Worldwide: Predictions For Chinese Year Of The Snake 2013

1. Hong Kong insurance industry pays higher price for regulation

The introduction of the proposed new Independent Insurance Authority (IIA) will significantly increase the costs to insurers and insurance intermediaries of meeting more stringent regulation.

While the consultation phase for the new regulator is under way, 2013 is expected to see the introduction of legislation that will make significant changes to the regulatory environment in Hong Kong. Like other sectors of the economy, insurance in Hong Kong has traditionally been subject to the principle of minimum intervention.

However, the new independent insurance regulator (due to come into force in 2015) will have strong powers to regulate and supervise across the market, and will include conduct of business requirements. In light of the enhanced oversight powers and duties, the IIA may be more vigilant in its supervision of industry practitioners.

All of this – plus new privacy and personal data obligations – will place a high, and increasingly costly, administrative burden on the insurance industry over the coming year.

2. International insurers seek new best friends in Myanmar

The opening up of the insurance sector in Myanmar to local private operations has created considerable interest in the international insurance community who are targeting local firms for co-operation and alliances.

The international insurance market is focusing on Myanmar, with insurers such as Tokio Marine, Sompo Japan, Mitsui Sumitomo and United Overseas Insurance already establishing representative offices there. These, and other international insurers, are after a deeper understanding of the country with a view to accessing one of last untapped insurance markets in Asia Pacific.

Even once the restrictions are lifted, it may still not be possible for any of these international insurers to apply and obtain a licence to write insurance business in their own name. We believe that international insurance carriers will only be permitted to enter the market in conjunction with local private insurers, so each of the existing 12 local partners can expect plenty of attention from potential 'new best friends'.

3. Significant increase in investment by Asian insurers outside domestic markets

In saturated insurance markets, such as Japan, South Korea and Taiwan, regulators are loosening the rules on outward investment by domestic insurers to make it easier for them to capitalise on opportunities elsewhere in the world.

An illustration of this trend was the uptick in outbound activity by Japanese companies in 2012. Some of these were in the growth markets in Asia, for example Mitsui Sumitomo's acquisition of Indonesia's Asuransi Jiwa Sinarmas PT and the purchase by Nippon Life Insurance Co of a stake in the Reliance Life Insurance Co Ltd of India. The acquisition of Delphi, a US based insurer, by Tokio Marine provided Japan's largest non-life insurance group with the ability to expand its presence outside its home insurance market.

Korea Life Insurance, South Korea's second largest life insurance company, expressed an interest in ING Group's Asia Pacific insurance operations and, in May 2012, was shortlisted in the bidding process for a deal that could eventually be valued above US$ 7 billion. This has been followed by plans made by their chief rival, Samsung Life, to develop operations in the insurance markets in Thailand, India and Indonesian in 2012.

Overseas expansion helps to spread risk and balance business cycles, as well as enhance revenue, profit and stability and, in the case of both Japan and South Korea, regulators are actively encouraging this trend.

4. Indonesian market set for substantial consolidation and development

New solvency rules in Indonesia mean that, by the beginning of 2013, insurers need a minimum paid up capital of US$ 7.7 million. With many unable to meet this target, there is likely to be a flurry of M&A activity in 2013, and increased international interest beyond.

Indonesia has seen impressive growth in GDP over the last five years with levels of employment and per capita income rising – a situation that will undoubtedly help drive demand for insurance products. However, in many cases, local insurers are seen as weak, with insufficient business controls, hence the increased regulatory oversight and control.

This will likely drive market consolidation creating more robust businesses that should attract the interest of international insurers. As new licenses are hard to come by, this will likely be in the form of equity investments.

2012 saw some start to this with Japanese insurers Mitsui Sumitomo Insurance, Hitachi Capital Corp and Meiji Yasuda Life Insurance Co all making acquisitions. In June 2012, ACE announced that it was continuing its Indonesian expansion with the agreement to acquire Jakarta based PT Asuransi Jaya Proteksi (JaPro) in a cash transaction worth approximately US$130 million. 2013 and beyond should see other strong players looking at ways to emulate these moves.

5. Sovereign wealth funds focus more closely on insurance industry in Asia

Sovereign wealth funds (SWFs) are increasingly looking to invest in Asian insurance companies to broaden out their financial markets portfolios, and to develop their local markets through strategic partnerships or outright investment.

