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Vietnam Insurance Market Reform Underway

Vietnam’s Ministry of Finance has announced that they will begin to restructure the country’s insurance sector this year. The move comes as part of the Vietnamese government’s 2012-2015 economic plan, which intends to revamp the Southeast Asian country’s credit institutions and securities sector in order to further develop the domestic capital market and open up to greater foreign investment.

The Saigon Times reported on Sunday that the overall goal of these insurance market reforms would be to promote financial market stability in Vietnam by supporting healthy insurers and encouraging weaker firms to either consolidate or leave the market all together. The Vietnamese government has come to accept the need to restructure some of their large state-owned enterprises, many of which have been blamed by economists for recent economic stagnantion. In addition to insurance market reform, the country’s securities sector and stock market are expected to undergo substantial restructuring over the next three years. The Ministry of Finance is currently developing a set of market criteria to assess and catalogue insurers operating in Vietnam into four separate categories, with plans to later design specific management and regulatory measures for each category.

According to the ministry’s initial proposal, the first group will comprise of insurance companies that are deemed profitable businesses and meet the guaranteed solvency rules. Insurance companies in this first category will be supported and given greater leeway to expand their operations across Vietnam if they can maintain their efficient business schemes. Group two meanwhile will focus on insurance companies that have met the prescribed solvency ratios but are otherwise struggling to run their businesses and improve their margins. Vietnamese insurance companies that cannot show a profit for two consecutive years due to high operational costs, heavy compensation rates or other factors will be dropped into the second group. Management agencies could then be brought in to evaluate the efficiency of these companies and work to reduce prohibitive operational expenses.

Insurance companies with solvency margins approaching or below the minimum threshold will be classified into group three. According to the ministry, these under-fire firms will be subject to a comprehensive financial assessment, complete with investment restructuring and debt settlement procedures. The regulator warned as well that parts of these insurance companies, be it policies or agents, could be transferred to other more stable firms in Vietnam. The last group in the ministry’s proposal is reserved for insolvent insurance companies, which will then be placed under special control and subject to further judicial review. If the group four insurer fails to overcome its difficulties during the special control period it could be forced to consolidate with another Vietnamese insurer or declare bankruptcy and go into receivership.

This industry-wide categorization project is expected to be carried out later this year. The Vietnamese Finance Ministry is currently in the process of drafting the restructuring scheme for submission to the Prime Minister. The government is also looking at setting higher start-up requirements for insurance companies in Vietnam. Current rules stipulate that local insurers are not permitted to retain risks exceeding 10 percent of their paid-in capital. Insurers who start with equity lower that the statutory capital requirements will now be asked to supplement this capital through outside loans in order to meet regulatory requirements. If the details are ironed out and the insurance restructuring scheme is approved by the Vietnamese authorities, work could begin on implementing the reforms this quarter. The Insurance Authority meanwhile is looking to introduce additional changes to better police fraud and to improve their training and recruitment efforts to ensure that the domestic insurance industry grows both larger and smarter.

Vietnam’s insurance sector has been experiencing rapid growth and development in recent years. Total written premiums have increased by around 20 percent per annum since moves were made to break-up monopolies and liberalize the Vietnamese insurance market after the country’s entrance into the World Trade Organization (WTO) in 2007. Despite this considerable progress however, the insurance market in Vietnam remains underdeveloped and small in comparison to many of its Southeast Asian neighbors, with penetration rates under 0.4 percent of GDP.

According to Finance Ministry, there are currently 39 insurance companies active in Vietnam, including 28 non-life insurance companies, 11 life insurance companies and 12 insurance brokers, with more expected to enter due to the market’s potential for growth. In the country’s non-life sector, intense competition, high operating costs and a claims-heavy environment (particularly in motor lines) have all made profitable underwriting difficult to achieve at the moment. The four big state-owned general insurers have gradually been losing market share as the market opened up to smaller largely-foreign competitors, who have been pursuing aggressive business development strategies at the expense of disciplined underwriting. The substantial catastrophe risks in Vietnam including threats of heavy typhoons and floods are also driving a demand to purchase reinsurance.

The Vietnamese life insurance sector meanwhile is less crowded than it’s non-life counterpart, with only 11 registered insurers currently operating in the country. Multinational insurers have come to dominate this market, bringing with them substantial capital and expertise to sell a product still largely unknown to the Vietnamese populace. Due to the country’s youth-leaning demographics and low per-capita income however , demand for life and other conventional insurance products remains subdued. Microinsurance is a way of accessing this large market segment, with Manulife Vietnam, for instance, providing products in an alliance with the Vietnam Women’s Union.

Overall, Vietnam’s continued demographic and economic development is expected to generate further awareness and a demand for insurance. Insurance companies looking to prosper in the Southeast Asian country will need to comply with new industry regulations, strong competition and the considerable operating challenges.

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Deloitte Report on Insurer Prospects for 2012

Though saddled with ongoing global economic challenges, moribund interest rates and intense competition, insurance companies will need to focus on innovation, sound business practices and emerging market opportunities in order to generate growth and profits going forward, according to a new report from international consulting firm Deloitte.

Released today, Deloitte LLP’s “2012 Global Insurance Outlook: Generating growth in a challenging economy takes operational excellence and innovation,” assesses the international insurance industry’s prospects for 2012 and the decade ahead. The report identifies that persistent global economic turmoil, high unemployment, low interest rates and a slow housing recovery have created unique challenges for insurers operating in US and Western European markets, sapping both consumer demand and investment income simultaneously. While the US economy has shown recent signs of recovery in terms of consumer spending, given Europe’s ongoing struggles with sovereign debt issues, Deloitte sees little respite for insurers on the economic front at present.

Despite these underlying macroeconomic concerns, there are still many things insurance companies can do for themselves to generate profitable growth and increase their market share. According to Deloitte, product development, distribution and customer service remain three key areas where industry innovation could reap sizeable returns almost immediately. Insurance companies in general must continue evolving their operations to improve margins and generate bottom line growth. They can do this by adopting new technologies and risk management strategies to squeeze out unnecessary costs and use their people and capital more productively.

