 5.8 magnitude earthquake following which Samsung recalled a number of devices
struck Gyeongju, the largest earthquake to strike citing faulty battery issues. Despite resuming sales of the
Korea. A week later, an aftershock caused further device with a safer and modified battery, more incidents
impact. Eastern Korea was also impacted by the of explosions and fires surfaced, halting production and
Kumamoto earthquakes in Japan in April. Though triggering the large-scale recall of the Galaxy Note 7.
these earthquakes did not impact large corporations The failure of the Note 7 is estimated to cost Samsung at
and their offices, property damage to houses and small least USD 5.3 billion. Following this incident, a number of
buildings in the region was reported. This has sparked clients who are in the mobile manufacturing business have
an interest in earthquake exposure coverage (EQ) and shown interest in Product Recall insurance. This demand is
resulted in a slight hardening of this line. expected to grow as the Galaxy Note 7 situation unfolds.
In October 2016, the country was hit by Super Typhoon The failure of the Note 7 is estimated to cost Samsung at
Chaba, one of the worlds strongest typhoons. This least USD 5.3 billion. Following this incident, a number of
was the fourth storm to hit the region in a span of three clients who are in the mobile manufacturing business have
weeks, causing extensive flooding and damage. The shown interest in Product Recall insurance. This demand is
severity of the loss is unknown, but it is estimated that expected to grow as the Galaxy Note 7 situation unfolds.
losses could cross USD 200 million.
Most lines of business have seen

rates decrease, with the exception of
Earthquake Exposure coverage
Bankruptcy of Hanjin IFRS4
When Korean creditors pulled the plug on Hanjins The Korean government is seeking to adopt the
financing in the last days of August 2016, its fleet was International Financial Reporting Standards (IFRS) 4 Phase
reportedly carrying 530,000 teu (20-ft equivalent units) II by the year 2020. According to this standard, insurers
in manufactured goods and USD 5 billion in debt. The liabilities will be based on market value, instead of book
collapse of Hanjin left USD 14 billion of cargo stranded value. This allows a fairer assessment of an insurers ability
at sea, triggering a number of Marine claims from cargo to withstand stress and forces them to build reserves
owners. Following this incident, cargo owners began worth 50 trillion Won (USD 44 billion) to cover potential
shifting their business to shipping lines deemed more losses. Life insurers are largely impacted by this because
financially stable. A number of shipping lines have they have sold long-term life insurance policies with high
embarked on mega-mergers or teamed up with rivals. fixed interest rates in the 1990s and 2000s. Most major
For example, three Japanese rivals, Nippon Yusen KK, insurers have the ability to prepare for the implementation
Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd. of this rule as they can liquidate significant real-estate
announced in November 2016 their plan to merge and gain holdings, but smaller insurers may feel the impact of a
control of 7 percent of the worlds container-shipping trade. more stringent solvency regime. The impact of this rule is
This move indicates the industrys effort to adapt to a world presently unknown but could possibly contribute to the
in which freight rates have been under pressure since slight hardening of markets due to shortage of capital.
2008, and similar announcements can be expected in the
coming year.

Singapore
The insurance industry is one of the brightest stars in the constellation of

Singapores financial sector
Singapore is recognised as the leading reinsurance Despite a slow start, Cyber Insurance has gained greater
hub in Asia, housing regional hubs of 16 of the top 25 traction in 2016, and this growth in demand is expected
reinsurers in the world. The market has significant to continue in 2017. Furthermore, more clients are
expertise in specialty insurance, namely marine, energy, purchasing Terrorism coverage on the back of increasing
catastrophe, credit and political risks, and is the second and ongoing global concerns. Expression of interest in
largest market for structured credit and political risk the past is now manifesting into a purchase.
worldwide after London. The number of global and
regional positions in Singapore has grown, with most
underwriting decisions being made on the ground Insurance business in Asia is projected
instead of being referred back to headquarters. The
Singapore market is able to respond more quickly to to grow at about 8%
clients needs. In line with the MASs vision, most Asian per annum. By 2020, Asia is likely to
risks, including entire large reinsurance programmes and
specialty risks, are being fully placed in Singapore.
40% of the
account for almost
global market.
Singapores insurance industry
is envisioned to become a global Brokers and insurers alike have to revisit their value
proposition and the basis on which they are remunerated
marketplace by 2020, with the ability to for the services that they provide to clients. The days
accept not just regional, but global risks of brokerage and simple fee discussions are long gone;
they are having to re-evaluate how they evidence their
As of end September 2016, the insurance industry value to the customer and consider a broader suite of
witnessed an 8% increase in total weighted new additional services. Risk and Analytics is playing an
business premiums compared to the same period last increasingly important role in helping clients quantify
year. Singapore also continues to be the destination of their losses accurately and provide them with the best
choice for insurers and reinsurers looking to establish a suited product for their business needs.
foothold in Asia thanks to a stable government, favourable
taxes and the availability of well- qualified staff. Managing business costs in a period of falling revenues
and globally occurring losses is challenging. However,
Change and uncertainty abounds and there continues to this has not seemed to affect premiums, which
be great competition for good people to support highly continue to fall despite significant losses and events.
ambitious, and expected, growth plans. Unless there is Rates continue to decrease and the intensification of
a shift in capital investment away from insurance and competition is squeezing margins of all parties involved.
back into equities, or there is a major natural catastrophe Current pricing models are no longer sustainable.
impacting a financially critical part of the world, existing
market conditions are unlikely to change regardless We are entering into a new era for global politics. While
of ongoing natural catastrophes and other attritional it is not possible to project the likely effect of Brexit
losses. The expectation is that the current soft market and the US election result on the insurance industry,
conditions will continue throughout 2017 and beyond, we predict that, for the foreseeable future, Singapore
representing very much a buyers market. Significant will continue to be strong, stable and lead the Asian
double digit rate reductions continue to be the norm. Insurance Market
Forget the Insurance Cycle, its gone. The market is not changing, it has already changed
Taiwan
The flooding of both domestic and international capacity Tainan, resulting in property losses of approximately USD
into the market created a very soft insurance market in 500 million, majority of which was incurred by the Hi-tech
2016. Rates decreased across most product lines except industry. Most of these losses were absorbed by local
for mega-size property accounts, Natural Catastrophes insurers. Sharp rate increases were observed on some
and Power Plants. A number of underwriters withdrew from renewal accounts due to the compound impact of the
Taiwanese business because it was not profitable enough to earthquake or fine loss and the new regulation.
write. No fundamental changes in the market are expected
in the coming year unless major events occur. Another significant loss that took place was a major fire
in a Taiwanese hi-tech company at the end of April that
Due to the economic slowdown, there has been a decline in resulted in a USD 70 million loss. Two power stations in
GDP growth and a reduction in investment into Taiwan. Stiff Taiwan broke down in the first half of the year, resulting
competition, combined with a dearth of large projects for in a combined loss of over USD 20 million. In September,
the past 3 years, is expected to provide mid-size loss free the super typhoon Meranti caused large-scale damage
property accounts with reductions of up to 20% when they and chaos with wind speeds of up to 230 miles per hour
are renewed. For mega-size loss free property accounts with and torrential rains. It resulted in the collision and collapse
layering structure, renewals have increased by 5% to 10% due of a crane at Kaohsiung Port, the estimated market loss
to the implementation of a new regulation on primary layer being no less than USD 30 million.
pricing, which is currently retained by local insurers. From the
start of 2016, regulators have insisted that local insurers must The outlook for the catastrophe risk insurance market
have a 30% A-rated reinsurance quote as lead terms. following these significant losses is that underwriters will
be more conservative on the pricing and capacity offered.
There have been a number of major losses in 2016. In
February, an earthquake struck the Taiwanese city of
Expanded Scope of Online

