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Aon Benfield
Welcome to
Asia Pacific
A journey through the region’s insurance
and reinsurance markets
Risk. Reinsurance. Human Resources.
1
Introduction Markets Topics
• Demographics
The Asia Pacific region is home to more than half With many insurance and reinsurance companies
the world’s population, with diverse societies, already investing in this region and seeking to take • Political & Terror Risk
cultures, economies and regulatory regimes. As advantage of the growth opportunities, an expert
rapid economic development, population growth insight into these markets is crucial. Aon Benfield’s • Sovereign Rating and Outlook
and urbanisation lead to increased insurance local teams have produced this guide as both an • Major Risks
penetration, Asia Pacific represents a key area of introduction to and exploration of sixteen key Korea (Republic of) Japan
growth in the global marketplace. markets in Asia Pacific. • Top 5 Insurers
Pakistan China
Hong Kong Taiwan • Non-life Insurance Penetration Rate
In fact, in Aon Benfield’s 2015 Insurance Risk Study, India
three Asian markets make the top 3 of the Country Thailand Vietnam
Philippines
• Industry Premiums Split by Line of Business
Opportunity Index (COI), which identifies the
world’s most promising property and casualty
Malaysia
Brunei • Industry Aggregate Premium and Trends
Singapore
markets. They were chosen by analysts owing to Indonesia • Capital Requirements
their profitability, growth potential and relatively
stable political environments. Indonesia, Malaysia, • Regulatory Updates
and Singapore tied this year for the number one
Australia • Foreign Ownership
position in the list of 50 countries. They were also
the top quartile performer in both 2013 and 2014. • Aon Benfield Outlook
New Zealand
Data has been collated from major rating Combined with Aon Benfield’s expertise and
agencies, industry associations and regulatory commitment to the region, we hope the guide
bodies, IMF, World Bank, AXCO, Aon Risk will boost your understanding of the region and
Solutions, Aon Hewitt, and Aon Benfield. In the available growth opportunities.
addition, we have included our own views of each
market’s major risks, regulatory & market updates, Wherever available, or unless otherwise stated, premiums include
and market outlook. numbers for non-life and personal accident & healthcare business
written by non-life companies.
With a global fact base and broad access to Wherever Incurred Losses were not available, Loss Ratio was
local market practitioners, Aon Benfield is calculated on the basis of Paid Losses.
equipped to provide insight across a spectrum Demographics refer to 2015 estimates.
of lines, products, and geographies. Inpoint,
2014 GDP for Guam was not available, hence, excluded from the
the consulting division of Aon Benfield, helps APAC insurance penetration calculation.
insurers and reinsurers address these challenges,
from sizing market opportunities to identifying To calculate Y/Y Growth, restated numbers from prior year are
used, wherever available.
distribution channel dynamics, assessing
competitor behaviour, and understanding what The premiums information put together ranges from gross to
it takes to compete and win. Our approach direct and net basis; depending upon whatever was best available
leverages Aon Benfield’s 130mn USD annual for each of the countries.
investment in analytics, data and modelling to
help our clients grow profitably.
2 3
Gold Coast Australia 4 5
Australia
(2015 est.)
GDP – PPP (USD bn) Top 5 Insurers Industry Aggregate Premium 2010 to 2014
1,136.9
GEP 2014 GEP GEP Inc claims UW result
Population (mn) Entity USD mn AUD mn AUD mn AUD mn 40,000
24.0 QBE Insurance Group Ltd. 16,606.9 18,423.7 11,515.6 609.5
35,000
Insurance Australia
GDP Per Capita – PPP (USD) 8,762.1 9,720.6 6,791.8 1,139.6
Group Ltd. 30,000
47,318 Suncorp Insurance
7,919.7 8,786.1 6,600.9 665.7 25,000
Holdings Ltd.
5yr Real GDP Growth (%)
Allianz Australia Ltd. 3,533.4 3,920.0 3,090.6 -8.5 20,000
4.4 2010 2011 2012 2013 2014
Zurich Financial Services
1,140.0 1,264.7 905.8 -115.9 Total Premiums AUD million Total Premiums USD million
Australia Ltd.
Unemployment Rate (%)
6.3 Ranking based on Gross Earned Premiums, includes domestic and overseas Non-Life
+ PA & Healthcare premiums
Inflation Rate (%)
2014 Insurance Penetration - Non-life and PA & Healthcare
1.8
GWP vs. GDP
Australia Prem: GDP = 2.2%; APAC Prem: GDP = 1.5% Foreign Ownership
There are no material restrictions on foreign ownership. Subject to
regulatory approval, foreign companies may acquire any percentage
Industry Premiums Split by Lines of Business of a domestic company’s equity or may establish wholly owned
subsidiaries or branches.
Low High
Political Risk Credit Rating and Outlook Lines of 2014 DWP Inc claims Loss Comb *Y/Y Foreign investments in Australia above a certain size must be
business USD mn AUD mn AUD mn ratio % ratio % growth % approved by the Foreign Investment Review Board (FIRB).
Rating Outlook Property 10,156.3 11,267.0 5,613.0 47.4 68.8 -0.2 For investors from the US, Chile, Japan, Korea and New Zealand, they
Terror Risk need approval from FIRB for acquiring a domestic company with
S&P AAA Stable Motor 12,235.0 13,573.0 10,388.0 77.1 94.1 1.9 assets in excess of 1.09bn AUD. For investors from other countries, the
Workers Comp 1,486.4 1,649.0 1,614.0 97.3 112.4 -6.1
approval limit is 252mn AUD.
Fitch AAA Stable
Liability 3,411.0 3,784.0 2,561.0 68.2 90.4 2.0
Moody's Aaa Stable
Miscellaneous 4,943.4 5,484.0 2,018.0 39.3 63.7 4.5
Easiest Hardest AM Best CRT-1
Industry-wide
World Bank relative ease of doing business 32,232.0 35,757.0 22,194.0 61.9 81.9 1.2
Non-Life Aon Benfield Outlook
Growth in the insurance market is relatively stable and broadly in line
*Growth % is based on premiums in local currency with natural inflation. With regards to reinsurance, catastrophe limits are
Break-up by line of business reflects written premiums within this market sector increasing at a low single digit rate each year. Following the 2010/11
Major Risks
events, the market moved away from proportional business, however
as reinsurers are searching for growth, there is an increased appetite to
move back into proportional solutions.