According to Deloitte’s market outlook, insurers involved in the property and casualty sector will likely benefit from increased top line prices due largely to 2011’s unprecedented string of natural catastrophe losses and the subsequent rate hikes in reinsurance premiums. Other non-life lines will also be able to recover, as auto and general insures charge higher loss-driven rates while the pricing market in commercial lines appears to have bottomed out with both insurers and brokers reporting consistent premium increases on renewals. Meanwhile in the life and annuity market, Deloitte notes that while sales of variable annuity products are growing, products with structured guarantees will probably continue to struggle due to rock bottom global interest rates. Sales of traditional whole life insurance policies could also further improve if insurers update their marketing, sales and distribution systems to target a still largely underinsured market.

Deloitte lists several possible avenues for growth insurers could pursue in 2012 and beyond, the most attractive of which perhaps being to tap emerging insurance markets with faster-growing economies for sustainable premium growth. With mature market economies in the US and Western Europe unlikely to generate consistent growth prospects in the short-to-medium term, insurers may be able to offset any anticipated shortfall and find success by entering potentially lucrative emerging markets, with China, India and Brazil being particular highlights. The Deloitte report acknowledges that while doing businesses in these markets often comes with unique business challenges, including cumbersome regulation, poor infrastructure and distribution networks as well as cultural differences, the overwhelming demand for greater insurance coverage and financial security amongst these countries’ expanding middle class populations will likely provided sufficient growth opportunities to international insurers with the resources to adapt and capitalize on them. According to Insurance Information Institute’s 2010 statistics, the ratio of general insurance premiums to GDP is still just 1.5 percent in Brazil, 1.3 percent for China and only 0.7 percent in India. By comparison, the penetration rate is 4.5 percent for the United States, 4.1 percent for Canada and between 3.1 to 3.7 percent in the major European economies. These differences translate into a trillion dollar coverage gap between West and East, plenty of room for new insurance companies to set up shop and acquire a share of these still largely untapped markets.

Insurance companies can also expand through strategic mergers and acquisitions. Deloitte noted that m&a volume was up during 2011 although deals tended to be calculated bolt-on acquisitions with buyers adding new product lines, distribution channels, and international market share. Sellers meanwhile divested from underperforming business lines to shore up their bottom lines and left overseas markets where they lacked sufficient scale to thrive. The Asia-Pacific region has fast become the most attractive market for investment activity, accounting for 23 percent of global M&A insurance activity in the first half of 2011, up by 12 percent on fiscal year 2010. Deloitte say there is potential for an uptick in bigger deals in 2012, especially if organic growth in mature markets remains elusive. The international insurance market in fact remains ripe for more consolidation due to excess capital, bargain pricing and low returns.

As well as expanding outward, Deloitte mentioned several things insurers could do to pursue operational excellence at home, with adequate preparation for upcoming regulatory changes that could arise when the Dodd-Frank Act and Solvency II come into effect being one such requirement. The report adds that many insurers are improving the integration of enterprise risk management (ERM) and taking greater steps to prioritize good governance, infrastructure and disclosure over risk modelling into their standard operation procedures. Improving both recruitment and retention of industry talent has also become a major challenge facing insurers today.

Insurance product innovation and augmentation is also an area where Deloitte says individual companies can now exert greater control over their own destiny during these tough economic times. Going forward, insurers must use market research effectively to ensure that both new and traditional insurance policies remain relevant to the needs of consumers operating in our new global economic environment. According to the report, the predominance of international business supply chains pose new property and casualty risks which have in turn necessitated new types of insurance products, including cyber liability, green construction cover, nanotechnology insurance and global political risk cover amongst others. Meanwhile in personal lines, more hybrid products are coming to market which meet multiple needs, including long-term care benefits in life and annuity, private unemployment insurance, homeowner’s value protection, and other products. Overall, it will be incumbent on insurers to continue and explore new niche markets and develop specialty coverage products to generate additional sales.

In addition to developing new products and entering new markets, Deloitte adds that perhaps insurers should take their social media marketing efforts more seriously. While most insurance companies already have a presence on prominent social media sites, like Facebook or Twitter, many have yet to analyze this massive dataset properly. According to Deloitte, these readily available analytics can offer valuable insights about buyer needs and can improve customer experience as well as the efficiency of their operations.

Overall, the report emphasizes that smart insurers should be able to weather current market conditions and potentially even thrive through sound, strategic investments that work to secure growth, achieve operational excellence and encourage innovation. Sam Freidman, Deloitte’s insurance research leader, expalins that “while achieving growth, operational excellence and innovation in such a difficult economic and competitive environment might be easier said than done, opportunities are available for insurers that can seize the moment. There are many options insurers might consider to grow even in the toughest of economies if they can overcome the obstacles they face.”

Company Mentioned

Deloitte

Deloitte is the world’s largest private professional services organization. The consulting firm, founded in 1845, now has over 170,000 staff, working out of 140 different countries. Deloitte provides audit, tax, consulting, enterprise risk and other financial advisory services through its many member firms.

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Growth Inevitable for Indian Insurance Market, Profits Maybe Not

A special report released today by international insurance information and credit ratings agency AM Best has provided new analysis on both the opportunities and challenges facing insurers, consumers and regulators in India’s emerging insurance market as we head into 2012.

At present, India’s insurance market is composed of 23 different life and 24 non-life companies, with a total value estimated at over US$ 66 billion per annum. The development opportunity for life and non-life insurance coverage has been driven by the continued growth and expansion of India’s overall population and economy. In their new report, titled ‘Growth Anticipated for Indian Insurers but Frustrations Remain’, AM Best acknowledges that while India’s insurance sector has posted strong growth indicators in the decade since the market was first liberalized in 2000, with consistent double-digit premium growth achieved primarily through the country’s life market, achieving profitability remains a challenge for many of the country’s individual insurance companies. While the insurance sector’s overall prospects for growth still appear bright in the long term, the market’s unique idiosyncrasies will need to be addressed in order to attract and sustain the necessary investment and innovation required to take India’s insurance industry to the next level.