Insurance Business
Credit
Insurance
due to
The Financial Supervisory Commission (FSC) is overcapacity
10%
from
encouraging insurance companies to engage in online
international
insurance business. Directions governing E-Commerce markets
of Insurance Enterprises have also been amended. Key
points of the amendment include expanding the types of
insurance products, adding insurance services and revising
eligibility restrictions for accessing online insurance Reduction of Personal Accident
services, simplifying procedures of inquiry for e-certificates Insurance Premium
and removing the requirement for insurers for telephonic
In recent years, the accidental death rate of personal
confirmation of purchase volition. This move is expected
accident insurance underwritten by non-life and life
to make it easier for people to buy insurance online and
insurers has been stable. As such, the FSC promulgated
demonstrates the movement of e-commerce into the
that, effective from 1 January 2017, the incidence rate of
insurance industry. As the market continues to grow and
PA insurance (excluding travel insurance) be fixed between
develop, insurers will have to find ways to differentiate
24.543 and 65.448, to serve as a reasonable range
themselves in the online marketplace in the coming years.
for insurers to set pure premium rates. The implementation
of this measure is expected to either reduce PA insurance
premium rates or increase the extent of cover available for
10%-40%
the same amount of premium, both of which are beneficial
to the customer.
Marine due to
reduction in
Hull value of vessel

AIG and Zurich Scale Down Operations through a new Taiwan branch of AIG Asia Pacific Insurance
in Taiwan Pte Ltd. NSGI will continue to be an AIG network partner
for consumer multinational clients.
AIG successfully completed the sale of AIG Taiwan
Insurance Co. Ltd.s consumer and SME business.to Nan In June 2016, it was announced that Zurich Insurance
Shan Life Insurance Co., Ltd. (Nan Shan) on 1 September would be selling its general insurance operations in Taiwan
2016. The company has been renamed Nan Shan General to the Hotai Group, subject to approvals and conditions
Insurance (NSGI). AIG will continue to support multinational from the supervisory regulator. Zurichs decision to sell
and commercial insurance business in Taiwan, including its general insurance business in Taiwan was due to the
property, casualty, financial lines, marine, and trade credit, limited scope for its general insurance business to achieve
an operating scale that warranted continued investment.
Brunei Cambodia
Brunei, with a population of 400,000 people, has a The insurance market is fairly small in Cambodia with
small insurance market with 5 to 6 insurers. insurance penetration at 0.46% in 2015, well below the
ASEAN penetration rate of 3.8%. A majority of citizens
In 2016, the insurance market was flat and did not are uninsured, as a result of which the focus has been
experience any growth. Rates were stable across all on educating the public in basic insurance concepts
lines of business. Heavy competition in Brunei kept and emphasising the benefits of insurance.
rates low and flat, making income hard to sustain and
growth a very distant prospect. There were no significant losses in 2016. Rates across
all lines of business remained stable. The decrease
Being the third largest oil producer in South-East Asia, in tourism in 2016 and political uncertainty regarding
Brunei is experiencing economic strain due to the the upcoming general election has impacted the
fall in oil prices. The market is forecasted to decline market. Investors are increasingly concerned about
further in 2017 because of the delay in time taken for the political environment following the assassination
the effects of the global economic slowdown to trickle of a political analyst who was a strong critic of the
down to the market. Declining economic performance government. A number of garment factories have closed
goes hand in hand with delays in paying for premiums. and a few companies withdrew their investments.
A foreseeable risk in the insurance industry due to the
difficult economy in the coming year is insurers being The environment is expected to turn positive after
kept waiting for payment from their clients well beyond the general election in 2018. Micro-insurance is also
the norm. an area that is experiencing high demand among the
low-income segment of the population, especially
for health, accident and crop insurance, and further
growth is expected in the coming years.
Rates in the insurance market were flat
across all sectors of business as most
business is driven by the government.
The annual
140m
gross written
premium is
USD
the bulk of which is motor insurance

India Malaysia
WTW is supported by Almondz Insurance Brokers in India
The non-life insurance market saw direct premiums

increase year on year by 0.8% between January and
The insurance market in India is growing, with a
July 2016 due to new business in the property line.
number of local and MNC brokers active in this
However, motor insurance remained flat due to lower
space. In March 2016, the Insurance Regulatory
automobile consumption. The absence of significant
and Development Authority of India (IRDA) granted
losses, coupled with continued profitable results has
approval to five foreign reinsurers - Munich Re, SCOR,
caused the local market to become steadily soft and
Swiss Re, ACR and Hannover and requested them
attractive to both insurers and reinsurers. Malaysian
to bring capital of Rs. 5 billion (approximately USD
Re continues to dominate the non-life reinsurance
73 million) each into the market. Lloyds of London
market and benefits from mandatory facultative and
also received approval to set up a branch in Mumbai
treaty cessions from direct insurers. These cessions
in 2017, thereby bringing extensive capacity and
were expected to be phased out in 2016, but are likely
underwriting experience into the market.
to be postponed to early 2017.
Terms and conditions in the Property, Casualty and
MAA Takaful Bhd, the third largest general takaful
Energy areas continue to be highly competitive.
operator, was purchased by Zurich Insurance
Government business continues to be tendered
Malaysia Bhd in July 2016. In the same month, Ace
each year and this is dominated by the Public Sector
Jerneh Insurance Bhd changed its name to Chubb
Undertakings (PSU) in India with strict adherence to
Insurance Malaysia Bhd following the merger of Chubb
tender compliance. Capacity continues to increase
Corporation and Ace Group.
and international Fac orders are decided on whether
business is ceded to treaties or not. The government
A plan for the liberalisation of the fire and motor
reinsurer GIC has a major role to play in this decision.
insurance market was released by Bank Negara
Malaysia (BNM) in March 2016. Effective from 1 July
The proposal to amend the Motor Vehicles Act to limit
2016, insurers and takaful operators were be allowed
the compensation payable to victims of a road accident,
to offer new, unregulated, products and optional extra
along with the introduction of a statutory time bar for
cover extensions to existing policies. Furthermore,
filing claims has been introduced in the parliament. The
from 2017 onwards, motor premium rates for
bill is now at a fairly advanced stage and can impact the
comprehensive and third party, fire and theft policies
fortunes of the industry as a whole.
will no longer be subject to a tariff, paving the way for
Indian M&A deals experienced a growth of 68.5% in user-based insurance.
the first nine months of 2016, the highest growth since
2010. This has also been witnessed in the insurance
industry, as insurers looked to consolidate in order to
remain profitable. For example, HDFC Life and Max
Life insurance merged to create the biggest private
sector insurance company. More deals are expected
in the coming year.
The total premium of both the life and non-life