Capital Requirements
Reducing premium rates are putting margins under pressure and
Minimum capital requirement of 5mn AUD is effective from 1 July 2002. forcing firms to have a clear focus on expense management going
Underwriting Risk Regulatory Risk Prudential Standards GPS 110 specifies that a regulated institution must forward. For insurers, the biggest challenge is the static market and the
ensure that it has a capital base, at all times, in excess of its Prudential Capital pressure to grow. Exacerbating this pressure, over recent years various
Given the consolidation of the Since LAGIC was introduced in
Requirement (PCR) which is intended to take account of the full range of risks international underwriters have entered the Australian market, utilising
insurance market in Australia, and 2013, the Australian market has
to which a regulated institution is exposed, including insurance risk, insurance global balance sheets to make the market even more competitive.
a highly competitive environment, quickly adapted to the horizontal
concentration risk, asset risk, asset concentration risk, and operational risk. These forces have forced many insurers to revisit and (re)define their
most insurers are heavily focused as well as vertical requirement of
value proposition and their “reason for being”.
on underwriting and risk selection. the solvency standard, resulting in
Increasingly the market is utilising the Australian market developing The biggest challenge for reinsurers in Australia is to try and remain
external data sources to help refine an equitable working relationship Regulatory Updates relevant to the well capitalised main reinsurance purchasers, as well as
underwriting decisions, with many with the regulation as it currently keeping their diversifying exposures in Australia aligned to the capacity
companies exploring the use of Big stands. In 2016 however, the Australian Prudential Regulation Authority (APRA) released a package that
they are deploying in the peak zone globally. Over recent years, the
Data analytics in their processes. Reserve Bank of New Zealand harmonizes and enhances its current risk management requirements. The
more successful of these have viewed their insurance clients on a
will have fully implemented its package includes the final cross-industry Prudential Standard CPS 220 Risk
holistic basis, viewing capital needs of their clients in totality rather
solvency regime, requiring (at Management, a proposed prudential practice guide on risk management,
than trying to underwrite selective placements.
an upper level) a 1 in 1000 year and a response paper that addresses submissions received by APRA on the
capitalisation for earthquake risk CPS 220 consultation package released in May 2013. APRA also released an
in Wellington. The ramifications of amended Prudential Standard CPA 510 Governance (CPS 510) to ensure that
this requirement are already being governance requirements related to risk management was aligned with those
seen, with some Trans Tasman of CPS 220. The new Prudential Standard CPS 220 Risk Management (CPS
insurers already setting reinsurance 220) and amended Prudential Standard CPS 510 Governance (CPS 510) have
needs based on their New Zealand been in effect since 1 January 2015.
exposure. Data Source: IMF, AXCO, SNL, S&P, Fitch, Moody’s, A.M. Best, Australian Prudential Regulatory Authority,
Aon, and Aon Benfield.
6 7
Sultan Omar Ali Saifuddin Mosque in Bandar Seri Begawan Brunei 8 9
Brunei
(2015 est.)
GDP – PPP (USD bn) Top 5 Insurers Industry Aggregate Premium 2009 to 2013
32.9
2013 GWP Market share 80
Population (mn) Entity USD mn BDN mn %
70
0.4 National Insurance Co. BHD 20.3 25.5 35.0
Audley Insurance Co. SDN BHD 15.1 18.9 26.0 60
GDP Per Capita – PPP (USD)
Standard Insurance SDN BHD 8.9 11.2 15.4
78,475.6 50
Tokio Marine Insurance
6.1 7.6 10.5
Singapore Ltd.
5yr Real GDP Growth (%) 40
MBA Insurance Co. SDN BHD 4.4 5.5 7.6
1.4
30
Excludes PA & Healthcare Premiums 2009 2010 2011 2012 2013
Unemployment Rate (%) Statistics refer to conventional non-life business and do not include the Takaful Total Premiums BND million Total Premiums USD million
2.7 business or companies
2014 statistics were not published by the regulator when preparing this report
Inflation Rate (%) Ranking based on total premiums written by an insurer within this market sector
0.0 2013 Insurance Penetration - Non-life and PA & Healthcare
Regulatory Updates
(excl. Takaful) GWP vs. GDP
The new General Insurance and Takaful Agent Handbook (GAH) was
Brunei Prem: GDP = 0.4%; APAC Prem: GDP = 1.5%
introduced by the Monetary Authority of Brunei Darussalam (MABD)
and Brunei Insurance and Takaful Association (BITA) with effect from
1 July 2014. A period of grace of six months was given to agents to
Industry Premiums Split by Lines of Business implement the new guidelines, which have been in effect from 1
Low High
January 2015.
Political Risk Credit Rating and Outlook
2013 GWP Paid Loss Comb *Y/Y
Lines of claims ratio ratio growth
Terror Risk Rating Outlook Foreign Ownership
business USD mn BND mn BND mn % % %
S&P NA — Foreign ownership is not restricted or discriminated against under
Property 9.5 11.9 7.7 64.9 105.7 -0.1
The Insurance Order 2006 and Insurance Regulations 2006.
Fitch NA — Construction
2.4 3.0 0.1 3.2 8.5 1234.5 Incorporated foreign companies wishing to establish a place of
Moody's NA — & Engineering
business in Brunei are required to register under Section 299 of the
Motor 11.2 14.1 4.2 29.5 48.4 15.4 Companies Act.
Easiest Hardest AM Best CRT-4
World Bank relative ease of doing business Workers Comp 8.9 11.1 2.8 24.8 65.5 15.3
Aon Benfield Outlook
Liability 6.0 7.6 0.5 7.2 14.5 157.8
Surety, bonds
The potential for any significant growth in Brunei remains low due to a
0.3 0.4 -0.0 -7.3 3.6 -9.4 small economy, a heavy dependency on finite oil and gas reserves, and
& credit
Major Risks a small number of insurers in the market. In addition, the Monetary
Miscellaneous 14.0 17.6 1.0 5.8 16.6 -12.3 Authority of Brunei Darussalam (AMDB) has introduced new loan
requirements including a loan cap aimed at reducing the debt burden
MAT 5.7 7.1 0.9 12.6 21.1 -15.9 among Bruneians. Motor is the main class of business but the outlook
in the personal lines sector remains limited. Apart from the compulsory
Industry-wide
58.1 72.7 17.1 23.6 44.6 10.5 purchase of motor insurance, there is no culture of buying insurance
Non-Life
Litigation Risk in Brunei.
The Legal Profession (Contingency Demand is driven by bank lending requirements and culture of state
Fee) Act 1994 has incentivised *Growth % is based on premiums in local currency welfare and religious concerns have affected the development of the
law firms to encourage clients to Excludes PA & Healthcare premiums industry. The contingency fee act remains to be an issue which has
go to court to seek compensation Statistics refer to conventional non-life business and do not include the Takaful increased the number of motor third party bodily injury claims going
for motor vehicle or occupational business or companies to court, many of which are grossly inflated.
injury accidents. A contentious
2014 statistics were not published by the regulator when preparing this report
motor liability case is more likely to
go to court in Brunei than in any Break-up by line of business reflects written premiums within this market sector
other country in South-East Asia,
many of which at grossly inflated
Capital Requirements
compensation demands.
The Insurance Order 2006 and Insurance Regulations 2006 require life and
non-life insurers to keep the minimum paid-up capital of 8mn BND with a
minimum deposit set at 1mn BND to be maintained with Monetary Authority
of Brunei Darussalem. The capital requirements for Takaful operators are the
same. Insurers established or incorporated outside Brunei who do not have
local share capital are required to maintain in Brunei a surplus of assets over
liabilities of an amount not less than the requirement for the minimum paid-
up capital of an insurer incorporated in Brunei.
Data Source: IMF, AXCO, SNL, S&P, Fitch, Moody’s, A.M. Best, the General Insurance Association of Brunei Darussalam,
Aon, and Aon Benfield.
10 11
The Great Wall of China China 12 13
China
(2015 est.)