According to AM Best, intense competition, poor underwriting practices, and high expense ratios have been three of the chief concerns brought forward by insurance companies operating in India. The impact of de-tariffing on the Indian general insurance industry in 2007 has made it particularly difficult for companies to sustain profitable operations at present. Over the past few years, intense competition has forced insurers to drive down rates without due regard to the risks and overall profitability of the business being generated. Ten years on since the state’s insurance monopolies were officially ended, the public sector undertakings (PSU) New India Assurance, United India, Oriental Insurance and National Insurance Co, in the non-life sector, and Life Insurance Corporation of India, in the life market, remain the dominant players across their respective lines. Private sectors insurers in India have continued to find it challenging to achieve profitability and generate the necessary scale to compete with state-backed firms, citing the costs of establishing distribution channels and sustaining a consistent customer base by offering ever-more competitive prices, as prohibitive obstacles.

AM Best adds that the Indian Motor Third Party Insurance Pool (IMTPIP) has also played a significant role in driving up company underwriting losses, as claims inflation continues to rise across the country’s non-life market. Under the IMTPIP, established in April 2007, all insured losses are distributed amongst the country’s auto insurers according to their overall market share of all lines of business. This mechanism has severely tested the solvency of those involved in the general insurance sector due to the huge inefficiencies in claims, fraud, and pricing amongst the market’s participants. According to AM Best’s report, India’s third-party motor pool posted a record loss ratio of 194.2 percent for the year 2009-2010, while it maintained reserves for a loss ratio of only 126 percent. Insurers are hopeful that the upcoming reforms to the IMTPIP in March 2012 will lead to an eventual improvement in rates and enable the country’s potentially lucrative motor insurance market to properly reset and prosper.

The country’s life insurance sector has meanwhile had to deal with new regulations governing popular unit-linked insurance policies, which took effect in 2010. AM Best notes that the impact has so far proven significant, resulting in a sharp industry-wide drop in first-year premium. The ratings agency notes however that companies are now beginning to adjust their product portfolio toward more conventional policies, which should in turn improve underwriting performances.

Despite these varied challenges, AM Best notes that there are still bountiful opportunities for insurers in India, and top-line growth remains strong, with non-life gross written premiums increasing by 23.8 percent from April to October 2011. Continued economic growth and infrastructure development, together with an expanding middle class and a surging demand for health insurance are resulting in international insurers and reinsurers seeking to develop a greater presence in the world’s second most populated country. International insurers have so far found success in the country through direct investment and operating as joint venture partners alongside major local insurance and finance conglomerates, which can provide more immediate access to local expertise and distribution networks. However, while these companies would like to increase their commitment to India, in pursuit of risk diversification and mutual growth, they are facing repeated frustrations in attempting to increase their involvement in the populous South Asian country, with a lifting of the country’s onerous foreign direct investment limit from 26 percent to 49 percent unlikely to change in the near term.

Recent foreign entrants into India’s insurance market include Japan’s Tokio Marine Holdings and Berkshire Hathaway, who became a licensed corporate agent of Bajaj Allianz last year. The country’s bancassurance sector has also grown in international importance, as was evident by MetLife India’s decision to acquire a 30 percent stake in Punjab National Bank in July 2011.This was followed by Nippon Life’s move to acquire a 26 percent stake in local power Reliance Life in August 2011. The year wrapped up with moves made by US health insurance giants to take advantage of India’s emerging medical coverage demands. First Aetna purchased local health provider network Indian Health Organization Pvt Ltd (IHO) and then Cigna signed a joint-venture agreement with Indian consumer goods company TTK Group to sell a range of health, wellness and insurance products in November 2011.

Overall, India looks set to be one of the world’s fastest growing insurance markets over the next decade, with total premium income projected to reach US$350-400 billion by 2020. Rising income levels and greater awareness of risk management practices are expected to drive a considerable demand for coverage solutions nationwide. Furthermore, India’s insurance companies could make a significant mark and compete on the international insurance stage if they are able to update their business models and capitalize on the tremendous potential client base available in their home market.

Companies Mentioned

A.M Best

A.M Best Company was founded in 1899 and is a full-service credit rating organization dedicated to servicing the financial services industries, including the banking and insurance sectors.

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India’s Insurance Lines to Grow in the Near Future

India’s insurance market will continue to deliver sound growth opportunities across both general and life insurance business lines for the forecast period of 2011-2015, according to two new dossiers from international research firm Bricdata.

In ‘Non-Life Insurance in India, Key Trends and Opportunities to 2015,’ Bricdata explains that despite ongoing global macroeconomic challenges, the Indian general insurance market will continue to grow at a healthy rate. Over the past few years, the level of competition within India’s non-life insurance industry has risen considerably due to the greater presence now of both private and public companies. The report acknowledges that while the large state-backed insurers will continue to dominate the market, private non-life insurers are expected to gradually increase their market share over the next 5 years through improved channel penetration and product innovation, which will be to the overall benefit of the domestic industry and customers.

According to Bricdata, there will be a number of key opportunities for private and foreign insurers in the Indian general insurance market going forward, particularly in motor insurance which is already the most popular business line and is set to grow further as Indian automobile sales continue to flourish. The report also cites the upcoming IRDA regulatory proposal, which will increase the country’s foreign direct investment (FDI) cap from 26 to 49 percent ownership, as a favorable development that will foster a larger and more diverse business and investor environment for product and service innovation if passed. “Private non-life insurance companies are, therefore, expected to substantially expand their market shares in the next five years,” Bricdata surmised.

However, while India’s general insurance industry has indeed experienced considerable growth over the past decade, Bricdata notes that it has so far failed to effectively penetrate into India’s large rural areas, where most of the population lives, due to a general lack of insurance awareness and distribution model deficiencies. To begin solving this dilemma, insurance companies need to better understand the demand-side dynamics, key market trends and growth opportunities within India’s non-life insurance industry, and to assess where competitive advantage dynamics can be sought in the market.

