ASEAN Life Insurers

ASEAN represents a large market for re/insurance products with a population of over 600 million people, combined nominal GDP of over $2.41 trillion and per-capita income at $3,852 in 2013. Furthermore, Asean has set ambitious regional integration targets for 2015 and 2020.

The Asean Economic Community (AEC) was established by the end of 2015. One of the AEC’s objectives is to establish a single market and production base, by having free flow of goods, services, investment, skilled labor and capital. Measures to achieve this include the removal of tariffs and nontariff barriers (NTBs), harmonizing customs procedures via an Asean Single Window, harmonized technical regulations, removal of all restrictions on trade in services, continued liberalization of financial services, and strengthening investment protection via most-favored nation (MFN)/national treatment.

Although some of the more advanced Asean countries have already committed to partially liberalize their insurance sectors by 2015, the exact forms of liberalization and deregulation are still subject to negotiation. To realize their vision by 2020, Asean member-states plan to undertake a number of cooperative actions, which the European business community in Asean is keen on supporting.

Insurance-penetration rates across Asean stood at 3.2 percent in 2013, above the emerging-market average of 2.7 percent, but below the global average of 6.3 percent. Rates range from a low of 0.05 percent (Myanmar), 1.4 percent (the Philippines), 1.42 percent (Vietnam), 1.8 percent (Indonesia), 4.8 percent (Malaysia), 5 percent (Thailand), to a high of 6 percent in Singapore. Thus, there is considerable room for Asean’s insurance-penetration rate to grow toward the global average of 6.3 percent. The Asean consumers’ appetite for re/insurance products is reflected in the average annual growth in premiums during 2007-2012, ranging from 6.4 percent (Singapore) to 26.3 percent (Indonesia).

More than 25 large European re/insurance companies operate across Asean member-states. They make a significant contribution to the population’s savings, investment and insurance needs; and have further contributions to make in working with Asean member-states to reach their 2020 objectives. To take just one example, Prudential Corp. Asia (PCA) in Indonesia has over 200,000 agents, and more than 2 million clients since its establishment in 1995. PCA allocates a large amount of investable funds into local government bonds in various Asian markets, especially in the emerging economies of Thailand, Vietnam, Indonesia, and the Philippines. These allocations align PCA as a provider of long-term stable financing to various national governments, supporting various local initiatives, including infrastructure financing. PCA’s exposure to government bonds in insurance funds is approximately GBP 10bn as of December 2014. 

Alongside local companies, European insurers provide life insurance, general insurance and reinsurance products and services to retail and corporate clients across the Asean region. Insurance brokers provide life and nonlife (P&C, aviation, maritime) products, and they are expected to expand into neighboring markets, benefiting from growing demand for insurance products and services as Asean economic integration proceeds. Other European companies have also invested across Asean fixed income, equity and alternative-asset markets, thus deepening the pool of investment capital available across the region. It is understood that European insurance companies are required to adhere to international best-practice regulatory regimes, such as the European Union’s Solvency II Compliance. Their experience of working within these standards can provide positive spillover effects on corporate governance across all companies in Asean member-markets. European companies operating in the region support Southeast Asia’s economic development via their investments, and help meet the growing demand for insurance products via sales to policyholders, thereby reducing the protection gap in each Asean member-state.

The re/insurance industry plays a key role in supporting long-term economic growth. Through risk mitigation and long-term investment, the re/insurance industry contributes to steady economic and social development. Its functions are essential for individuals and corporations, but also support the macroeconomic goals of governments. An open and inclusive investment environment will best stimulate an innovative and competitive market that brings better protection for consumers.