GDP – PPP (USD bn) Top 5 Insurers Industry Aggregate Premium 2010 to 2014
19,510.0
2014 GWP Market Loss Comb 850,000 140,000
Population (mn) Entity USD mn CNY mn share % ratio % ratio %
750,000 120,000
1,375.0 PICC Property & Casualty
41,087.6 252,419.2 33.5 64.5 95.6
Co. Ltd. 650,000 100,000
GDP Per Capita – PPP (USD) Ping An Property & Casualty
23,253.7 142,857.3 18.9 57.6 90.6 550,000 80,000
14,189.50 Insurance Co. Ltd.
China Pacific Property 450,000 60,000
5yr Real GDP Growth (%) 15,111.6 92,837.3 12.3 68.1 101.2
Insurance Co. Ltd.
350,000 40,000
9.6 China Life Property & Casualty 2010 2011 2012 2013 2014
6,575.7 40,397.4 5.4 61.6 97.3
Ins. Co. Ltd. Total Premiums CNY million Total Premiums USD million
Unemployment Rate (%)
China United Property
5,675.2 34,865.2 4.6 61.6 94.0
4.1 Insurance Co. Ltd. In March 2015, CIRC formally issued the Notice on Implementing
Reinsurance Registration System. Beginning 1 January 2016, all
Includes Non-Life + PA & Healthcare premiums
Inflation Rate (%) reinsurers (including primary insurers writing inward business) and
Ranking based on total premiums written by an insurer within this market sector
reinsurance brokers must register on the platform built and maintained
1.5 by CIRC. Cedants must select reinsurance counterparties from those
2014 Insurance Penetration - Non-life and PA & Healthcare
valid in the registration system. Treaty reinsurers must have secure
GWP vs. GDP
rating (“A-“ or above for leaders and “BBB” or above for followers).
China Prem: GDP = 1.2%; APAC Prem: GDP = 1.5% Certain exemptions may apply. In April 2015, China’s Residential EQ
Pool was established in Beijing. In June 2015, motor de-tariff began in
Industry Premiums Split by Lines of Business six provinces/cities. In August 2015, CIRC kicked off the pilot residential
earthquake scheme in Da’li prefecture of Yunnan province. In October
Low High Lines of 2013 GWP Paid claims Loss *Y/Y 2015, the State Council proposed to amend the Insurance Law. The
Political Risk current clause that “a P&C insurer’s net premium cannot exceed 4X its
Credit Rating and Outlook business USD mn CNY mn CNY mn ratio % growth %
capital” will be removed.
Property 11,629.6 72,054.0 42,367.4 58.8 15.5
Foreign Ownership
Terror Risk Rating Outlook
Construction
1,264.0 7,831.6 3,123.6 39.9 24.5 If 25% or more of a Chinese insurance company’s shares are held by
S&P AA- Stable & Engineering
foreign entities, the firm is considered foreign funded and regulated
Fitch A+ Stable Motor 76,294.6 472,702.8 272,080.4 57.6 17.9 by the Regulations on the Administration of Foreign-Invested
Insurance Companies. Otherwise it is deemed to be domestic.
Liability 3,470.5 21,502.1 8,914.8 41.5 18.9
Moody's Aa3 Stable To be eligible for a branch, joint venture, or subsidiary license,
Surety, bonds foreign insurers must has been in business for over 30 years, set
Easiest Hardest AM Best CRT-3 4,384.4 27,164.8 8,515.6 31.4 8.6 representative office in mainland China for at least 2 years, and has
& credit
World Bank relative ease of doing business total assets of at least 5bn USD.
Miscellaneous 200.5 1,242.0 817.9 65.9 11.0
Aon Benfield Outlook
MAT 3,106.1 19,244.7 8,872.4 46.1 1.0
The China insurance and reinsurance market potential remains high
Industry-wide
given low insurance penetration, continued economy growth, and
Major Risks Non-Life
100,349.6 621,742.0 344,692.0 55.4 16.7
clearly stated government desire for market growth and product
PA & Health 4,257.4 26,378.0 11,758.5 44.6 31.5 diversity. Significant growth has been achieved in recent years in
non-life sector such as Agriculture, Liability, and Credit – mostly due
Grand Total 104,607.1 648,120.0 356,450.5 55.0 17.2 to government incentives and guidance. Personal lines continue to
be untapped, except Motor. CIRC recently launched a liberalization
*Growth % is based on premiums in local currency
of motor tariff for selected regions in China, aiming to expand
Catastrophe Risk Regulatory Risk Financial Risk Break-up by line of business reflects premiums written within this market sector nationwide shortly. Immediate impacts on the market have mainly
2014 statistics were not published by the regulator when preparing this report been centered on reduced written premium with stable loss ratios. As
China is one of the most exposed However, at the country level, Regulators have introduced GDP growth rate is slowing down
countries to natural catastrophe catastrophe insurance for many new regulations. The in light of the government’s motor contributes more than 70% GWP, the industry will continue to
perils. Earthquake risk of insurers residential risk is still not in place. most important ones are China intention to bring structural Capital Requirements monitor developments closely. Specialty lines performed better than
portfolio is mainly driven by Data and modelling continue to Risk Oriented System (C-ROSS), changes to the economy. Reform Property and Engineering which continues to be very competitive.
Minimum capital required is 200mn CNY and 20mn CNY increment for each The impact of C-ROSS to date has been limited to specific cedants
growing exposures in and around improve for these two major perils. motor de-tariff pilot programs of the financial sector, particularly new provincial branch, with total capital capped at 500mn CNY. Insurers
the capital of Beijing. Tropical in six regions, the Agriculture regulating the “shadow banks”, and placements. However, C-ROSS marks a significant change in how
should keep solvency ratio (actual capital divided by minimum capital) no regulatory capital is quantified in China and may result in significant
Cyclone exposures are driven Reinsurance Pool, the Reinsurance is increasingly attracting more lower than 100%. Actual capital is insurer’s admitted assets minus admitted
by accumulations along the Registration System, and attention and debate. changes in the local market in the future. Discussions regarding the
liabilities. Minimum capital is the greater of 18% premium last year up to upcoming January 1 renewals have centered around the impact of
Eastern Coast from Shanghai amendment of the China Insurance 100mn CNY plus 16% premium last year excess of 100mn CNY (no ceded
to Guangdong, which are the Law. These new regulations may CROSS on signings for offshore reinsurers and the impact of the Tianjin
reinsurance and business tax), or 26% average incurred claims last 3 year up Port Explosion on renewal terms and conditions. Early expectations are
manufacturing and trading have many implications, e.g. to 70mn CNY plus 23% average incurred claims last 3 year excess of 70mn
centers of China. Catastrophe changing the cedant’s retention for onshore reinsurers to continue enjoying more favourable signings
CNY (no reinsurance recoveries). on placements. This trend will likely be accelerated due to the rapid
risk continues to be a focus of level, increasing demand of
the Regulator and Industry. non-proportional reinsurance, increase in the number of Llyod’s Syndicates writing business via
Catastrophe risk insurance is pushing reinsurers to get (better) Regulatory Updates the Chinese Platform. Aon Benfield remains confident however that
still in an embryonic stage. Pilot international rating, etc. offshore reinsurers will still play an important role in the market. In the
China Insurance Regulatory Commission (CIRC) published the final version
catastrophe schemes have been absence of clarity on loss positions for 2015, predictions on renewal
of China Risk Oriented Solvency System (C-ROSS) in February 2015. The
launched in Shenzhen, Yunnan and conditions remain subject to significant uncertainty. Early expectations
industry is in the transition toward C-ROSS with the formal implementation
Ningbo, Zhejiang province. are for a moderate impact on renewal terms for the market given
expected to be in 2016. For non-life insurers, the average solvency ratio under
Data Source: IMF, SNL, S&P, Fitch, Moody’s, A.M. Best, China Insurance Regulatory Comission, favourable loss activity in recent years and the continued strong
C-ROSS was 282.0% for 1Q 2015 and 286.3% for 2Q 2015.
