Worldwide Aon Benfield study links pure profitability metrics to growth potential and political risk
Three south-east Asian markets have made the top 10 of Aon Benfield’s latest Country Opportunity Index (COI), which identifies the world’s most promising property and casualty markets. They have been chosen by analysts owing to their profitability, growth potential and relatively stable political environments.
Singapore comes top of the list of 50 countries, followed by Indonesia in second place, with Malaysia in equal eighth spot. Hong Kong and Australia share 16th position, while Thailand, South Korea and India are all equal 20th.
The COI forms part of Aon Benfield’s 2013 Insurance Risk Study, which reviews insurers’ premium growth, profitability and loss ratios, as well as other key industry metrics.
Aon Benfield, the global reinsurance intermediary and capital advisory arm of Aon, created the index using five statistics. The five-year average combined ratio received one-third of the weight, while five-year annualised premium and population growth, five-year real growth in GDP and an assessment of political risk contributed equally to the remaining two-thirds.
Head of Aon Benfield Analytics Asia Pacific, George Attard (pictured), said the COI combined demographic, economic, sociological, and political information to identify and rank potential opportunity by country. “Importantly, utilising this information in combination with the experience and insight of our local teams means we can provide our clients with market intelligence to assist them in meeting their strategic objectives,” he said.
The study reveals that Indonesia’s foreign ownership limit is higher than that of several neighbouring countries, but that actual foreign ownership is still low due to the highly competitive nature of the market. It points out that Indonesia is refining its regulations to strengthen insurance development in line with international standards, and that an enhanced capital requirement is already in place ahead of full implementation of the ASEAN Free Trade Agreement in 2015. The study states: “A number of undercapitalised local insurers face significant challenges, and merger or acquisition is a good option available for them, otherwise they will have to surrender their licences.”
As for Malaysia, the study points out that foreign investment of up to 70% is permitted in insurance companies. With proper approval on a selected basis, 100% foreign equity for insurance companies will be considered. The study also reports that the new Financial Services Act of 2013 is expected to spark another round of consolidation as insurers will be prohibited from operating both life and general insurance simultaneously. “Takaful operators are to be subject to the same conditions under the Islamic Financial Services Act,” it states. “As a result of the new act, various frameworks and guidelines have been amended or introduced recently aimed at further improving the industry.”
The study also reports that automotive insurance is the fastest growing segment globally, with premiums increasing 7.3% year-on-year, helped by substantial growth in China. Within the $1.5trn of global property/casualty premium, motor accounted for 45%, property for 32% and liability for 23% of the total premium.
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