In a separate report, ‘Life Insurance in India, Key Trends and Opportunities to 2015,’ Bricdata analyzed the Indian life market, which is expected to continue outpacing the country’s overall economic growth, with forecasts reaching US$111.9 billion in premium income by 2015, up from US$66.5 billion in 2011 at around a 14 percent annual growth rate. Bricdata cites India’s overall population growth, robust economic expansion, lucrative tax benefits, the rising disposable income of a new middle-class population, and increased awareness of the need for insurance, especially amongst the younger generation, as the primary growth drivers pushing the life industry so far.

The number of life policies sold overall is expected to increase to 85.21 million in 2015 from 53.23 million in 2010, and this will open up new business avenues across the entire insurance industry. The individual life insurance segment, which comprised almost 75 percent of the total Indian life insurance industry last year, is expected to expand to 79.3 percent in 2015 on increased investment in individual life insurance products such as term and pension policies. Unit-linked insurance plans (ULIP) meanwhile are expected to become the fastest growing product category, growing by 21.2 percent annually by 2015, with Bricdata noting that Indian customers were increasingly demanding insurance products that offer some assured income through annuities. Bricdata predict that India will become the third-largest life insurance market in the world by 2015, only behind other fellow Asia-Pacific rivals China and Japan. At present, India is the 12th largest life insurance market in world, 4th in Asia.

According to Bricdata, India’s low life insurance penetration rate combined with the rising overall awareness of the need for adequate protection and savings services will be the key growth factors for the domestic insurance industry going forward. Improved foreign investment practices with more varied capital-raising options will also help create an environment for greater collaborations and joint ventures. With a relatively large number of insurance companies already active in the country, the Indian life insurance industry has shown early signs of entering a consolidation phase. Combined this with improving distribution infrastructure and the widespread adoption of new channels with differentiated product offerings, India competitive landscape will continue to change significantly. The research dossier notes as well that the country’s reinsurance market is also expected to continue growing, driven primarily by growth in non-life, accident and health insurance business lines.

Overall, India looks set to continue being one of the fastest growing insurance markets over the next decade, with rising income levels and awareness of risk management expected to drive a considerable demand for coverage solutions nationwide. Furthermore, Indian insurers could look to make a significant mark and compete on the global stage if they are able to refine their business models and capitalize on the tremendous potential available in their home market.

Companies Mentioned

BRICdata

BRICdata publish in-depth strategic intelligence on emerging markets designed to help clients better understand better identify, understand and pursue growth opportunities in these regions. The company is headquartered in London and covers a broad range of industry sectors, including consumer, financial services, insurance, telecoms, construction and more.

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China, India Insurers’ Involvement in Capital Markets Has Potential

The further expansion of insurance and pensions sectors in populous Asian countries like China and India will be both integral to the development of their own capital markets as well as offering huge potential for rapid growth for overseas investment, according to a new report published this month by the City of London Corporation.

In ‘Insurance companies and pension funds as institutional investors: global investment patterns,’ Trusted Sources, a top emerging markets research group, study how pension funds and insurance companies have historically helped to shape the financial systems of developed countries, gradually increasing liquidity in their established capital markets through the introduction of long-term and stable funding mechanisms to market. By contrast, the contribution of such institutions towards China and India’s development has been limited so far due to the evolving nature of their insurance and pension sectors as well as tighter government restrictions placed on their investments and business decisions. If these two emerging Asian superpowers want to increase the depth and diversity of their respective financial markets, greater liberalization of investment mandates for insurance companies and pension funds may be needed going forward to match their rapid growth potential.

The report first observes the role insurance companies and pension funds have played in developed markets and what experiences can be garnered for emerging economies now. Generally speaking, as a country grows richer, they develop more active insurance sectors and the markets benefit overall. This has been especially true in the United Kingdom and United States, where the pension and insurance industries have grown rapidly in tow with their more sophisticated financial systems and with more people demanding protection and retirement planning services as they grew richer. The report cites that in the past 30 years, insurance company assets in the UK have increased from 20 percent of GDP in 1980 to 100 percent in 2009, with pension assets growing four-fold as well. In the US meanwhile similar growth was occurring, with pension funds and insurance companies investing more in equities and corporate bonds.

As a result of these developments, huge sums of stable, long-term funds have been pumped into the UK and US’s respective capital markets over the past three decades. This deep and stable pool of capital provided by the insurance companies and pension funds has worked to reduce market volatility and fund other ventures. In the UK, this influx of capital has been behind the development of the country’s stock market, helping it turn into one of the most efficient and sophisticated financial centres in the world. Before foreign investors became major shareholders on the FTSE, UK pension funds and insurance companies held the majority of issued shares. Insurance company and pension fund investors in the US meanwhile have contributed both significantly to equity markets as well as the growth of the corporate bond market, which is now the world’s largest at 140 percent of GDP.

Trusted Sources’ report also examined the approach other Western markets have taken. Continental Europe has used a more bank-based financial system, where the role insurance companies and pension funds have played in the markets has historically been much smaller. Furthermore, investments remained much more focused on government bonds, partly due to regulations that are stricter than in the UK and the US. As a result, the financial system remained centred on bank lending and growth has been more limited. However more recently these same European institutional investors have grown and have diversified their investments into equities and corporate bonds considerably. This has facilitated a move towards market-based financing through stocks and bonds, following the likes of the US and UK. While in the US, the insurance sector has stabilised at around 40 per cent of GDP, in Germany it is at 60 percent, and France near 100.

Insurance companies and pension funds in Asia have much to do to match the overall contribution made by their Western counterparts toward their respective economies but time is on their side. The report notes that while the insurance and pension sectors in India are underdeveloped now, with assets at 7 percent and 16 percent of GDP respectively and limited investment activity in equities and bonds, there is considerable potential for growth going forward.