Aon, and Aon Benfield. interest in China from a strategic long term perspective. Corrections on
14 the worst affected programs may be more significant however. 15
Skyline of Hong Kong Hong Kong 16 17
Hong Kong
(2015 est.)
GDP – PPP (USD bn) Top 5 Insurers Industry Aggregate Premium 2010 to 2014
414.5 2014 GWP Net *Y/Y
45,000 6,500
USD HKD Market claims Underwriting growth
Population (mn) Entity mn mn share % incurred profit / (Loss) %
7.3 AXA General 470.8 3,650.9 8.4 1,840.46 187.32 4.3
40,000 5,500
GDP Per Capita – PPP (USD) Zurich Insurance 342.7 2,657.0 6.1 603.75 71.21 1.6
Bupa 303.3 2,351.7 5.4 1,390.86 92.65 12.3
56,689.1
35,000 4,500
China Taiping (HK) 263.6 2,043.6 4.7 779.30 46.92 14.7
5yr Real GDP Growth (%)
BOC Group Ins. 237.6 1,842.6 4.2 1,041.23 63.46 3.3
4.6 30,000 3,500
*Growth % is based on premiums in local currency 2010 2011 2012 2013 2014
Unemployment Rate (%) Includes Non-life + PA & Healthcare premiums Total Premiums HKD million Total Premiums USD million
Ranking based on total premiums written by an insurer (domestic + overseas)
3.2
Inflation Rate (%) 2014 Insurance Penetration - Non-life and PA & Healthcare
GWP vs. GDP Foreign Ownership
2.9
Hong Kong Prem: GDP = 1.9%; APAC Prem: GDP = 1.5% There are no restrictions on foreign ownership. Foreign companies
may acquire any percentage of the shares in an existing insurance
company or establish branches or locally incorporated subsidiaries.
Industry Premiums Split by Lines of Business
Any person who intends to acquire control of 15% or more of
the voting power of a locally incorporated insurer must seek the
Lines of 2014 GWP Inc. claims Loss **Comb *Y/Y
Low High
regulator’s approval before making the acquisition.
business USD mn HKD mn HKD mn ratio % ratio % growth %
Political Risk Credit Rating and Outlook
Motor 624.5 4,842.1 2,296.4 58.0 90.9 6.5
Regulatory Updates
Rating Outlook Aircraft 2.1 16.1 8.5 119.7 132.8 -27.1
Terror Risk The Insurance Authority (IA) conducted a three-month consultation
Ships 260.6 2,020.5 835.7 64.7 82.6 7.7 exercise from September to December 2014 to solicit views on the
S&P AAA Stable
proposed Risk-based Capital (RBC) framework for Hong Kong. In
Goods in Transit 221.9 1,720.5 378.3 43.2 59.4 23.9
Fitch AA+ Stable September 2015, IA issued the consultation conclusions. There is
Property 1,155.5 8,959.9 1,168.6 29.9 49.0 -0.2 general support from the insurance industry for the move towards
Moody's Aa1 Stable a risk-sensitive capital framework and the enhancement of risk
General Liability 1,429.2 11,082.4 5,271.1 62.0 86.7 0.7 management. There is general agreement on the high level principles
Easiest Hardest AM Best CRT-2 of the conceptual framework, although there are mixed views on some
Pecuniary Loss 369.2 2,862.9 354.5 24.7 48.2 13.9
World Bank relative ease of doing business of the technical aspects. IA decided to proceed to the next phase
Non-Prop Treaty 26.2 202.8 91.8 47.8 58.3 12.1 which involves developing the detailed rules and carrying out the QIS.
After that, another consultation exercise will be conducted.
Prop Treaty 51.6 400.3 190.0 50.5 86.8 -4.4
Industry-Wide
Major Risks 4,140.7 32,107.5 10,594.9 51.6 75.0 3.8
Non-Life
Aon Benfield Outlook
PA & Health 1,487.5 11,534.0 6,090.6 67.5 87.9 6.2
Hong Kong insurance industry will also embrace the implementation
Grand Total 5,628.2 43,641.5 16,685.5 56.4 79.0 4.4
of Risk-Based Capital regulatory framework in a matter of few years’
time. And insurers would have to prepare for the potential impact
Catastrophe Risk Underwriting Risk Market Risk *Growth % is based on premiums in local currency arising hereunder: 1) potentially to trigger a wave of consolidation
**Expense ratio computation includes “Net Commissions Payable/Receivable” & and to drive smaller carriers out of business; 2) more holistic/
Hong Kong is generally considered There is fierce competition among Hong Kong by all means is closely “Management Expenses” stringent approach on risk management and capital requirement by
as low catastrophe-prone region insurers on all lines particularly for adhering to the Chinese economy
Break-up by line of business reflects total written premiums (domestic + overseas) direct insurers and reinsurers operating in Hong Kong; 3) Additional
with no proximity to earthquake those premium-rich classes such as in various arenas – investment,
burden onto insurers in regard to the compliance of myriad of risks –
fault line. Despite the frequent visit EC/EL and Motor and unfortunately, tourism, import/export, etc.
underwriting risk, credit risk, market risk, operational risk, liquidity risk,
of typhoon, Hong Kong is saved there is no sign of possible rebound Slowing down of the Chinese Capital Requirements counter-party risk plus other non-quantifiable risks.
from major losses as a result of in the near future. economy is to drive weaker demand
strict regulations on building code. on insurance particular for SME Minimum paid-up capital requirements are 10mn HKD for a non-life Voluntary Health Insurance Scheme (VHIS): Hong Kong Government
Owing to much increase in property sector and therefore profound company, 20mn HKD for a non-life company writing the statutory class of is proposing an alternative to those who are able and willing to use
value (insured value) as well as impact onto Hong Kong insurance business, 20mn HKD for a compositive, and 2mn HKD for a captive. Insurance private healthcare services through the collaboration with local
the extreme high concentration of industry. companies must submit a three or five-year plan when they apply for insurance industry by providing insurance to general public, with
risks, we can never underestimate authorisation. The applicant and the regulator agree how much capital they potential key challenges to medical insurance carriers including:
potential major losses arising from will need based on the business plan. This is normally much higher than the 1) Guaranteed renewal for life; 2) Covering pre-existing conditions
those “un-modelled” perils such as statutory minimum. subject to a waiting period; 3) Accepting high-risk groups through a
landslide, terrorism and other man- high-risk pool; 4) Standardization of policy terms/conditions. Medical
made hazards. Insurance coverage An insurer shall maintain an excess of assets over liabilities of not less than insurance is an important sector in the Hong Kong insurance industry
for catastrophe perils in Hong Kong a required solvency margin which is the greater of 1/5 of the relevant – for 2014, it captured 20.4% of overall premium income to the
is almost free for the time being, premium income up to 200mn HKD plus 1/10 of the amount by which non-life market. Yet operating margin was under severe pressure due
something, that needs immediate the relevant premium income exceeds 200mn HKD, or 1/5 of the relevant to escalating insurance payment and ended up being 4%. Challenges
attention. claims outstanding up to 200mn HKD, plus 1/10 of the amount by which the emanating from VHIS are to pose major uncertainty onto Hong Kong
Data Source: IMF, SNL, S&P, Fitch, Moody’s, A.M. Best, Office of the Comissioner of Insurance, relevant claims outstanding exceeds 200mn HKD, subject to the minimum medical insurance carriers.