insurance industry in India is projected to reach Rs. 17
to 22 lakh crore (approximately USD 250 - 350 billion)
by 2020, according to a report by Confederation
of Indian Industry (CII) and KPMG India. Untapped
household savings will offer new business potential
for financial services companies. Insurers need to be
prepared to tap into the opportunities presented by
record growth in market size, penetration rates and
new business income that market analysts predict will
be entering the industry in the coming years..
Myanmar Philippines
WTW is supported by Winebrenner & Inigo Insurance Brokers Inc. in the Philippines
The demand for different risk products
by both local and international investors The market in the Philippines was soft in 2016.
Insurance penetration remained low at 2% due to
is driving innovation in Myanmar limited affordability and lack of insurance education
among the general population. The volume of new
Myanmar is highly regarded as one of the most exciting business entering the market has been nominal for
investment opportunities of our generation following the past 3 years, pushing insurers to cut rates in order
recent political reforms and the lifting of US sanctions. to remain competitive. In order to prevent rates from
dropping to unreasonably low levels, the Insurance
However, there are considerable challenges that Commission in Philippines mandated a minimum
accompany such opportunities. Myanmar ranks 170th premium rate of 0.05% for the typhoon and flood lines
out of 190 countries on the World Banks Ease of of business, and 0.10% for the earthquake line of business.
Doing Business league table with registration and
sourcing finance cited as some of the main challenges. The non-life insurance sector displayed growth,
Myanmar also faces significant natural catastrophe mostly driven by the demand for micro-insurance. The
exposures such as typhoons, flood and earthquake. Insurance Commission issued a Circular letter in April
Therefore, the insurance industry plays an important 2016 containing regulations for the provision of health
role in supporting investment in Myanmar, protecting micro-insurance products and services with the aim of
capital investment, offering stability to revenues and inclusive health insurance for the general population,
assisting in attracting debt financing. especially the low income and informal sectors. A
drastic uptake of micro-insurance is anticipated in the
Currently, there are 24 insurance representative coming years.
offices in Myanmar, 6 of which are brokers. A
continuous decline in insurance premium rates is The market is not expecting any drastic changes in
expected and wider coverage can be achieved due to the following year. Insurers are looking forward to
increased competition and greater market capacity new infrastructure projects coming into the country
from international players. 2016 did not see any next year under the new administration, but this is
significant losses; however, small losses were reported dependent on the amount of new investment entering
due to floods and a small fire. the country.
There remain a number of restrictions that apply to

local insurance companies which limit their capacity
or ability to support large and complex risks. However,
the market is very positive about the changes that are
happening in Myanmar and market/industry players
are committed to the development of the insurance
industry in the coming years.

Thailand Vietnam
WTW is supported by Multi Risk Consultants (MRC) in Thailand
The first six months of 2016 showed a 24% increase in
premiums written as compared to 2015, the total gross
The insurance market in Thailand continued to be written premium amounting to USD 1.75 billion. Non-life
soft, with a significant amount of capacity entering insurance premiums reached USD 792 million, a growth of
the market due to which pricing across all lines 15% in comparison with the same period of last year.
of business dropped sharply. Insurers with broad
appetites encouraged underwriters to write new
business in a competitive manner. Marine Cargo
witnessed an especially sharp drop in rates due to stiff
Health and Benefits (H&B)
competition, higher capacity and small market premiums.
Health insurance reached a premium income of USD
In 2016, Thailands insurance regulator, the Office 190 million, constituting 24% of total non-life insurance
of Insurance Commission, increased death benefits market. Insurers increased net premiums by cutting group
attached to compulsory insurance for motor vehicles discounts in order to compensate for high loss ratios and
from 200,000 Baht to 300,000 Baht. Favourable loss medical inflation of 30% at public hospitals. Clients in the
ratios for motor insurance seem to have driven this Health and Benefits sector showed interest in controlling
change. The impact on insurers is not expected to be their loss ratio, thus signalling the potential for growth in
large. This is because approximately 5000 new motor Global Wellness and Benefits Advisory services.
vehicles are registered in Thailand every day, so the
increase in premium volume more than offsets the
Growth of Chinese-Supported Programmes
higher payouts.
The Vietnamese government is encouraging selective
Sixty percent of premiums in the market are controlled new investment in manufacturing industries due to
by the top 10 insurers, which has sparked a trend of growing concerns of environmental pollution. Most large
consolidations and acquisitions in order to gain market investments in textiles, paper, steel, electronics and
share and strengthen market position. This trend is infrastructure are awarded to Chinese contractors or
expected to pick up pace in the next 3 to 5 years. Chinese bank sponsors. As a result, insurance programs
are supported by the Chinese market and are placed with
2017 is expected to be a continuation of 2016, with local fronting insurers at competitive rates.
rates continuing their downward trend. Elections are
due to take place late 2017. Companies with business
interests in Thailand are likely to pay closer attention
to developments in the political arena and monitor
ensuing risks accordingly.
In 40 years of broking, premiums have

never been this low across all lines of
business as in 2016

Product Focus

Rate Movements 2016
Across Asia for both Wholesale and Retail
-10% - -10% -
-20% -15%
Property and Aviation
Casualty
For major airlines , there was a 10%
Excessive capacity is the key driver reduction in rates.
of falling rates.
For Low Cost Carriers, there were
A number of syndicates have 10-15% rate reductions.
withdrawn from Lloyds Singapore
platform, demonstrating tough Hull War had flat rates due to
trading conditions in the market. shrinking capacity. A significant
However, this move does little to correction is not expected to happen
reduce the availability of capacity barring a major desertion of capacity
to clients. from the market.
-20% -
-10%
-30%
Construction E&O/D&O
The market is highly competitive. There has been continued oversupply
Abundant capacity is fuelling the of capacity dedicated to FINEX,
decline in rates. The economic coupled with nearly zero loss activity.
slowdown has carriers competing for Regulations and mandated limits
less business as an increasing number have changed this year, driving down
of projects are delayed or cancelled. demand and increasing competition.
Clients have also shifting their buying
habits and are now buying insurance
as a commodity as opposed to
looking for a specific product.
-10% - -15% -
-20% -25%
Financial Terrorism
Lines Excessive capacity is the key driver of
falling rates.
Reinsurers trying to grow and
diversify into areas other than A number of syndicates have
developed markets such as Hong withdrawn from Lloyds Singapore
Kong and Singapore, resulting in platform, demonstrating tough trading
overcapacity. There have been no conditions in the market. However,
major claims or incidents for the past this move does little to reduce the
few years. Buyers are price driven and availability of capacity to clients.
have little interest in cover, causing
local markets to write for the top line.
-10% -
-25% -20%
Marine Energy
Rates are at an all-time low and show The fall in commodity prices has had
no signs of changing in the next 24 an impact on insured values, causing
months. Capacity continues to grow rates to decrease for all coverages.
and competition among underwriters The intensity of competition for new
is fierce. business due to a number of existing
projects being delayed has further
fuelled a decline in rates.

Aerospace
Aviation | Space
Hull and Liability - Market Premium and Hull War - Market Premium and Claims
Claims. *Data till September 2016 *Data till September 2016
600 700
2000 200
1800 600
175 500
1600
500
1400 150 400
1200 400
125 %
300 %
1000
300
100
800
200
200
600 75
400 100 100
50
200
0 0
0 25 2011 2012 2013 2014 2015 2016*
2012 2013 2014 2015 2016*
Premium Claims Loss Ratio
Premium Claims Loss Ratio
*Source: WTW Data *Source: WTW Data
Senior managers of Aviation underwriters have begun to exert more discipline

in their underwriters behaviour in order to slow the rate of reductions. This is fine
in principle but not necessarily possible in practice, as underwriters are fearful of
losing market share
Space Market Capacity vs. Average Launch + One Year

