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EAIC Today Day Three 2016

News FRIDAY 14.10.16 Over-regulation poses challenges for region The over-regulation of some markets is the hottest topic in Asian insurance at present, Alamgir Kabir senior vice-president of the Asian Reinsurance Corporation, told EAIC Today. “Many insurers in the territory have been struggling to comply with the regulatory requirements, such as minimum capital requirements or the risk-based capital regime,” he said. “Mergers and acquisitions and winding-up are seen as common. Regulators have also been stringent in some of the countries by limiting reinsurance placement in the overseas markets. Many reinsurers, having sufficient capacity, are not allowed to write their reinsurance business, despite prerequisites being met.” Over the coming year Kabir expects that penetration will increase in Asia for new products such as health, crop and cyber. The greatest opportunity for re/insurers in the region is disposable income-related insurance buying. “Tourism is one of the biggest and fastest-growing industries in this region, so personal accident, travel and health can be the greatest opportunities for re/insurers,” Kabir said. He added that motor is the lead portfolio in most of the countries in the region, and is believed to have potential for further growth. Other than motor, health and crop are the fastest growing portfolios. Asked about the main challenges for the market, he identified price slashes and additional capacity as key issues. “It is observed that the primary premium rates of traditional classes are falling. This is due to the abolition of tariffs, unhealthy competition for acquiring business and the fact that many players are bringing additional capacity into the market,” Kabir said. The Asian Reinsurance Corporation is an intergovernmental organisation established in May 1979 under the auspices of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). Membership is open to all state members or associate members of ESCAP. Since July 9, 2005 associate membership has been open to non-ESCAP member countries of the UN, private organisations, private corporations, non-government organisations and multilateral institutions. Kabir said the corporation’s biggest achievement to date has been its response to the catastrophic flood loss in Thailand in 2011. “We are based in Thailand, and 2011’s catastrophic flood loss was the biggest ever cat loss for the region, amounting to nearly $20 billion. Most of the global reinsurers were affected badly by this event. We were also affected badly, but we were able to manage this mega event well and settled the loss without any complaint from the cedants.” n Alamgir Kabir Stricter rules create competition in China’s life market Stricter regulations rolled out by the Chinese Insurance Regulatory Commission (CIRC) in 2016 have created a more competitive environment in China’s life market, according to an AM Best briefing, Asia-Pacific Reinsurance Movement. Increased competition has prompted small and medium-sized life insurance companies to offer higher interest rate guarantees in universal life products in order to increase their market share, according to AM Best. But in March, the CIRC ordered life insurance companies to stop offering one-year term-savings-type life insurance business. Also—within a period of three years—they must reduce one-to-three-year term-savings-type life insurance business sales to 90 percent, 70 percent, and 50 percent of total sales in each consecutive year (and to not more than 50 percent after three years). “These regulatory actions are part of the growing pains of a fledgling marketplace.” The bancassurance channel, according to industry sources, is the main form of distribution for selling savings-type life insurance business as part of a wealth management service, particularly in promoting universal life products. Universal life products offer expected returns at 4 to 6 percent per annum over a two-to-three-year term. Following regulatory intervention, the sales activity of such products has cooled down, but it is still promoted as a “limited time offer” sales strategy. In August, CIRC introduced further supervisory measures on life insurance companies, extending its focus to savings-type life insurance business across all maturity terms, whereas previously it was on maturities of three years or less. CIRC will look into the product term, asset allocation, asset and liability matching, investment return of the underlying assets, and valuation of insurance liabilities, for each of the four categories (less than three years, three to five years, five to10 years, and longer than 10 years). According to AM Best, the focus of the supervision is to scrutinise the universal life business interest margin and risk of loss. “These regulatory actions are part of the growing pains of a fledgling marketplace and the depressed global interest rate environment,” said AM Best. “The stricter regulatory oversight and intervention will create additional pressures for life insurance companies in China.” n 6 | EAIC TODAY | DAY 3: Friday October 14 2016 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com


EAIC Today Day Three 2016
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