Aon, and Aon Benfield. paid-up capital requirements.
18 19Taj Mahal in Agra, Uttar Pradesh India 20 21
India
(2015 est.)
GDP – PPP (USD bn) Top 5 Insurers Industry Aggregate Premium 2010 to 2014
8,027.0
2014 DWP Market share Loss
Population (mn) Entity USD mn INR mn % ratio % 900,000 15,500
1,292.7 New India 800,000 13,500
2,249.3 137,276.1 17.2 84.0
Assurance Co. Ltd.
700,000 11,500
GDP Per Capita – PPP (USD) United India Insurance
1,681.3 102,609.7 12.8 77.5
6,209.5 Ltd. 600,000 9,500
National 500,000 7,500
5yr Real GDP Growth (%) 1,590.9 97,089.3 12.1 84.4
Insurance Co. Ltd.
400,000 5,500
8.4 Oriental
1,193.3 72,825.4 9.1 81.9
Insurance Co. Ltd. 300,000 3,500
Unemployment Rate (%) 2010 2011 2012 2013 2014
ICICI Lombard GIC Ltd. 1,123.4 68,561.6 8.6 81.3
Total Premiums INR million Total Premiums USD million
6.3
Includes Non-life + PA & Healthcare premiums
Inflation Rate (%) Ranking based on total premiums written by an insurer within this market sector
5.4 Foreign Ownership
2014 Insurance Penetration - Non-life and PA & Healthcare
GWP vs. GDP In March 2015, the Indian Parliament passed the Insurance Laws
(Amendment) Bill raising the ceiling for foreign investment in the
India Prem: GDP = 0.6%; APAC Prem: GDP = 1.5% insurance sector. The foreign direct investment cap in an Indian
insurance company will be increased from 26% to 49% but ownership
and “control” of the Indian insurance company will remain with Indian
Industry Premiums Split by Lines of Business residents.
Low High
Political Risk Credit Rating and Outlook The Bill amends the definition of ‘foreign company’, which will now
Lines of 2014 DWP Inc claims Loss Comb *Y/Y include a company or body established under a law of any country
business USD mn INR mn INR mn ratio % ratio % growth % outside India, and includes Lloyd’s of London, established under the
Terror Risk Rating Outlook Lloyd’s Act, 1871, or any of its members. Foreign reinsurers will be
Property 1,340.7 81,820.6 35,984.5 71.0 76.6 12.0 permitted to conduct reinsurance business through setting up branch
S&P BBB- Stable offices in India.
Construction
427.8 26,109.5 10,636.8 71.6 71.6 2.0
Fitch BBB- Stable & Engineering
Moody's Baa3 Positive Motor 5,704.3 348,131.9 234,856.1 73.7 77.6 14.0
Liability 226.8 13,841.9 2,853.2 27.4 40.2 18.8
Easiest Hardest AM Best CRT-4
Aon Benfield Outlook
World Bank relative ease of doing business Miscellaneous 1,632.7 99,643.1 46,988.6 78.0 75.6 8.7
The anticipated original rate increases following the burning cost
MAT 541.2 33,027.2 11,899.5 63.0 71.7 4.5
initiative are yet to fully materialize, yet despite this, double digit
Industry-wide growth was still achieved, driven mainly by health and motor lines.
9,873.5 602,574.2 343,218.7 72.5 76.0 11.8
Non-Life Motor third party liability is compulsory and an inflationary increase
Major Risks in premium is built into the tariff for this segment, all other motor
PA & Health 3,224.1 196,767.3 148,567.5 84.8 89.8 13.8 insurance remains detariffed. Motor reinsurance is purchased mainly
Grand Total 13,097.6 799,341.5 491,786.2 75.8 79.0 12.3 by private companies in the market with the public sector largely
looking to run on a net basis. Original rates in the direct market are at
*Growth % is based on premiums in local currency their lowest levels making the reinsurance purchase look expensive for
Break-up by line of business reflects premiums written within this market sector the companies, regardless of the soft international market. The cost is
Regulatory Risk Litigation Risk creating challenges for companies to ensure they are buying sufficient
In 2014, the new Government As such, there is little Regulatory protection, particularly among the Public Sector Undertakings (PSU).
The Indian Insurance market re- As a rule, individuals accept an
opened its doors to privatisation of India introduced an amended Risk involved except that any offer of a claim made by an insurer Capital Requirements There is a real top line approach driving the competition in the market,
in 1999 and the first set of Insurance Bill to Parliament to allow amendments to Bills have to receive although in the past couple of years, and with the number of new entrants, this approach will soon start
regulations came into effect in 49% Foreign Direct Investment in Parliamentary support and that can people are getting more aware Minimum capital for direct insurance companies (life and non-life) of 1bn
hurting balance sheets, especially whilst there is no correction in the
2001, with Broker Regulations being insurance and also for reinsurers take time. of their rights. Group Companies INR and 2bn INR for professional reinsurers.
market. There was some interest in the market to develop and utilize
announced in October 2002. to set up branches in India. After generally drives a hard bargain at
The “Required Solvency Margin” (RSM) shall be the maximum of the structured products to reduce costs and increase profitability however
much debate, the government the time of taking insurance and
following amounts: beyond one or two deals this is yet to materialize.
There were very few changes got the Bill passed through an also is not averse to litigate a claim
made to regulations for the next Ordinance in 2015 and the IRDAI is if they feel that they are not being The new government has increased focus in disaster financing through
a) 500mn INR for direct non-life insurers, (1bn INR for reinsurers), or
10 years or so until the new set now in the process of finalising new given a fair deal by their insurer. The risk transfer and following its initiative of Bank accounts for all people
b) a sum equivalent to 20% of net premium income, or
of regulations were announced regulations to incorporate into the process of litigation is a long drawn has introduced schemes for Life and PA cover There are also discussions
c) a sum equivalent to 30% of net incurred claims.
by the Insurance Regulatory and existing ones. The IRDAI is trying to out one with cases usually taking a taking place to develop a natural catastrophe relief product, which
Development Authority of India get these regulations finalised by minimum of 10 years to get settled. should increase public/industry awareness around the importance of
(IRDAI) in December 2013. These October 2015 but it may well take Regulatory Updates
catastrophe coverage.
regulations were announced them till the end of the calendar
A bill is currently under consideration in Parliament which will impose a
after the IRDAI had meetings with year to announce them.
cap on motor third party bodily injury damages per person of 1mn INR.
Insurance Companies, Brokers,
The bill has already been approved by the lower house and is currently
Agents, Loss Adjusters, Third Party
being debated by the upper house. If ultimately passed into an Act of
Administrators and the General
Parliament, this legislation would have a beneficial effect on the market’s
Insurance Corporation of India.