The county’s insurance sector in particular has progressed rapidly over the past decade, driven by an expansion of life products, which dominate the market. Since the insurance sector in India was first opened up to the private sector with the passage of the Insurance Regulatory and Development Authority Act in 1999, total insurance penetration has doubled with the domestic protection industry overtaking several developed markets in output. According to the report, the market share of state-run firms has decreased to 65 percent for life insurance and 60 percent for non-life insurance during this period. Foreign multinational insurers have been integral to the sector’s overall development so far. Despite a 26 percent cap on foreign ownership, 20 out of the 22 life and 16 of the 18 general insurance firms that have been set up since 2000 have been joint venture operations with foreign partners. One of the first recommendations Trusted Sources makes is to of course lift these restrictions to increase overseas stimulus.

India’s pension funds and insurance companies are expected to grow as the overall economy matures, as has happened of course in the UK, US and other developed markets. Regulation permitting, there is of course considerable room for insurers and pension funds to shift their assets from government bonds into equities and corporate bonds. The country’s expansive, high-inflation market environments make equity investment attractive and this, according to Trusted Sources, will drive the popularity of index-linked insurance products (ULIPs) for the foreseeable future. Despite this considerable potential however there are several restrictions holding India back. Insurance companies are, in general, barred from investing more in equities, and have been blocked moving into corporate bonds and derivatives as well. Pension funds face even more obstruction. Trusted Sources notes that the Employees’ Provident Fund Organisation (EPFO), which accounts for around two-thirds of India’s pension fund market, is prevented from investing its sizeable reserves into equities at all.

These restrictions are obviously limiting the overall contribution pension funds and insurance companies could make towards growing India’s capital markets. To improve upon this situation, Trusted Sources made several policy recommendations including: lifting restrictions on equity investments, corporate debt and derivatives, allowing the EPFO to invest in equities and removing burdensome tax and regulatory constraints which would increasing incentives for institutional investors to buy Indian corporate bonds.

In China, like India, the insurance and pension sectors have traditionally had a small presence in the domestic stock market, each holding only around 2 percent of issued shares at present. According to Trusted Sources however, that will soon change with both institutions likely to start playing a larger role in both equity and corporate bonds in the near future. China’s insurance industry has grown dramatically over the past few years and currently ranks as the sixth largest protection market in the world with assets under management now worth CNY4.6 trillion (US$720 billion) at the end of 2010, up from CNY1.4 trillion (US$171 billion) in 2005. Despite increased competition as of late, the Chinese insurance market is dominated by four state-backed insurers, China Life, Ping An, China Pacific Insurance Corporation (CPIC) and People’s Insurance Corporation of China (PICC). The market share for foreign insurance companies (who operate principally through joint ventures) remains at around 5 percent. More than 70 per cent of total premium income of China’s insurance industry currently comes from life insurance companies. As the country grows richer, demand for more sophisticated savings products will likely rise in tow, driving further expansion.

In spite of this pronounced industrial growth, institutional investment in China’s capital markets from insurance companies has been perhaps overly risk averse. Chinese Insurance companies invest only around 11 percent of their holdings into equities, with the rest held in bank deposits and bonds. According to Trusted Sources, this is occurring due to several factors. The first is that most insurance activity in China still involves conventional insurance products, which offer returns of only around 4 and 2.5 percent respectively. These returns are backed by government bonds and negotiated-term deposits with limited downside risk, and provide little incentive for insurers to diversify their investment portfolios at present. Trusted Sources inferred however that this could soon change “ULIPs occupy only a marginal position. If they increase in popularity, as happened in the UK and the US when competition increased, a shift into equities is expected.”

Chinese insurance companies, in general, are finding the stock market too volatile to invest in at the moment, with dividend guarantees effusive. The report claims furthermore that strict regulatory control over corporate bond issuance is affecting supply, and is thus restricting overall investment growth. To encourage greater participation from Chinese pension funds and insurers in capital markets, Trusted Sources listed several policy recommendations including increasing competition amongst local insurance companies, tax incentives for ULIPs, clearer dividend-payout rules for listed companies, and the relaxation of qualification rules for private companies allowed to issue bonds.

Overall, the report believes that, in China and India, increased liberalization of local insurance and pension markets could foster greater liquidity and depth in their domestic capital markets, which will of course be needed to support the effective growth of businesses in each country going forward.

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Health Insurance Coverage Debated in Africa

Government health ministers, academics and healthcare industry consultants from over 20 African countries are attending the first annual Pan-African Health Congress on Universal Coverage in Accra, Ghana this week to discuss the best ways to implement and sustain successful long term social insurance systems across the continent, and improve on the overall healthcare standards for their citizens.

The Congress, now underway between the 15th and 17th November 2011, is hosted by Ghana’s Centre for Health & Social Services with principal support by the Rockefeller Foundation and World Health Organization (WHO). The three day event has been planned to foster a recurring dialogue between healthcare industry analysts, company stakeholders and government officials, to address the current state of national health insurance schemes across Africa and to help craft policies which could expand and improve the service quality of these coverage networks. The keynote speaker is WHO Deputy Director General Dr Anarfi Asamoa-Baah. Representatives from each country and organization will present papers that analyze the effectiveness and feasibility of their respective social health insurance system, both pro universal coverage and con, and these insights in turn will be reviewed by Congress attendees to provide additional prospective on what to do going forward.

In the commencement address, Dr. James Nyoro, Africa Managing Director for the Rockefeller Foundation, outlined the necessity of building and maintaining a strong political will in order to achieve greater health coverage results in Africa. “A great deal of work has already been done in health insurance, but there is a need to draw available material together, focus on the neglected issues and integrate insights on these areas into the overall health insurance policy framework,” he said. It is hoped that by the end of the event a consensus framework for action will be drawn up that includes a platform for intra-party support and a sustainable economic plan addressing the issue of universal coverage in both sub-Saharan Africa and the developing world at large.

Over the past twenty years, health insurance has been promoted as a valuable development tool across Africa, one which can improve access to vital healthcare services because it avoids direct payment of expensive medical fees by low-income patients and pools the financial risk among all those insured. Many mutual health insurance organizations have sprung up in sub-Saharan Africa since then and, most recently, the national governments themselves are getting involved, experimenting with state-backed social insurance systems to reduce barriers to medical care and hopefully limit the contagion of communicable diseases. Because of the lack of adequate healthcare infrastructure and coverage options, developing countries have suffered disproportionately from diseases and other public health problems in the past.