Capacity has not
In-Orbit Premium Rates
evolved a lot since
1000
900
2012, yet average
800 premium rates
700
600
continue to fall
500
400
300
Market Launch Capacity
200 Average Launch +1 year % Premium Rates
100
0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Rates fell across most aviation products in 2016. Major Hull war - Increased global political unrest and terrorist
airlines received rate reductions of up to 10%. With a high threat has not affected the Hull War market. Large
Combined Single Limit (CSL) (USD 2 billion) and high aircraft additional premiums are charged for flights into conflict
value (approximately USD 275 million), significant capacity areas or hot-spots. Despite Hull War losses in 2015,
is required to complete the risk at competitive terms. Low the market in 2016 has been relatively stable. Renewals
Cost Carriers (LCCs) received up to 25% rate reductions, are being treated on a case by case basis, and a 10%
more so after July 2016. With a CSL of less than USD 1 reduction will be the most an airline can get if it has had no
billion and an aircraft value of approximately USD 50 million, losses and decent growth, making it hard to establish a
significant capacity is available to complete the risk at more common trend.
competitive terms than the major flag carriers.
Despite volatility and marginal profitability, additional Space:

capacity continues to be attracted to the sector. Fidelis Launch - Ariane 5 rates were the most competitive in the
began operations at the end of 2015 with capacity of up to market. Proton premium rates were significantly higher
USD 15 million on any one risk, ElseCo continue to expand than other launch vehicles due to poor loss experience,
with overall maximum capacity of over USD 150 million, quality control and reliability over the last 5 years.
LRS and XL Catlin are writing in-orbit business again after Several other vehicles such as Atlas V, H-IIA (H-IIB) and
substantial periods of inactivity and Chinese markets are Long March 3BE remain popular with insurers but have
offering ever-increasing capacity on programmes utilising presented limited commercial opportunities to date.
Sino hardware (DFH-4 satellites/LM launch vehicles). Insurers now have an increasing appetite for other smaller
Insurance for Non-Proton risks is expected to become and emerging launch vehicles such as Dnepr, PSLV, Rokot,
more competitive as insurers look to secure additional and Vega. There is ample capacity even for dual launches
premium income on these risks. Rates and premiums are with large sums insured.
expected to decrease even further in 2017.
In-Orbit - Rates continued to decrease during the first half
of 2016, with standard western built communications
Aviation: satellite rates at a historical low (0.375% - 0.425% for
Hull And Liability - Premiums fell an average of 10% from straightforward payloads, 0.50% - 0.60% for bigger more
January 2016, with a 9% decrease in Q3. The Average complicated spacecraft). Average reductions are now 5%
Fleet Value (AFV) rose by 7% from the start of the year. to 10%, compared to 10% to 15% in 2015. Premiums are
The impact of losses is short-lived and has no impact now so low that many underwriters consider them to be
on rates at the time of policy renewal. Airlines with high at minimum levels already and further reductions are not
growth potential and low attritional losses are offered economic. Russian- built spacecraft continue to command
extremely low premium rates. substantially higher rates, stemming from the Egyptsat 2
USD 75.5 million Total Loss and Amos-5, a potential Total
Significant losses: Loss of USD 158.5 million.
Loss of USD Loss of USD Loss of USD Satellite Platform - With a limited number of commercially
61 million 30 million 15 million and insured GEO satellites and LEO imaging satellites in
USD 18 million any given year, insurers are broadening their portfolios
The nose Asiana Airlines
respectively by offering coverage for the new generation of LEO
wheel of a was damaged
constellation satellites. Designing coverage for these
UPS freighter while being Collision of
constellations can be complex. Insurers are able to balance
collapsed after towed out Batik Air and
their portfolios by offering smaller capacity.
a failed take of a hangar TransNusa Air
off in Seoul at Incheon
airport

Captives Base Erosion and Profit
Captives provide a means to identify, value and finance Shifting (BEPS)
any form of risk, and to access non-traditional reinsurance BEPS relates to practices by which companies may
products. Company directors and risk managers have transfer profits to regions of lower tax. In October 2015,
increasingly realised the strategic value that captives add the OECD released a 15 point action plan to address this,
in the management and financing of non-traditional risks expected to be enacted by all OECD members.
alongside those usually considered insurable.
A number of these points expose captives to increased
Traditionally, in a competitive price market, the financial fiscal uncertainty and tax scrutiny, along with a greater
benefits of transferring risks to commercial insurers tend to need for documentation and reporting. Mitigating BEPS
outweigh those of establishing a captive. With companies risks by putting frameworks and adequate governance in
recognizing a broader range of risks for which the market place is essential to ensure captives are fully compliant
has yet to fully develop products, we saw an increase in
interest in captives in 2016 and expect this to continue in
2017 as the technique gains greater acceptance in Asia. Changes in Singapore Tax Regulations
Large reinsurers are also devoting resources to structure With 68 captives, Singapore continues to be the leading
products specifically for captive reinsurance in response to Asian hub for captives. Many companies incorporate
the market trend. captives in Singapore due to strong but appropriate
regulation, and local captive expertise. Singapore also
offers tax concessions to offshore business written in
Captives are writing a broader range captives.
of risks, including emerging risks that In the 2016 budget, the Inland Revenue Authority of
the insurance market may be reluctant Singapore (IRAS) announced that such business would
be taxed at a concessionary tax rate of 10% for new and
to underwrite renewal awards, starting 1 April 2018 (each award is for
ten years). Concessions awarded previously exempted
offshore business in captives from tax for a ten year period.
Rise of Insurance Captives

Insurance companies globally have, for many years,
established captives for their own use. As Asian insurance
companies regionalise, we are seeing more insurers
driven to consolidate risks assumed in a variety of risk
classes and countries, to increase capital efficiency and
reinsurance access.
Growth of Chinese Captives

The increased interest in captives by Chinese state-owned
enterprises (SOE) continued into 2016. The captive market
is expected to grow further in China in 2017, both in the
SOE sector and as non-SOE companies aim to follow the
lead of SOEs.

Launch of Megaprojects
Construction The Silk Road Economic Belt and the 21st-century
In 2016, the construction market continued to soften with Maritime Silk Road is a large-scale initiative by the Chinese
an ever increasing amount of capacity available. Major government to improve connectivity across China with the
showpiece and large infrastructure projects are seen as rest of Eurasia through building a network of infrastructure
attractive risks for construction underwriters and rates facilities and expanding existing trade routes. The South
fell by up to 20% due to the heavy competition and a Asia and South East Asia wings of the project encompass
perceived lack of significant losses in the sector to date. 220 projects, valued at USD 339.6 billion. Three projects
A dearth of financing resulted in a number of projects rank at the top of CG/LAs Strategic 100 list, namely the
coming under review by lenders; many developers and Kuala Lumpur-Singapore High Speed Rail, Singapore Tuas
governments are eager for these projects to begin. Despite Terminal Phase 1 and Kuala Lumpur Mass Rapid Transit,
this, Asia is still viewed as a growth engine for construction, Line 2 for which construction is already underway.
which is why Lloyds syndicates and Berkshire Hathaway
have been adding new capacity into an already saturated Such megaprojects are gaining popularity with insurers
market. AIG increased capacity on major projects by 35% due to their scale, duration and complexity. However,
and other major insurers have increased their ability to this poses a challenge as well because megaprojects no
write much bigger lines than a few years ago. longer equate to mega premiums in the same way as they
once did. As the market continues to soften, the fear of
The current competitive market conditions are expected to missing out on such prestigious projects is fuelling fierce
continue on into 2017. However, the question being asked competition. Insurers can try to differentiate themselves by
by an industry that has seen two reasonably benign CAT providing enhanced coverage for such projects.
years, is when the downward spiral of pricing will plateau.
This question looms larger than ever. For many developers, Increase in Capacity from Chinese Insurers
a positive change in the financial markets is needed in
Chinese insurers such as PICC, Ping An and CPIC have
order to put lenders at ease and for delayed projects to
been increasing their capacity for international projects. As
receive much needed funding. The opportunities posed by
Chinese contractors look to Latin America and Africa for
the One Belt One Road project and developments along
new business opportunities, they bring with them Chinese
the Mekong Delta belt are expected to fuel construction in
financing as well as Chinese insurers to insure their risks.
Asia in the coming years. In some of the more developed
This in return adds to the ever-growing insurance market.
countries such as Hong Kong and Singapore, infrastructure
investment, which has been the back bone of many
insurers income for the past couple of years, may only Renewable Energy
continue at the same pace in the short term.
With global protocols and impending deadlines to
meet green energy quotas, there has been a trend for
governments to fast track renewable sources of energy in
an attempt to achieve a level of environmental sustainability.
In 2016, investment into sectors such as solar, wind and
geothermal energy in Asia was particularly strong.
For the first time last year, developing economies surpassed

developed countries in terms of total new renewable energy
investment. This has resulted in more and more insurers
turning to this sector to provide their own products, which
naturally results in further pricing competition.
Downstream Energy that produces a withdrawal of capacity as well as a
significant increase in loss activity that will impact gross
underwriting performance and reinsurance costs.
The downstream energy market continued to soften
in 2016. Rating reductions continued, with some large Insurers are left with the decision to choose between
accounts with significant premium pull being awarded sticking with quality accounts and shrink accounts where
particularly significant reductions. More modest reductions profitability is compromised, or aggressively fight for
of up to 15% were more common on clean businesses with market share and rely on deeper pockets. Buyers are free
superior risk profiles. Despite there being consolidation to choose to stay with trusted insurer partners or to move
and restructuring of businesses, there has been no to alternative markets.
significant reduction in capacity, resulting in further
competition for market share between insurers. However, All things being equal, the outlook for 2017 is further
the dwindling premium income pools may eventually leave reductions, unless there is a severe market changing
some insurers unable to afford as much reinsurance event. Supply and demand laws will continue to dominate
protection as they have sought in the recent past. the market cycle and businesses must endeavour to
There has been some movement of talent within the

industry in the Asian market. The transfer of the Head of Asia, where most global
4b
Global Energy at HDI to Singapore was a statement of markets are represented,
intent in the onshore energy space and also enhances
expertise in Asia Pacific. Qatar Re is a new entrant and is
has significant capacity of
actively looking at energy onshore risks in Asia. Trust Re
USD
is also looking to enhance their energy offering in Kuala
Lumpur by the end of 2016. Berkshire Hathaway, which
began operations in 2015, is increasingly active in the
onshore energy space and has consolidated its position by
taking advantage of growth opportunities. differentiate and innovate in order to prevent further price
reductions. As 2016 is likely to yield overall underwriting
At an industry level sub USD 50/barrel oil prices have profits for this class, competition for premium income and
resulted in reduced drilling and construction activity, as market share should continue into 2017.
well as added pressure on oil companys and contractors
costs. The consequence of this is reduced insurance
spend into the market and possible safety compromises..
One can foresee that premium rates will continue to fall Insurers are left with the decision
until the overall dynamics change this will likely require a
combination of a change in global investment opportunities
to choose between sticking with
quality accounts and shrink accounts
where profitability is compromised, or
WELD Downstream Energy losses 2000-2015, adjusted for inflation (excess of USD 1m)
versus estimated global Downstream premium income
12 12
USS Billion
USS Billion
10 10 aggressively fight for market share and

8 8 rely on deeper pockets
6 6
4 4
2 2
0 0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Source: Willis Towers Watson/ Willis Towers Watson Energy Database
Downstream Losses Estimated

excess USD 1 million Worldwide Premium

Financial Solutions gain traction in the coming year. Many of the countries
which form these economic corridors will pose a challenge
to financiers and contractors and the insurance market
In 2016, a slowdown in overall trade and investment was expects to see interest in the coming year.
witnessed, resulting in a reduction in transactional volume.
The current geopolitical environment is an uncertain one
at best: continuing tensions within the South China Sea,
the rise of anti-establishment feelings in Europe and the Credit Insurance
credibility that has given to non- mainstream Political There is little doubt across the board that 2016 was
movements, and continued conflict in the Middle East are an especially difficult year for the credit market. The
just some examples of socio-political unrest the world is global collapse of commodities prices, a slowdown
facing today. As expected, all leading insurers have taken a in economic growth in emerging markets and volatile
far more cautious approach to risk and have adjusted their financial markets has negatively affected the volume
underwriting appetites accordingly. of deals done (and credit insurance purchased) by
banks and financial institutions this year.
The appetite for the shipping sector and oil and gas
industry remains limited, with an increasing number WTW estimates that financial institutions represent
of insurers announcing they will not take on any new 70% of all transactional credit insurance policies
exposure to these sectors. Significant growth is expected purchased in the private market. The most common
out of India, China and the ASEAN region in the coming type of credit insurance cover is Comprehensive Non
year, and whilst losses have hit Insurers hard in 2016, the Payment Insurance, which covers the insured from
general feeling is that the insurance market will continue to loss as a result of the other party failing to meet their
deepen, with more entrants and more capacity expected. contractual obligations irrespective of the default
being caused by insolvency or protracted default.
Aspen Insurance is the newest entrant into the Asia Credit insurers continue to be exposed to increased
Pacific Insurance market. While the syndicate has been levels of risk, arising from large single events such
operating in Singapore for the past year, they will begin to as the bankruptcy of Hanjin Shipping, or from macro
write Political Risk and Credit business from December events such as the government in India pushing banks
2016 onwards. This is a hugely positive development for to recognize non-performing assets, which has led to
the Asia Pacific market, as it not only gives this part of a spike in corporate defaults.
the world access to additional capacity, but also enforces
Singapores reputation as Asias insurance hub.
Political Risk
A substantial amount of interest in Political Risk
Insurance was generated in 2016, particularly in
Shock Elections of 2016 Myanmar, which investors have dubbed Asias final
Credit and Political Risk Insurance is about managing frontier. For multinational corporations that have
uncertainty, and nowhere is this more evident following international expansion at the forefront of their
the shock elections of 2016. The world will be watching strategies, this is a highly valuable product that
President Elect Trumps first 100 days in office with great mitigates political uncertainties that investors face
interest as it is likely to dictate capital flows and trade when carrying out business in a foreign country and
agreements for a long time to come. In a similar way, a ensures coverage against an ever-expanding array of
hard or soft Brexit will have varying consequences for the global political risks.
global economy.
An influx of recent capacity has put pressure on
insurers to maintain softer pricing, despite geopolitical
Chinas One Belt, One Road Project volatility and uncertainty. Insurers are also becoming
Arguably one of the most ambitious economic and increasingly selective about the countries they choose
diplomatic programs that any country in Asia has ever to increase their exposure in, and a number of insurers
embarked on, this initiative is set to increase annual trade have begun to implement a blanket ban on enquiries
volume by USD 2.5 trillion by 2025, and will continue to from regions that are particularly volatile, such as
Pakistan and Ukraine.
Financial Lines (FINEX) A number of significant events took place in Asia in 2016,
forcing managers and C-suite executives to think twice
about the risks facing their organisations.
Rates in 2016 were in free fall, with reductions varying
across the region, depending on the type of product. A robust market is expected to continue in 2017, with no
Competition intensified among insurers, attacking accounts sign of diminishing competition or capacity. Markets will
by offering drastic rate reductions and enhancing coverage. continue to roll out coverage enhancements and buyers
Loss-free accounts with manuscript wording were awarded will avail unprecedented value in the trade-off between
enhanced coverage. Retentions were reviewed on a case- terms and price. A further reduction in rates is expected
by-case basis, driven by the overall size of an organization in the coming year, as well as an influx of new capacity into
and the professional services being provided. The key the market.
players in the market this year were Chubb, Allianz and
AIG. New and traditional insurers such as Antares and
Berkley sought to expand market, share, especially in the
professional liability space.
Growing Demand for Warranty and
Indemnity Insurance
The Monetary Authority of Singapore (MAS) withdraw Asian corporates are quickly catching up to their private
the merchant status of a wholly owned subsidiary of equity (PE) counterparts in adopting the use of Warranty
a bank established in Switzerland ensuing serious and Indemnity (W&I) or Reps and Warranty insurance,
breaches of anti-money laundering requirements, especially when negotiating with a PE seller exiting a
poor management oversight of the banks operations, portfolio company or a buyer looking to differentiate their
and gross misconduct by some of the banks staff. bid. New insurers have been entering this sector,
leading to an increasing supply of W&I insurance capital
for M&A targets in a growing number of Asian jurisdictions,
including frontier and emerging Asian territories.
An Oil and Gas company filed a petition to wind up
The market is therefore becoming more competitive,
and liquidate the company after facing demands
which benefits coverage, rates and capacity for larger
from creditors amid a slump in offshore oil and gas
transactions. W&I rates in Asia vary depending on the
businesses, triggering investigations into potential
nature of purchase agreement and the targets business.
lapses in disclosure.
For single jurisdiction and mono-line targets, rates could be
below 2% (relative to the W&I insurance coverage).
Cyber Risk Management Solutions