Data Source: IMF, SNL, S&P, Fitch, Moody’s, A.M. Best, Insurance Regulatory and Development Authority, motor third party insurance future loss ratios.
Aon, and Aon Benfield.
22 23Borobudur Temple in Yogyakarta, Java Indonesia 24 25
Indonesia
(2015 est.)
GDP – PPP (USD bn) Top 5 Insurers Industry Aggregate Premium 2009 to 2013
2,838.6
2013 DWP Market Loss Comb *Y/Y 45,000,000 4,500
Population (mn) Entity USD mn IDR mn share % ratio % ratio % growth %
40,000,000 4,000
255.5 Asuransi Astra
361.3 3,779,889.0 8.7 49.2 85.1 26.3
Buana
35,000,000 3,500
GDP Per Capita – PPP (USD) Asuransi Sinar
341.1 3,568,439.0 8.2 60.2 96.9 3.6
11,111.8 Mas
30,000,000 3,000
Asuransi Jasa
5yr Real GDP Growth (%) 269.7 2,821,370.0 6.5 51.2 71.5 -1.6
Indonesia 25,000,000 2,500
7.2 Asuransi Central
220.4 2,305,945.0 5.3 76.0 103.7 14.5
Asia 20,000,000 2,000
Unemployment Rate (%) 2009 2010 2011 2012 2013
PT. Tugu Pratama
198.4 2,075,843.0 4.8 43.4 70.2 38.3 Total Premiums IDR million Total Premiums USD million
5.8 Indonesia
Inflation Rate (%) *Growth % is based on premiums in local currency Regulatory Updates
Includes Non-life + PA & Healthcare premiums
6.8 Ranking based on total premiums written by an insurer within this market sector In October 2015, President Joko Widodo signed a presidential
regulation on the formation of PT Reasuransi Indonesia Utama, also
2013 information is updated based on the revised numbers now available
known as Indonesia Re. The company is formed through the merger of
2014 statistics were not published by the regulator when preparing this report state-owned PT Asei Reasuransi Indonesia (Persero) and PT Reasuransi
Umum Indonesia (Persero). The establishment of Indonesia Re is aimed
at creating a large-scale national reinsurance company that can help
2013 Insurance Penetration - Non-life GWP vs. GDP
promote domestic retention.
Low High Indonesia Prem: GDP = 0.3%; APAC Prem: GDP = 1.5%
In September 2015, OJK mentioned that it would temporarily lower
Political Risk Credit Rating and Outlook insurers’ required solvency margin as part of a stimulus policy package
to help local insurance industry weather the impact of volatile
Industry Premiums Split by Lines of Business
currency and capital market by relaxing some criteria for computation
Terror Risk Rating Outlook of insurers’ risk-based capital requirement, including the evaluation
2013 DWP of securities investments, particularly those companies that suffered
S&P BB+ Positive Lines of Inc claims IDR Loss *Y/Y
investment losses as a result of weakening local financial conditions.
business USD mn IDR mn mn ratio % growth % Overall, the OJK said it will allow insurance companies to meet only
Fitch BBB- Stable
Property 1,040.4 10,883,507.0 4,759,477.0 56.9 16.8
50% of the minimum capital requirement, instead of 100%, until such
Moody's Baa3 Stable time the markets have recovered. The new measures are applicable
Construction & to conventional insurers and reinsurers and Shariah insurance and
132.8 1,388,778.0 675,218.0 59.8 19.9
Easiest Hardest AM Best CRT-4 Engineering reinsurance companies.
World Bank relative ease of doing business Motor 1,235.5 12,924,531.0 6,390,310.0 64.9 15.1 Foreign Ownership
Liability 84.2 881,234.0 79,043.0 10.7 34.8 Foreign ownership in joint ventures are capped at 80%. This level is
Surety, Bonds & flexible, however, provided that the Indonesian partner’s aggregated
300.8 3,146,440.0 967,768.0 50.8 108.0 paid-up capital is maintained. Then, the foreign insurer can increase
Major Risks Credit
its stake beyond 80%. This is a much higher level than in other
Miscellaneous 227.0 2,375,072.0 787,885.0 49.8 -1.1 countries in the region. Foreign ownership is still lower due to the
highly competitive nature of the market.
Marine, Aviation
608.5 6,365,945.0 380,110,058.0 N/A 12.1
& Transit Aon Benfield Outlook
Catastrophe Risk Regulatory Risk Financial Risk Litigation Risk Industry-Wide
3,629.2 37,965,507.0 393,769,759.0 58.0 18.8 The insurance market in Indonesia is growing through the increase in
Non-Life
Volcanic Eruption and Flood remain With enforced regulation systems The current exchange rate between The Indonesia government put the number of automobiles and scooters, micro financing schemes,
the dominant catastrophe risk by OJK, the business operation of Indonesia Rupiah (IDR) and United special effort to strengthening Personal large scale commercial projects, and infrastructure development. The
factors in Indonesia. In 2015 alone, insurance & reinsurance companies States Dollar (USD) has wider the litigation system especially in Accident & 503.8 5,270,155.0 3,264,813.0 74.8 14.4 impact on reinsurance is largely around Commercial lines, specifically
Indonesia experienced eruption of in Indonesia can be considered impact in insurance & reinsurance financial sector. The impact of KPK the development of infrastructure and public utilities. The new
Healthcare
Mt. Sinabung, Mt. Raung and Mt. improved than in the past. The transactions as most of commercial has been significantly changed government has assigned the infrastructure and public utilities sector
Gamalama, although for the last two implementation of Enterprise policies in Indonesia are using USD. the way people or industry doing Grand Total 4,132.9 43,235,662.0 397,034,572.0 N/A 18.3 as a key area of focus, after a lack of any significant investment for
incidents, the social & economic Risk Management for insurance The Central Bank of Indonesia (Bank transactions with more clarity on decades. Insurance rates have been growing to optimum levels since
losses are not significant. Floods, & reinsurance companies also Indonesia) this year issued law that business procedure and optimising *Growth % is based on premiums in local currency early 2014 with the introduction of the motor tariff which is expected
in many cities in Indonesia are monitored by OJK with special minimized transaction in USD and electronic or online system for 2013 information is updated based on the revised numbers now available to be maintained for at least the next three years. However it is
considered a man-made loss due supervision for the Board of to use IDR as the main currency. tender, procurement including 2014 statistics were not published by the regulator when preparing this report expected that earthquake and flood rates are likely to be reviewed and
to poor maintenance of water ways Directors. Failure to maintain level Specific for insurance & reinsurance taxation. If this mechanism has been changed in the near future due to the recent losses on these programs.