SWFs have a war chest of around US$ 3 trillion and, over the last several years, there have been signs that they are committing resources to insurers. In 2010, the Kuwait Investment Authority invested about US$ 1 billion in the initial public offering of AIA group Ltd and a year later The Government Investment Corporation of Singapore purchased a stake in Chinese insurer Taikang Life Insurance.

This trend looks set to continue. In January, 2013 the State Administration of Foreign Exchange, the government body responsible for managing China's US$ 3.2 trillion foreign reserves, established a new investment body called SAFE Co-Financing to assist Chinese companies in investing overseas. It would not be surprising to see some of this flow to mature insurance markets such as Australia which can supply both capital to insure assets owned there and expertise and knowledge. In Malaysia, the national SWF – Khazanah Nasional – is teaming up with Canada' Sun Life Financial to acquire 98% of local life insurers, Aviva Malaysia. Previously Khazanah Nasional supported the launch of Asia Capital Re based in Singapore back in 2006.

As governments in these regions seek to close the gap between the current state of their financial sectors and the sophistication of the international markets, access to valuable resources and skills may be a keener motivation than pure investment returns.

6. Australian insurers up the stakes in Asian investment

The release of the Australian government's Asian Century White Paper in October 2012 articulated the view that Asia is the economic epicenter of the region and pledged greater federal support for businesses looking to expand into the region. Insurers are likely to embrace this ambition.

Government support for businesses wishing to expand into Asia includes regulatory reform to make Australian businesses more competitive, as well as a commitment to make it easier for Asian businesses to transact in Australia, including improving the availability of visas, developing the foreign investment screening process and the reduction of tariffs.

IAG is setting the pace. In July 2012 it announced that it had invested US$ 720 million in five Asian countries, including US$ 500 million in established businesses in Thailand and Malaysia and US$ 220 million building its presence in India, China and Vietnam. Managing Director and CEO Mike Wilkins has said "It remains our target for Asia to represent 10% of the Group's GWP, on a proportional basis, by 2016".

QBE Insurance Group is also taking steps by acquiring Hang Seng General insurance Co. Under the agreements, QBE will become the exclusive provider and underwriter of bancassurance general insurance products to Hang Seng Bank's customers in Hong Kong and mainland China.

7. Distribution in Chinese insurance market set of seismic change

With agents for insurance sales in rapid decline, new rules limiting the number of insurers distributing through bancassurance and the growth of e-commerce, the channels so vital for product distribution are seeing considerable change.

The pace at which insurers are able to penetrate China has always been hampered by the geographic size of the market and their lack of access to distribution. Historically, tied agents were a vital sales conduit (in 2010 there were three million life insurance agents in China) however this channel is now in decline, with concerns over expertise and mis-selling.

New regulations from the China Insurance Regulatory Commission have also been introduced which limit the sale of insurance products in bank branches, and these insurers are now not allowed to have sales representatives on site. Banks are also starting to roll out their own proprietary products.

All of China's major insurers now have e-commerce offerings. Ping An intends to set up an insurance joint venture with Alibaba Group and Tencent, pending regulatory approval, and China Taiping's e-commerce subsidiary has started operations in Shenzhen. The other three major insurers, China Life Insurance, PICC, and China Pingan Insurance have also started to provide online insurance services. All of this will means that the traditional methods for getting products to market will come under intense scrutiny.

8. Inbound investment in China is the short-term focus, while outbound will take much longer

With foreign life and property & casualty (P&C) players only holding 4.3% and 1.2% respectively of the Chinese insurance market in 2012, its sheer size and potential remains a compelling proposition for inbound investment.

Compared to the rest of Asia, China remains an underinsured market, with insurance penetration extremely low at around 2%. While real premium growth is extremely strong, penetration rates are still below most other Asian markets. So, foreign P&C insurers continue to see this market as offering significant opportunities for strong growth.

The opening of the motor third party liability insurance markets in 2012 represents a major opportunity, as does any possible opening up by the regulator of other key areas of the market. For example on the life side, changes on pensions, retirement product, tax incentives and health insurance could allow foreign insurers to leverage their knowledge and expertise. All of this means that China remains a very attractive destination for international underwriting businesses.

Chinese domestic insurers are facing a more challenging regulatory environment, with increasing capital adequacy pressures, significant shifts in distribution and a shortage of local talent. This will mean that, while their longer term goals might include international expansion, in the shorter term the focus will remain domestic.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Fenwick Elliott LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Fenwick Elliott LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions