The survey took into account the views of 92 professionals from the insurance sector across the Asian Pacific region, taking into consideration their knowledge and practical experience in the insurance industry across the region in compiling of the report. The report named ‘Asian Pacific Insurance Survey 2011‘ focused on six key criteria taken into account by insurers in decision making; these included growth prospects, regulatory controls, solvency issues, risk management, capital input and claims procedures.
The findings showed that the Asian powerhouses and two most populous countries – China and India – offer insurers the most significant growth prospects within the Asian insurance sector over the next two years, closely followed by the insurance markets in Indonesia, Vietnam and Malaysia.
Participants in the Norton Rose survey rated China and India as having the greatest prospects for growth in the Asian Pacific region. Analysis of the respondent’s views found that 97 percent believe China offers a ‘very significant to significant’ prospect for growth in the insurance markets; China was followed by India, Indonesia, Vietnam and Malaysia at 90 percent, 80 percent, 77 percent and 77 percent respectively.
The general growth in the economies across the Asian Pacific region is expected to continue and develop as the wealth of the massive populations in these countries grows, creating an increased demand for insurance protection and wealth creation products.
Common characteristics between the five key countries revealed in the survey covered high populations, growing insurance markets, tight regulatory criteria and restrictions surrounding foreign investment.
Speaking on the survey results, Susandarini, Managing Partner, Susandarini & Partners said: “The prediction of significant growth prospects for Indonesia’s insurance industry over the next two years is arguably true given the size of Indonesia’s current population of around 240 million people. Furthermore, the low penetration in the Asia Pacific markets, especially Indonesia, as compared to the mature markets of Europe and North America, should be viewed positively by international insurance businesses looking to diversify their geographical portfolio to countries like Indonesia.”
While recognizing the opportunities present in the Asian insurance markets, the survey reflected on the hurdles insurers need to overcome to be successful such as restrictions on foreign investment and regulatory entry barriers to these countries, which can present a problem for foreign insurers wishing to gain market access.
However, even though there is some evidence of protectionism within the Asian insurance market, the significant opportunities for multi-national insurers wishing to enter or grow in the Asian insurance markets by means of joint ventures with local insurers is recognized. Insurers such as Aviva, Zurich, Generali, and Bupa have all established a presence in the lucrative Asian insurance markets by establishing joint ventures with locally based insurance companies in order to capitalize on the increasing demand for insurance products in the region.
The survey also included the insurance markets in Australia, Japan and Taiwan, where respondents thought that the prospects for significant growth over the next two years were limited due to the mature nature of the markets in these countries.
The prospects in Thailand were rated at sixth place despite the country being subject to political and social turmoil during 2010 with some uncertainty on these issues still prevalent.
The findings in the Norton Rose survey reinforce an earlier report released by Swiss Re, which highlighted the prospects for insurers in the emerging Asian markets in 2011. The Zurich based insurer predicted that the developing economies in Indonesia, Malaysia, Thailand, Vietnam and the Philippines – along with China and India – offered multinational insurers higher premium growth than European and US insurance markets.
The Vietnamese, Chinese and Indian insurance markets are expected to experience an increase in competition over the next two years as more insurers enter these growth markets and vie for market share. However the position in Malaysia is expect to be more stable.
It should be noted that the Philippines, New Zealand and Papua New Guinea were not included in the survey – an issue pointed out by respondents taking part in the survey.
Current regulations and foreign investment procedures within China, India, Vietnam and Indonesia present foreign insurers with an element of difficulty resulting in the preferred method of entering the market being through a joint venture with a local partner. However, a note of caution on adopting this initiative was stressed by Norton Rose, with insurers needing to consider the complexities of entering into successful joint ventures.
The Norton Rose survey has underlined the potential for growth for insurance companies in emerging Asian markets galvanized by a rapidly expanding middle class, particularly in China, India, Indonesia, Malaysia and Vietnam. The findings indicate greater scope for growth for multinational insurers in Asia’s fledgling insurance sector than that which exists in the mature European and American insurance markets.
Although there is some uncertainty surrounding local insurance and investment regulations and possible political issues in the Asian-Pacific region, these are considered to be over shadowed by the opportunities for insurers currently operating or seeking to enter the burgeoning Asian-Pacific insurance market. However, Norton Rose has stressed that diligence is required by insurers looking to enter these markets due to the need to comply with strict regulatory controls and the potential for changes arising from political issues.
Speaking about the overview of the survey, Norton Rose Partner, James Bateson, said: “That Asia is ripe for growth in the insurance sector is a given; just how and when that will occur is more uncertain. Political and regulatory uncertainty together with protectionist regimes are a barrier, but the pure scale of opportunity means that new entrants and existing players wishing to expand have to take strategic risks with those factors. Additionally, the desire and regulatory necessity for global players to maintain minimum standards and group capital, which for most European and US headquartered operations means standards higher than those imposed by local regulation, risks making these operations less competitive than their local peers and when investment opportunities arise, allows local acquirers/investors to offer considerably higher prices.”
Asian economies have been spearheading the global financial recovery, with the Chinese economy officially becoming the world’s second largest economy after overtaking Asian neighbors Japan. Along with China, the Indian economy has gained significantly since the 2007-2008 global recession. The output from China and India has underpinned growth across the Asian Pacific region, with the upward trend set to continue. Meanwhile, doubts exists in respect of the economies in Euro zone countries and North America as austerity measures begin to take effect.