Break-up by line of business reflects premiums written within this market sector
infrastructure. of reporting or implementing risk business, OJK has discretion but fully adopted by all industry, the There is over-supply in the reinsurance market as reinsurers look
management could be resulted in encourages industry to maximise business process would be more to support the local cedants and benefit from the growth in
penalty not only for the company the use of IDR in making the productive, transparent and time Capital Requirements
premiums from the new tariff. Main themes in the market are around
but also to the Directors. payment, moreover in direct side. effective. The litigation risk at this consolidation with reinsurers looking to increase scale and establish
Insurance companies’ minimum capital has to increase to 100bn IDR in 2014.
stage can be considered lower than more flag positions and multinationals looking to set-up joint ventures
The requirements for reinsurance companies are 200bn IDR in 2014. Both
in the past. on the direct side. How the OJK-proposed regulatory change is to
insurers and reinsurers are required to maintain a minimum guarantee funds
as policyholder protection in the event of bankruptcy. The requirement is impact the reinsurance industry is to be observed.
the greater of 20% of paid-up capital or equity benchmark and 1% of net
Data Source: IMF, SNL, S&P, Fitch, Moody’s, A.M. Best, Otoritas Jasa Keuangan, There is an increased emphasis on developing mobile technology as a
Aon, and Aon Benfield. premium plus 0.25% of reinsurance premium.
distribution for retail products.
26 27Mount Fuji Japan 28 29
Japan
(2015 est.)
GDP – PPP (USD bn) Top 5 Insurers Industry Aggregate Premium 2010 to 2014
4,842.4
2014 NWP Market Loss Comb
Entity USD mn JPY mn share % ratio % ratio % 9,000,000 110,000
Population (mn)
Sompo Japan Insurance 8,800,000 100,000
126.7 20,589.0 2,181,300.0 27.0 65.6 97.4
+ NIPPONKOA Insurance 8,600,000 90,000
GDP Per Capita – PPP (USD) Tokio Marine & Nichido 8,400,000 80,000
19,225.0 2,036,790.0 25.2 61.3 91.5
38,210.6 Fire Insurance Co. Ltd.
8,200,000 70,000
Mitsui Sumitomo
13,646.9 1,445,819.0 17.9 62.2 94.0 8,000,000 60,000
5yr Real GDP Growth (%) Insurance Co. Ltd.
7,800,000 50,000
2.3 Aioi Nissay Dowa
10,957.3 1,160,867.0 14.4 63.2 96.9 7,600,000 40,000
Insurance Co. Ltd.
2010 2011 2012 2013 2014
Unemployment Rate (%)
The Fuji Fire & Marine
2,632.5 278,898 3.5 54.8 92.4 Total Premiums JPY million Total Premiums USD million
3.5 Insurance Co. Ltd.
Inflation Rate (%) Includes Non-life + PA & Healthcare premiums
Excludes Zenkyoren, that has a significant market share and other cooperative
0.7 mutual insurers e.g., Kyosai
Ranking based on total premiums written by an insurer within this market sector Regulatory Updates
In June 2015 the Japan Financial Services Agency (JFSA) disclosed the
2014 Insurance Penetration - Non-life and PA & Healthcare results of the second field tests which covered all insurance companies
GWP vs. GDP with the aim of introducing economic value-based solvency regime.
JFSA summarizes the direction of future examinations as follows:
Japan Prem: GDP = 1.8%; APAC Prem: GDP = 1.5%
Low High 1. A variety of issues and challenges were recognized in the field tests,
Political Risk Credit Rating and Outlook Industry Premiums Split by Lines of Business as in the previous tests. Based on the results, JFSA needs to conduct
further examination toward establishing a specific framework.
Rating Outlook Lines of 2014 DWP Inc claims Loss ratio *Y/Y
2. There are ongoing movements in the economic value-based
Terror Risk solvency regime and accounting system, such as the IAIS’s ICS field
business USD mn JPY mn JPY mn % growth %
S&P A+ Stable tests, Solvency II in Europe and examination of IFRS 4 “Insurance
Property 13,461.1 1,426,141.0 744,307.0 52.2 0.5 Contracts”. Under such circumstances, it is considered to be important
Fitch A Stable to establish a regulatory framework suitable to Japan, paying attention
Construction to the nature of the Japanese insurance market.
Moody's A1 Stable & Engineering
796.1 84,347.0 41,029.0 48.6 9.2
3. Introducing the economic value-based solvency regime requires
Easiest Hardest AM Best CRT-2 Motor 46,182.9 4,892,843.0 2,910,732.0 59.5 1.2 some revisions to the business management and risk management
World Bank relative ease of doing business methods used by insurance companies. Therefore, the JFSA will
Workers Comp 531.7 56,330.0 19,299.0 34.3 -45.3
make steady efforts to establish a new framework through dialogue
Liability 4,938.6 523,217.0 236,775.0 45.3 -5.5 with relevant parties in various situations, so as to ensure a smooth
introduction.
Surety, bonds,
401.1 42,493.0 10,478.0 24.7 -7.5
Major Risks & credit
Miscellaneous 7,395.6 783,525.0 200,964.0 25.6 3.0
Aon Benfield Outlook
MAT 2,877.5 304,854.0 145,218.0 47.6 -1.5 With a challenging growth environment in Japan for a number of
years the merger activity of the mega insurance groups looks almost
Industry-Wide
76,584.6 8,113,750.0 4,308,802.0 53.1 0.1
complete on the domestic front. Once all the mega-mergers are
Catastrophe Risk Regulatory Risk Underwriting Risk Market Risk Non-Life completed in 2015 the three largest insurance groups will have a
combined market share of over 90%, with concentration being close
Japan is exposed to multiple In March 2015, Japan FSA Revised fire base rates will be Japanese insurers typically hold PA & Health 6,680.9 707,807.0 354,200.0 50.0 -7.9
to 100% in certain specialist lines. Published mid-term plans point
catastrophe risks including requested all the insurance introduced in October 2015 a relatively high percentage of to further M&A activity outside of Japan as insurers look to reduce
Grand Total 83,265.4 8,821,557.0 4,663,002.0 52.9 -0.1
earthquake and weather related companies to submit an ORSA reflecting recent loss experience assets in equity. While this has led exposure to the Japanese equity market and use the proceeds to build
events which are a significant report on an annual basis. The due to weather related exposures significant increases in financial *Growth % is based on premiums in local currency on the successful strategy of M&A driven growth outside of Japan in
challenge to insureds and insurers aim is to enhance and speed (e.g. snow, freeze). On average strength over the past couple of both life and non-life lines of business.
Break-up by line of business reflects direct net premiums written (net of
alike. For insurers both frequency implementation of ERM within the rates are increased by 3.5% years driven by the NIKKEI, it was
cancellations) within this market sector
and severity must be carefully Japanese insurers. There are although there is variation also a major challenge during the Domestically, profitability has rebounded following the recent revision
managed in accordance with potential implications for how across the different rating zones Global Financial Crisis. Volatile Capital Requirements of Motor rates which has led to improved underwriting performance in
heightened ERM governance insurers view and therefore depending on loss experience. financial market therefore remains a the dominant Motor line of business. However, some concern remains
requirements. Profitability is heavily purchase reinsurance with an As part of this base rate change, risk factor. A number of companies The minimum capital requirement for both the stock insurance company and over the impact of the consumption tax rate increase to 8% and how
dependent on frequency and increased focus and accountability the maximum duration of the have active strategies to change the mutual insurance association is 1bn JPY. it will affect both claims and acquisition costs. Japan is exposed to
severity of natural catastrophe losses on decision-making for the long-term dwelling policies will be the shift in their asset bases within multiple catastrophe risks include earthquake and weather related
in any given year. reinsurance purchase. capped at 10 years. their published mid-term plans. Foreign branches are required to deposit normally minimum 200mn JPY in events. These remain a significant challenge to insured’s and insurers
cash or securities and must hold assets in Japan in equivalence to the total of alike. Profitability of domestic insurance remains heavily dependent on
their underwriting reserves and outstanding loss reserves. frequency and severity of natural catastrophe losses in any given year.