A major telecom company in Singapore experienced
broadband outages that were the result of intentional Cyber insurance is a huge but largely untapped opportunity
and malicious damage in October 2016. for the insurance market. Following the higher frequency
of incidences and significant losses associated with
cyber breaches, businesses are no longer ignoring the
reputational and financial risks posed by cyber threats.
Insurers are realising the value of providing clients with
end-to-end loss control, risk management solutions
and guidance in the event of a cyber-related crisis. In
August 2016, Chubb launched a Cyber Enterprise Risk
Management (ERM) solution in Asia-Pacific to move
beyond insurance and deliver tailor-made solutions to meet
specific client needs. This move underscores how threats
have evolved to become enterprise-wide issues and also
signals the growing needs of clients in this segment.
A number of insurers are expected to follow suit and
introduce integrated cyber solutions in the coming year.

Marine
Marine market pricing has been in steady decline over the last five years,
fuelled by overcapacity resulting from the influx of external capital seeking
greater returns than that available elsewhere. Marine and Aviation are
the only insurance classes offering non-static risks where modest losses
as the price of gaining access to the higher potential rewards appear
acceptable.
In previous depressed insurance cycles, there were still a The major causes of total losses in the industry remains as
few sectors of the shipping industry that remained buoyant. Heavy Weather followed by Fire and Groundings, usually
2016 was perhaps the first time when nearly every type of as a result of poor ship-management procedures and poor
ship across the world saw declining rates - as depressed navigation. Indonesia suffered two high profile losses with
as some of the underwriters who wrote their risks. Reports the Wihan Sejahtera and the Thorco Cloud at the end of
are that the overall underwriting results are good, largely 2015, which could have an effect on underwriting appetite.
because of a benign claims environment which literally The good news is that 2016 has bucked the trend so far
keeps them from sinking. As a result, there is some ill- and has seen a reduction in major casualties.
disciplined marine underwriting chasing income, with little
understanding of the risk involved and a poor approach to
claims when they occur. In this buyers market, P&I and Hull
Premiums are falling despite major
Marine premiums reduced by 10.5% between the years
2014 to 2015. This put the USD per Deadweight Tonnage losses demanding higher claims costs
(DWT) at the lowest point since the last soft market in
the early 1990s. The market still belongs to the buyers,
with individual accounts varying predominantly according Hull and Machinery (H&M) is offered by a growing list of
to claims record rather than quality of the underlying insurance companies and is subject to fierce competition,
risk. Variance between markets continues with more reflecting overcapacity. Hull market rates have been
placements than ever on verticalised rating basis even reducing for almost a decade and no sudden changes are
within the same regional market, ranging upto 25%. foreseen for the next 24 months at the least.
Average Rate and USD per DWT per vessel

6.00
Hull and Freight Interest rates were at an all-time low due
1.000%
to fierce competition amongst underwriters. Being total
0.900%
0.800%
5.00 loss insurance only, Hull & Freight insurance is more of a
0.700%
commodity product as there is no need for added value
4.00
0.600%
in service. As long as this is placed with well reputed
0.500% 3.00 underwriters, HI/FI is recommended to be used as a tool to
0.400%
achieve the best possible result.
2.00
0.300%
0.200% Rate USD per DWT 1.00

0.100%
0.000% -
2009 2010 2011 2012 2013 2014 2015 2016
Protection and Indemnity (P&I) had a notable year
in 2015/16 from an underwriting perspective. The
International Group (IG) market has not seen an
underwriting surplus of the size achieved in 2015/16 in over
25 years, discounting those years distorted by unbudgeted
calls. The key driver behind this underwriting improvement
-10.0%
Net paid claims reduced
was a dramatic reduction in incurred claims. Despite a
3.9% increase in tonnage entered in the IG, net incurred
claims reduced by a remarkable -14.4% across the market.
88%
Even with the significant downturn in overall claims values,
volatility in the severity of major claims means the financial
outlook is by no means certain. The overall frequency
of claims in the market has not changed materially and Combined ratio improvement1
consequently a reverse of the current low incidence of very
high value claims remains entirely possible. The anticipation
is that a number of clubs will announce premium rebates Marine Cargo insurance market conditions for buyers
or reductions in their deferred calls and widespread nil have never been better, thanks to favourable supply/
general increases for the renewal on 20 February 2017. demand dynamics, moderate claims from global natural
catastrophe disasters, coupled with financial stability
and discipline amongst insurers. Due to the lack of
major claims to impact the Marine Cargo market and the
continued increase in capacity available we predict the soft
market to continue in the foreseeable future. The cargo
Continued variance between
market is showing no signs of hardening. Over capacity
best and worst performing clubs
from both new entrants to the marketplace and existing
insurers expanding their portfolios, together with losses
having been spread over the global market place means
-14.4%
cargo insurance is still viewed as a relatively attractive
proposition despite dwindling returns.
1 Compared to the 2014/15 market average of 97%

Incurred claims reduced

Property and Casualty Taiwanese business that were affected by the earthquake
of magnitude 6.4 that struck in February, following which
some premium increases were evidenced. In addition to
2016 seems likely to end as another year of below the multitude of negative factors bombarding insurers, the
average losses in the Asia region, characterised by market was also impacted by considerable over-capacity
natural catastrophe losses which continue to be lower coupled with below-average global losses.
than projected averages, incidents generally occurring in
areas of low insurance penetration, such as the flooding The treaty market continued to drift downwards for the 5th
in Myanmar, and large individual man-made losses which consecutive year; however, the rate of reductions slowed
have had no impact on overall market for industrial accounts slightly from the previous year with individual examples of
, but impact specific niche areas such as power generation. hardening generally driven by specific local market events.
Natural catastrophe cover was abundant and the pricing
The pricing environment for Property & Casualty risks in continues to reduce, while broadening of terms continues
Asia remained soft in 2016, and the market witnessed to be the trend. Changes in legislation are beginning
rates fall between 10% and 25%. Stressed accounts to impact client retention policies but the competitive
compromised by poor risk management and adverse market is encouraging more interest in additional
claims experiences were awarded different outcomes. earnings volatility protections, providing a much needed
Reductions were higher for some businesses where there uptick in demand. Reinsurers have tended to be highly
was tougher competition and/or limited capacity required, segmented in their pricing approach leading to substantial
particularly where the risk was in scope for underwriters. inconsistencies in individual markets between one client
The only exception was the lower layers of some segment and another.
Downward Neutral Upward

Pressure Pressure
The demand for P&C
on Rates on Rates insurance in emerging
Asian countries is
expected to grow in
Competition for Liquidity/recapit Underwriters
market share alisation aspirations the coming years,
Surplus capacity Macroeconomic M&A Activity
largely driven by rising
factors Low inflation
Insurer financial
results Climate change Reduced client
prosperity, the growth
Global claims Compliance/co business activity
(static
in infrastructure and
activity ntract certainty
premiums)
Cost of Solvency II
the rising frequency of
Investment
reinsurance
returns natural catastrophes
Consolidation continues amongst insurers. Some examples

of this would be the acquisition of Endurance Insurance
by Sompo Holdings, and Liberty Mutuals acquisition of
Ironshore Insurance Limited from Chinas Fosun International
Limited, although this has yet to significantly reduce market
capacity for good quality risks. With significant domestic
capacity in many territories across Asia, many regional
underwriters remain hungry for income and are often still
keen to grow top line revenues.
Power and Utilities What makes the power and utilities sector even more
challenging for insurers is the exposure to machinery
breakdown losses which have delivered year on year
The insurance market for power and utilities risks is a attritional losses to insurers in the region of USD 5 - 25
specialist area of the wider property market and has its million. Furthermore, in recent years we have seen, on a
own dynamics, but is characterized by the same pressures global basis at least, the emergence of mega losses in
experienced in the wider Property market, namely year on the region of USD 100 million and upwards. These losses
year declining premium levels. Indeed, such has been the have put considerable pressure on insurers profit margins
sustained nature of these market conditions that some which is exacerbated by declining premium levels.
commentators have suggested the term soft should be
replaced with normal, with few now expecting any broad It is worth noting that the market has only seen a decline
market hardening in the future. in premiums, not underwriting discipline, with deductibles,
limits and coverage remaining steady. This is true
There exists in Asia an over supply of capacity with the especially with new unproven or prototypical combined
presence of the majority of international insurers and cycle gas turbine technology, which is being used more and
European reinsurers, various Middle East and Asian more in Asia as operators strive for ever greater efficiency
regional players represented, together with the Lloyds gains, with original equipment manufacturers (OEMs)
Asia platform leading inevitably to downward pressure on looking to meet that demand. Insurers will still treat these
premiums and soft market conditions. Conversely, whilst technologies with a degree of caution, and the deductibles
and coverage offered will reflect that approach.
The consequent shortage of new demand

The challenge for insurers is to
for insurance capacity and opportunity for
manage their way to delivering revenue
additional premium growth has added to the
budgets with an acceptable margin in a
already significant budget pressures faced by
marketplace where abundant capacity
insurers and has placed further downward
is leading to declining premiums whilst
pressure on premiums as a result
losses continue unabated.
the demand in Asia for power continues to grow, with
various state-led and internationally financed initiatives Insurers are looking to address those parts of their
across the region to satisfy that demand, in the last couple portfolio that are failing their own risk selection criteria,
of years we have witnessed a number of projects that have with strategies that range from standing firm on further
been delayed or even cancelled due to regulatory, political premium reductions, and possibly implementing more
and financial constraints. restrictive terms to mitigate the perceived enhanced
risk, to walking away from a risk altogether. However,
any attempt by an insurer to implement this strategy and
retain business is compromised by the abundance of
replacement capacity available. Premium savings then look
set to continue, but perhaps at a lessening rate of decline
overall, and very much on a case by case basis, depending
on perceived risk quality and acceptable loss record.
Upstream Energy
The Upstream Energy market is a global market. Taking a micro-Asian
perspective on this market would not give us a full understanding of the
current situation.
Global
7.5b
The overall global Upstream premium income pool declined
30% from 2014 to 2015. However, the decline in premium capacity =
income was even more pronounced in some sub-classes Approximately
such as Offshore Construction and Operators Extra
USD
Expense they were particularly impacted by the fall in oil
prices. This is not expected to change until confidence
is regained in stability of oil and gas prices. In addition to
low activity, pressure on rates and operating costs, claims
2b
have continued to arise. The Willis Energy Loss Database
recorded 16 claims in excess of USD 50 million during Global
2015, totalling over USD 3.5 billion. Incidents have also
occurred in 2016 including a major platform loss in Asia premiums =
USD
amounting to USD 51 million plus another loss that has not
yet been declared for underwriter confidentiality reasons
that has the potential, when the Business Interruption
element of the loss is fully adjusted, to reach a total
between USD 750 million and USD 1.5 billion. Should this be
the case, when this loss is finally paid by the market, there The full impact of recent loss deterioration will become
will be a profound effect on the cash flows the affected evident in 2017, potentially prompting a retreat from this class
insurers and reinsurers. of business due to negative underwriting results. Capacity is
expected to increase, so even if losses occur, the worst-case
There has been an increase in the number of insurers scenario would be a flattening out of the softening process.
scaling back their involvement in less attractive There would have to be several losses with common insurers
programmes featuring meagre premium income returns. for a significant withdrawal of capacity to occur, which would
There are a small but growing number of insurers who were in turn harden the market. If the market stays as it is, a further
beginning to distance themselves from some of the worst downward pressure on rates can be expected. Buyers are
excesses of the soft market, preferring instead to wait out in a position to take full advantage of the markets current
this period until market conditions improved. Now at the end predicament and force prices down further, but while making
of 2016, we can report that these insurers have been joined sure to ensure that their risks are placed with insurers who
by others who can see no long-term rationale to continue to are likely to be in play in the event of a fundamental change in
support some of the least attractive programmes. market dynamics.
WELD Upstream Energy losses 2000-2016 (excess of US$ 1m)
versus estimated Upstream premium income
However, at present this trend has been effectively 20 20
USS Billion
USS Billion
cancelled out by the position of many other insurers in 18 18
this market, which is that they are currently way short 16 16
of meeting their premium income targets set earlier in 14 14
12 12
the year by their management. As a result, programmes
10 10
featuring substantial premium income are still being placed
8 8
in the market, even at a significant reduction on last years 6 6
rating levels. And while such programmes have been 4 4
declined by a large proportion of the incumbent market, 2 2
such is the need for some insurers to increase their 0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
0
premium income that there have been a steady supply of Source: Willis Towers Watson/Willis Towers Watson Energy/Loss Data base as of October 6 2016
(figures include both insured and uninsured lossess)
alternative insurers willing to take the place of those who Upstream Losses Estimated Worldwide
excess USD 1 million
have withdrawn. Upstream Premium