Different African governments have instituted different national health insurance mechanisms, including those based on donor contributions, tax-based systems, and pension funds, all to varying effect. In several countries like Senegal, Namibia and Rwanda, local authorities, public sector employers, and third party mutuals are supposed to provide third party support for low-income constituents, resources permitting. The two countries that have made the most progress in universal healthcare coverage so far have been the United Republic of Tanzania and Ghana, which is why they are hosting the conference. Both countries offer quite comprehensive outpatient and inpatient services to policyholders, and they are eligible for treatment in both public sector and accredited non-government facilities. Tanzania was the first to introduce a compulsory coverage plan in 1999, with the National Health Insurance fund for civil servants and now covers about 10 percent of the population. Ghana’s NHI system, introduced in 2003, has proven the most successful thus far with 38 percent of the populace covered.

More prominent nations are now looking to develop their own health insurance systems. Looking at the progress made in neighbouring West African countries, the Nigerian government recently approved a compulsory national health insurance scheme for their public sector workers, to be run through private employers, with the ambitious goal of eventually covering their entire population; Africa’s largest. In Kenya, the government has also started rolling out a similar scheme to engage with lower income clientele. The most pertinent recent development though is perhaps occurring in South Africa, the continent’s largest private insurance market. In April, the South African government began testing their compulsory medical insurance scheme in 10 districts, and will expand the program out across the rest of the country over the next 14 years. South Africa have estimated that the scheme will cost R255 billion (US$31.3 billion) once completed in 2025, and could in fact be much more due to the shortage of skilled staff, limited tax-returns and failing infrastructure.

Indeed, it has been these persistent infrastructure and funding shortfalls that continue to hamper insurance sector development in most sub-Saharan African countries. A considerable majority of the region’s populace still resides in rural and largely informal economies that remain difficult to tax, monitor and fund a robust health network with effectively. When these citizens do need medical care they are forced to pay out of pocket, and this, according to the World Bank, is the number two cause of impoverishment in region, behind job losses. This lack of resources thus creates problems both when it comes time for a consumer to pay a premium, and when the insured need to use decent quality health care services. Thus, because the taxable base in Africa is low, various methods have been used by government to mobilize resources for healthcare, including now the international insurance industry.

Luckily, these multinational insurers are gladly shifting their focus to up-and-coming insurance industries in emerging markets anyway. According to The International Finance Corporation (IFC), public insurance schemes are expected to represent a US$1.4–US$2.5 billion investment opportunity in Sub-Saharan Africa over the next ten years. These low-penetration markets offer better opportunities for growth in premium returns, and could work to offset the more static performance in mature European and North American markets. While much of the international focus has thus far been on the lucrative Asia Pacific and Gulf regions, Africa should present a reasonably attractive business opportunity for multinational insurers as well. Overall market penetration for insurance products in the region is low and many standard coverage services remain untapped on the market, including most life, health, property and savings-related insurance options. The insurance premiums collected in Africa currently represent only two percent of total world premiums, and the contribution of the domestic insurance sector towards the GDP of the region remains small by international standards. This demonstrates that insurance policies are not yet being used effectively as a vehicle for protection and savings these countries.

As Africa’s economies grow, urbanize, develop and further open their markets, demand for healthcare and insurance services will increase in tow. As Ghanaian Minister of Health, Joseph Yieleh Chireh, explained at the conference, the government and insurance industry must be there and work together to meet these mounting needs. “Universal health insurance is very important to Africa’s development. It is crucial to offer all, regardless of economic standing, quality health care at an affordable cost. It is important to engage in the dialogue on ways to make universal health care work in Africa.”

Globalsurance International Health Insurance - Expat Medical insurance products for you and your family no matter where in the world you live.

Bupa Finding Their Feet in India

India’s nascent health insurance industry may finally be turning the corner with the news that foreign joint-venture investors in the market could at last be generating significant returns on their activity in the populous South Asian country.

In the 10 years since India’s insurance market first allowed private and international sector involvement, total insurance penetration across the country has doubled, with the domestic protection industry overtaking several more developed markets in the process. There has been a considerable rise in insurance coverage, with both the number of life insurance and non-life insurance policies increasing many times over, and combined premium income is now projected to reach between US$350 to US$400 billion in India by 2020. Health insurance, in particular, has become as one of the country’s fastest growing business lines, accounting for 20.8 percent of the overall market in 2010. With total expenditure on healthcare, through both Indian government schemes and private sector activity, expected to exceed US$200 billion by 2015, even more significant opportunities for the country’s health insurance sector will likely emerge. A recent IRDA ruling, which permits health insurance portability, has further provided private companies with the impetus to tap into India’s healthcare protection needs.

In their third quarter statement released this week, Max Bupa Health Insurance posted sales of Rs 21.9 million (US$4.37 million) worth of gross written premiums through to September 30, 2011. These figures were up 268 percent on the Rs 5.9 million (US$1.17 million) reported during the corresponding period last year. The private health insurance company, which became active in 2010 as a 76:24 joint venture between local firm Max India Ltd. and UK-based healthcare giant Bupa, added an additional 40,000 policyholders onto their books during the summer months, taking their number of active policies in India to near 100,000 since the standalone business commenced operations. Bupa would likely now look to increase their involvement with Max Bupa but under current industry regulations, Indian insurance companies are forbidden to offer more than a 26 percent maximum stake to foreign business partners when their joint venture operation is first incorporated.

Overall Max Bupa Health Insurance has done well as one of the newer entrants into India’s health insurance business, collecting Rs 356 million (US$7.1 million) in premiums so far this year, a 335 percent increase on the Rs 8.2 million (US$1.6 million) premiums reported for 2010. The joint venture insurer now has a presence in nine large cities in India and has established a robust healthcare provider network, featuring over 700 hospitals across the country. The company, which began with an equity commitment worth Rs 7 billion (US$140 million) from its joint venture partners, now expects to break-even on their initial investment by their fifth year of operations, 2015.

Max Bupa has been able to effectively distinguish themselves from their competitors in India by introducing innovative new coverage options and service plans to the market. In a country where the average sum insured by health cover has traditionally been around Rs 200,000 (US$400), Max Bupa has been able to capture the emerging middle class demand and ability to pay for greater service, with policy covers ranging from Rs 1,500,000-5,000,000 (US$3,000 to US$10,000). In line with India’s rapid macroeconomic development over the past decade, there has now emerged a sizeable segment of the population who want the most robust healthcare coverage options money can buy. Furthermore, as the average Indian consumer spending power improves, healthcare inflation and medical costs are rising rapidly in tow, and this forces even more people to address long term coverage concerns and to consider policies with a higher sum insured. Max Bupa has been amongst the first to recognize and capitalize upon this trend. Indeed, the company was the first in India to offer more robust health insurance products with cover exceeding Rs 1,500,000, and upon seeing its success many other companies have since followed suit.

Max Bupa are now aiming to report Rs 700 million (US$14.25 million) worth of new business premiums in India by the end of the fiscal year 2012. To help achieve these goals, the insurer has been working with banks, post offices, and other administrative branches to expand their distribution network and better engage with the rural and largely underinsured masses across India. Max Bupa has, until now, offered and promoted their insurance products through agents, telemarketing, direct sales or online channels. However, in order to reach the more remote areas of the country, gaining access to more entrenched business networks, like community banks and post offices, becomes important. The company is also working to further diversify their insurance product portfolio. In the third quarter, India’s insurance industry regulator The Insurance Regulatory and Development Authority of India (IRDA) approved two more Max Bupa products, Employee First Classic & Health Companion, which will come to the market shortly.

It is not only the protection and savings aspects that Bupa is concerned with in India, but also the general state of health in the country. According to their recently released international healthcare and lifestyle survey, Bupa found that around 40 percent of Indians could be classified as unhealthy, while one out of every 10 surveyed was obese. It is ironic perhaps that the rapid development of the national economy, the same thing that is enabling more citizens to spend on and insurance, is driving more middle class people in India to neglect their health and wellbeing due to the now ever more demanding hustle of everyday life. Indeed, over half of the Indians polled by Bupa in August thought that their work life was preventing them from exercising more and making healthier lifestyle choices overall. Of these respondents, it is the 25-34 age-group that will lose the most productivity due to medical illness in the coming years and they will need adequate insurance to address this. According to Bupa, diabetes and heart disease are the most common health concerns across all India.

Max Bupa has responded to this study with a new website: www.YourHealthFirst.in. On the site the company offers lifestyle and fitness advice, designed to support policyholders and encourage them to improve their health for both themselves and their beneficiaries. Efforts likes this will no doubt help Bupa establish an even stronger position in India, a market that will further expand as economic conditions strengthen. Bupa now intend to build upon this momentum and further develop their international medical distribution network, expanding the scope and rage of their operations in the Asia Pacific region in particular.

Insurance Companies Mentioned

MaxBupa

Max Bupa Health Insurance is a 74:26 joint venture between Max India Limited and UK-based Bupa. Bupa is a leading private healthcare provider with more than 10 million customers worldwide and over 60 years experience in the health sector. The Max India Group has expertise in both health and insurance related services including hospitals, clinical research and life insurance.

Bupa

Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. The insurer today has ten million customers in over 190 countries, and over 52,000 employees around the world.As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.

Globalsurance International Health Insurance - Expat Medical insurance products for you and your family no matter where in the world you live.

Fortis Healthcare Consolidates Asia Pacific Healthcare Business

Indian private hospital chain Fortis Healthcare Ltd have announced that they will fully acquire their Singapore-based sister firm Fortis Healthcare International for US$665 million, in what will be the biggest ever deal struck in India’s healthcare services industry.

The board of Fortis Healthcare, owned by the billionaire brothers Malvinder and Shivinder Singh, had approved the merger of their privately held Asia-Pacific healthcare services firm into their majority-owned publicly-listed firm Fortis Healthcare (India) in September, but agreed to leave the terms of the buyout (an all-cash deal) to be set later by an independent valuation agency due to the fact that the transaction involved related party assets. The move follows the similar intra-group acquisition of the previously privately held diagnostics firm Super Religare Laboratories from Fortis shareholders earlier in the year.

On November 1st, Fortis Healthcare revealed that the committee of independent directors had valued the deal at US$695.7 million, based on the recommendations of independent valuation agency Haribhakti & Co. Fortis’ board however agreed to a lower price of US$665 million, around 4.4 percent lower, to complete the buyout. Managing Director Shivinder Singh explained in a company statement that the purchase price was intended to only cover the cost of investments made by the founders of Fortis International for their overseas acquisitions and the multiple international businesses set up in the past year. “We felt that as a family we did not want to profit from this deal, and we therefore requested the independent committee and requested them to lower the price,” Singh explained.

The proposed transaction is still subject to regulatory approval in certain jurisdictions and is expected to be concluded by mid-December 2011. According to Fortis officials, the acquisition will initially be financed through bank loans, which will increase the Indian parent company’s total debt to around US$1 billion. Once the transaction is complete the firm then plans to raise capital and reduce the combined entity’s debt-equity ratio starting next year, although exact details have not yet been forthcoming. “We have multiple capital raising plans already in place to do at various entities and we will announce so at the right time,” Malvinder Singh said.

While questions remain about whether in fact Fortis Healthcare, with just Rs 48 crore (US$100 million) in available cash as of March 31, can fund such an expensive acquisition at this time, investors certainly indicated that they were confident enough about this development. After Fortis Healthcare announced the valuation of the upcoming transaction last Tuesday, the company’s share prices rose by over 3.6 percent to close at Rs 128.35 a piece in India. At that price, the firm has a market cap worth little over US$1 billion.