Reinsurance rates have reduced towards the pre-Tohoku levels follow a
Foreign Ownership combination of softening market conditions and in some cases payback
being achieved from the events of 2011. Barring a significant shock the
Foreign companies are allowed to establish wholly owned subsidiaries
Data Source: IMF, SNL, S&P, Fitch, Moody’s, A.M. Best, Financial Services Agency, softening market looks set to continue.
or branches in Japan or to acquire any percentage of a Japanese company’s
Aon, and Aon Benfield.
equity.
30 31Boats at Haeundae in Busan Korea (Republic of) 32 33
Korea (Republic of)
(2015 est.)
GDP – PPP (USD bn) Top 5 Insurers Industry Aggregate Premium 2010 to 2014
1,894.4
2014 DWP Market Loss Comb
80,000,000 75,000
Population (mn) Entity USD mn KRW mn share % ratio % ratio %
75,000,000 70,000
50.6 Samsung Fire & Marine
18,850.0 19,848,346.3 26.2 85.5 103.7
Insurance Co. Ltd. 70,000,000 65,000
GDP Per Capita – PPP (USD) Hyundai Marine & Fire 65,000,000 60,000
11,588.2 12,201,961.9 16.1 85.2 102.5
36,528.4 Insurance Co. Ltd.
60,000,000 55,000
Dongbu Insurance
5yr Real GDP Growth (%) 10,363.4 10,912,234.2 14.4 86.8 105.0 55,000,000 50,000
Co. Ltd
4.6 *KB Insurance Co. Ltd. 9,245.2 9,734,845.8 12.9 87.5 106.7 50,000,000 45,000
Meritz Fire & Marine 45,000,000 40,000
Unemployment Rate (%) 4,904.9 5,164,677.2 6.8 84.9 106.6 2010 2011 2012 2013 2014
Insurance Co. Ltd.
3.7 Total Premiums KRW million Total Premiums USD million
*KB Insurance Co. Ltd. was previously LIG Insurance Co. Ltd.
Inflation Rate (%) Includes Non-life + PA & Healthcare premiums Excluding PA & Healthcare premiums
Ranking based on total premiums written by an insurer within this market sector A dip in 2013 industry premiums is a result of financial year-end change in
0.7
Korea (nine-month period from 1 April to 31 December 2013)
2014 Insurance Penetration - Non-life and PA & Healthcare
GWP vs. GDP
Regulatory Updates
Korea Prem: GDP = 5.1%; APAC Prem: GDP = 1.5%
FSS is moving towards a more evolved version of the RBC with
Low High strengthening of the confidence level of capital sufficiency for all risk
Political Risk Credit Rating and Outlook factors from 95% to 99% and this is being implemented at different
Industry Premiums Split by Lines of Business times for different risk factors.
Rating Outlook Insurers will be required to prepare and implement an Own Risk and
Terror Risk Solvency Assessment (ORSA) policy in 2017, based on 2016 financial
Lines of 2014 DWP Inc claims Loss ratio
S&P AA- Stable data. ORSA guidelines, a manual to the guidelines and an FSS reporting
business USD mn KRW mn KRW mn % template will be published towards the end of 2015.
Fitch AA- Stable
Property 1,681.8 1,770,822.5 855,646.5 49.3
Moody's Aa3 Positive
Construction
291.5 306,925.9 96,507.1 30.8 Foreign Ownership
Easiest Hardest AM Best CRT-2 & Engineering
World Bank relative ease of doing business Foreign insurers are allowed to establish branches or wholly owned
Motor 12,301.0 12,952,448.6 10,347,520.7 82.5
subsidiaries in Korea or to buy any percentage of a domestic
Workers Comp 100.0 105,344.4 80,637.5 77.0 company’s equity.
Liability 598.9 630,650.4 360,038.8 58.0 Foreign insurers must hold an investment grade rating from an
Major Risks international rating agency.
Surety, bonds, & credit 1,207.4 1,271,352.8 588,524.9 46.1
Miscellaneous 53,558.1 56,394,574.7 48,622,978.9 86.4
Aon Benfield Outlook
MAT 711.3 749,006.2 604,235.6 78.4
There are currently no major changes occurring in the Korean market
Industry-Wide Non-Life 70,450.0 74,181,125.5 61,556,090.0 83.6
Catastrophe Risk Underwriting Risk Regulatory Risk as direct rates remain flat and stable. There is excess capacity in the
PA & Health 1,400.6 1,474,824.7 1,134,223.9 77.3 market and despite high loss ratios, reinsurance rates have not seen
Typhoon season in Korea is normally 2015 has proved to be a With regards to reinsurers’ visit much increases. Most primary companies are focussed on increasing
during summer which is May to challenging year for Korean to Korea, overseas Reinsurers’ Grand Total 71,850.7 75,655,950.2 62,690,313.9 83.5 their market share in long-term A&H policy, as the majority of their
September and looks like typhoon risk programmes with sizeable visit to Korean clients in Korea portfolio is driven by this class of business. A large proportion of
season is mostly over now. That property losses emanating from has been proceeding smoothly the A&H portfolios are reinsured through quota share directly with
Break-up by line of business reflects premiums written within this market sector
means it will be another clean the Middle East and China in through the past year. We strongly Korean Re and very little Excess of Loss (XOL) coverage is purchased.
cat year and we will be able to addition to Korean domestic risk recommend Reinsurers to arrange The development of new products has focussed on increasing
expect modest rate deduction losses. We expect certain pro-rata their meetings through a registered coverage as opposed to investment products due to the low interest
continuously. treaties to be adversely affected broker for their meetings with Capital Requirements rate environment. Alternative capital is beginning to gain some real
and reinsurers would be looking Korean cedants. Being one of the traction, causing insurers to think about consolidation in order to
for improved terms and/or limiting top reinsurance brokers in Korea, Minimum capital requirements have been set by line of business. increase scale and competitive advantage. KB Financial Group has
the coverage of certain overseas Aon Benfield is ready to assist all recently signed a contract with LIG to take control of the controlling
For insurance companies, minimum capital requirements depend on the
property types. reinsurers to arrange for clients’ stake of LIG insurance, stating the need for diversification as the main
complexity of their business portfolio. The minimum capital for a mono-line
meeting in Korea. driver for the investment.
insurer writing only engineering or title insurance is 5bn KRW. The minimum
capital for a multiline insurer is the sum total of the capital requirements Following a change in the Insurance Business Law, the common
applicable to each of its authorized business lines, subject to a maximum of fiscal year-end for the insurance industry has been changed from 31
30bn KRW. For application of a reinsurance license, the minimum capital is at March to 31 December, effective from 2013. Most major reinsurance
30bn KRW. programme renewal dates have been changed to 1 January.
The RBC ratio is based on available capital divided by the required capital.
Data Source: IMF, SNL, S&P, Fitch, Moody’s, A.M. Best, Financial Services Commission, The ratio which has to be maintained by all insurers is to be more than 100%.
Aon, and Aon Benfield.
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