Terrorism and Political Violence
The market in 2016 remained competitive, with rates moving downwards
primarily due to new capacity entering the region. Singapore continues to act
as the hub for terrorism and political violence insurance in the region, with an
estimated maximum capacity of USD 2.5 billion a significant increase from
previous years. There has also been deployment of experienced resources
from established markets such as London into the region.
Terrorism insurance offers favourable loss ratios to insurers. Cyber Coverage is highly specific to each policy, with
Due to falling premiums in other product lines, insurers have little standardisation across insurers. Typically, coverage
an increased business interest to write terrorism insurance. includes indemnification for losses arising from a data
Rates have fallen between 15% and 25% depending on breach, business interruption, and cyber-extortion, among
the country, driving underwriters and brokers to add value others. Insurers are faced with a number of challenges as
to clients by offering new products and services to stem the pace of cyber-crime is quickly evolving and past data is
the loss of revenue. Falling rates will drive more product unlikely to provide an insight into the future. As the demand
innovation, client awareness and understanding. for comprehensive cyber-risk solutions exceeds supply,
insurers are adapting to the dynamic nature of technology in
In the coming year, there is an expectation of further order to overcome difficulties in pricing and underwriting that
increases in total available capacity, lower rates, an have constrained their ability to fully penetrate the market.
increase in product development and innovation, and
the introduction of wider wordings to maintain premium. A.L.T (Active Assailant, Loss of Attraction, Threat)
Enquiries from countries such as Myanmar and Vietnam, Active Assailant covers property damage / business
which are countries that did not traditionally buy such interruption and extra expenses following a premeditated
insurance, are also expected to increase. malicious physical attack by a person armed with a weapon.
In response to market trends, a new suite of hybrid Loss of Attraction covers any business interruption caused
products have been created to address the changing when a terrorism event occurs at a location within 1km of the
profile of terrorism. We have seen an increase in popularity Insureds premises or at a pre-specified attraction property,
of these products, such as: without any property damage to the Insureds premises.
Property Damage and Business Interruption covers Threat is a policy triggered when there is a threat of a
physical assets and consequential business interruption malicious act to either physically damage the Insureds
following a property damage loss. property or cause bodily injury to directors, officers,
employees of the Insured at an insured location. It includes
Impairment of Access is a product exclusive to Willis any malicious act, not just the threat of terrorism.
Towers Watson. It offers comprehensive Gross Earnings
cover, with or without a property damage trigger, where
the Insureds operations have been impaired. Coverage
triggers include Terrorism (and the threat of Terrorism), The Terrorism Insurance market has
Sabotage, SRCC, Malicious Damage, Protestors and Order become more sophisticated Risk
of Civil or Military Authority. The minimum deductible is 3
hours per occurrence. Engineering and Assessments are
increasingly offered to large clients
to find products better suited to their
business needs
Rate Movements
Expectations for 2017
Property and Aviation Financial Terrorism

Casualty Lines
-10% - -10% - -10% - -15% -

-20% -15% -20% -25%
Construction E&O/D&O Marine Energy
-20% - -10% -
-10% -20%
-30% -20%

Sources:

Cyber Risks Time to wake up to the risks of cyber crime - http://www3.asiainsurancereview.com/Magazine/ReadMagazineArticle?aid=37892

Catastrophe Insights - http://catastropheinsight.aonbenfield.com/Pages/Home.aspx

Global FinTech Investment - https://newsroom.accenture.com/news/global-fintech-investment-growth-continues-in-2016-driven-by-europe-and-
asia-accenture-study-finds.htm

Japan Earthquakes - https://www.bloomberg.com/news/articles/2016-04-15/sony-s-plant-for-smartphone-cameras-halts-after-japan-earthquake

Zurich Insurance Operations in Taiwan - http://www.insurancejournal.com/news/international/2016/06/17/417564.htm

Willis Towers Watson Power Market Review 2016

Cyber Attack - http://www.straitstimes.com/tech/starhub-cyber-attacks-behind-broadband-outages

Koepp, R. (2016, May). One Belt, One Road: An Economic Roadmap. Lecture.

Swiss Re, (2016, October). Chinas Belt & Road Initiative and the Impact on Commercial Insurance.

AXCO 2016 Insurance Market Report, Non-Life

Munich Re Press Release July 2016

Top Insurance Industry Issues PWC, Volume 8 2016

Emerging countries in Asia still linchpin of global premium growth - http://www3.asiainsurancereview.com/Document/Munich%20re%20
insurance%20market.pdf

EY Asia Pacific Insurance Outlook 2016 - http://www.ey.com/Publication/vwLUAssets/EY-asiapac-insurance-outlook-2016/$FILE/EY-asiapac-
insurance-outlook-2016.pdf

Indian Insurance Industry Premium - http://www.deccanherald.com/content/583707/total-premium-insurance-industry-may.html

Chubb launches Cyber ERM - http://www.acegroup.com/sg-en/assets/chubb-launches-end-to-end-risk-management-solution-for-cyber-threats-
in-asia-pacific.pdf

Samsung Galaxy Note 7 Recall Crisis - http://fortune.com/2016/10/10/timeline-samsun-galaxy-note-recall-crisis/

Navigating cargo risks following Hanjins collapse - http://blog.willis.com/2016/09/navigating-cargo-risks-following-hanjins-collapse/

http://www.mas.gov.sg/news-and-publications/speeches-and-monetary-policy-statements/speeches/2013/singapore-as-a-global-insurance-
marketplace.aspx
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Asia Insurance

Market Report 2016

IS THE MARKET CHANGING?

Trends Were Watching 8

Risk and Analytics 10

Asia Insurance Market Report 2016 5

Cliff Jeyes is the Head of

Watching Tien Phong Bank foiled an

the average time that Singapore :

Terrorism The Philippines raised its terror

Asia Insurance Market Report 2016 9

Complete View of Risk

Business as usual risks...

Global Peril Diagnostic to evaluate

Asia Insurance Market Report 2016 11

3rd Party & Product Recall/

Many clients that have chosen to implement Affinity

Asia Insurance Market Report 2016 13

Asia Insurance Market Report 2016 15

Tough competition is driving companies to cut

moves from a self-regulatory to a

Asia Insurance Market Report 2016 17

despite being flooded with capacity,

Asia Insurance Market Report 2016 19

Most lines of business have seen

Asia Insurance Market Report 2016 21

The insurance industry is one of the brightest stars in the constellation of

Expanded Scope of Online

Asia Insurance Market Report 2016 23

Asia Insurance Market Report 2016 25

The non-life insurance market saw direct premiums

The total premium of both the life and non-life

There remain a number of restrictions that apply to

Asia Insurance Market Report 2016 27

In 40 years of broking, premiums have

Asia Insurance Market Report 2016 29

Asia Insurance Market Report 2016 31

Asia Insurance Market Report 2016 33

Senior managers of Aviation underwriters have begun to exert more discipline

Space Market Capacity vs. Average Launch + One Year

Despite volatility and marginal profitability, additional Space:

Asia Insurance Market Report 2016 35

Rise of Insurance Captives

Growth of Chinese Captives

Asia Insurance Market Report 2016 37

For the first time last year, developing economies surpassed

There has been some movement of talent within the

10 10 aggressively fight for market share and

Downstream Losses Estimated

Asia Insurance Market Report 2016 39

Cyber Risk Management Solutions

Asia Insurance Market Report 2016 41

Average Rate and USD per DWT per vessel

0.200% Rate USD per DWT 1.00

1 Compared to the 2014/15 market average of 97%

Asia Insurance Market Report 2016 43

Downward Neutral Upward

Consolidation continues amongst insurers. Some examples

The consequent shortage of new demand

cancelled out by the position of many other insurers in 18 18

this market, which is that they are currently way short 16 16

of meeting their premium income targets set earlier in 14 14

rating levels. And while such programmes have been 4 4

declined by a large proportion of the incumbent market, 2 2