Fortis Healthcare International is the group’s Singapore-based healthcare delivery firm, with a multi-line presence across primary healthcare facilities, hospitals, speciality day care healthcare, and other diagnostic operations. The Singh family set up the Singapore branch, first named Fortis Global then later Fortis Healthcare International, in October 2010 to continue the group’s international healthcare operations in the aftermath of their aborted corporate takeover for Parkway Holdings Ltd, which they lost to Malaysian sovereign wealth fund Khazanah last year. Since then, the new firm has embarked on an aggressive overseas expansion strategy, using acquisitions and setting up new private hospital across the Asia Pacific region, to match the soaring global demand for quality healthcare services. Fortis’ international operation have now in fact become the same size of their home Indian market operations.

Today, Fortis Healthcare International operates out of nine prime international markets including Australia, Canada, Dubai, Hong Kong, Mauritius, New Zealand, Singapore, Sri Lanka and Vietnam. Amongst its most important global medical assets, Fortis Healthcare International owns Quality Healthcare Ltd, Hong Kong’s largest primary healthcare network, as well as the Dental Corporation Ltd, the largest dental care group active in Australia and New Zealand. The company also holds a majority stake in two specialty hospitals in Singapore and the UAE, as well as shares in the 350 bed Lanka Hospitals Corporation, Sri Lanka’s biggest specialty hospital. Most recently, Fortis Healthcare International acquired a 65 percent stake in one of Vietnam’s largest private healthcare provider groups, Hoan My Medical Corporation, for US$64 million in August. According to company filings, overall international operations are expected to generate roughly US$500 million in sales this year.

The deal will integrate Fortis Healthcare International and the public-listed Indian parent company into a combined entity, renamed Fortis Healthcare Ltd. Management structure will of course change in tow. Vishal Bali, previously heading Fortis Healthcare International, will become CEO of Fortis Healthcare Ltd. Aditya Vij will head the company’s Indian operations, while Eng Aik Meng will run international business and further overseas expansion activity. Malvinder and Shivinder Singh will continue acting as executive chairman and executive vice-chairman of Fortis Healthcare respectively.

As a consolidated firm, Fortis Healthcare will be the owner of over 74 hospitals (with more than 12,000 beds combined), 190 diagnostic facilities, 580 primary care clinics and 191 day care centers across 10 countries, making it one of the leading integrated healthcare delivery networks active in the Asia and number one in India, overtaking Apollo Hospitals in the process. The newly combined company will pool the strength of over 23,000 employees, including 4,000 doctors, to better challenge the previously potential purchase, Parkway Holdings, for supremacy amongst private healthcare service providers in the Asia-Pacific region. While these two conglomerates are concentration on international expansion aimed primarily at treating local clients, their ever-expanding global healthcare networks will no doubt also be used as valued multinational medical tourism destinations where global travelers can find high quality medical treatment at competitive prices.

In the company statement Malvinder Singh concluded that consolidating their Asian health businesses at this time would enable them to establish a firm position in a market that is only looks to grow and grow. “Our vision is to create a leadership position in integrated healthcare delivery in the pan Asia-Pacific region. This integration is a fundamental step in that direction. With the region’s increasing urbanization, ageing population and greater access to new medical technologies, the demand for more and better healthcare is rising sharply. Fortis is keen to capture this opportunity. This integration provides us the model and the scale to harness the opportunity.”

Companies Mentioned

Fortis Healthcare Limited

Founded in India in 1999, Fortis Healthcare is a healthcare provider that currently operates 46 hospitals in India, which are organized as a hub and spoke model around their specialty hospitals. They offer laboratory, wellness, information technology, travel and financial services through the wholly owned Religare Enterprises Limited

Parkway Holdings

Parkway operates 16 hospitals in Asia, with over 3,400 beds throughout Singapore, China, Malaysia, India, Brunei, and the UAE. Parkway also boasts a nursing and health science college, extensive diagnostic, imaging and laboratory resources and the largest foreign owned medical network in Shanghai.

Globalsurance International Health Insurance - Expat Medical insurance products for you and your family no matter where in the world you live.

US, China Insurers Post Q3 Earnings

As November approaches, many of the world most prominent multinational insurers are releasing their third quarter earnings reports, the cumulative results of which could present some interesting insights on the future of the international insurance industry.

Metlife, the United States’ largest life insurance group, posted the most considerable gains this week. The New York based insurer announced on Thursday that net income had grown more than tenfold during the third quarter reporting period, beating market estimations on the back of substantial investment gains and the continued development of its international sales division from its Alico acquisition last year. For the three months ending September 30, Metlife earned US$3.55 billion, or US$3.33 per share, a significant improvement over the US$286 million, 32 cents a share, earned during the corresponding period in 2010. Total revenues meanwhile hit US$20.46 billion for the period, up from US$12.34 billion in the same quarter a year ago. The insurer also reported US$4.2 billion in total net derivative gains for the quarter, compared with a US$244 million loss last year.

Metlife attributed much of their quarterly success to their Alico acquisition and the impact this has had on the investment portfolio, which was up from US$383.2 billion a year ago to US$493.2 billion now at the end of the third quarter 2011. Metlife had long been looking to expand its international presence and distribution platform, and in 2010 the company decided to purchase American Life Insurance Company (ALICO) from AIG for US$15.5 billion to achieve these objectives. The acquisition of Alico, which operates out of 50 countries, has given MetLife immediate access to new Asian, European, Middle Eastern, and Latin American insurance markets and they been rewarded already as the international segment reported operating earnings had increased by US$578 million from US$189 million in the year-on-year for the quarter. This has come while the operating earnings in Metlife’s home US market have fallen 23 percent to a comparable US$655 million, due to increased insurance reserves, high catastrophe losses and flagging consumer confidence.

This influx of new international business, led by the ALICO deal, has helped MetLife’s premiums grow by a remarkable 41 percent year over year to a record US$12 billion in q3 2011. As the global economic order subtly changes in the wake of the 2007-2008 financial crisis, multinational insurers such as MetLife are finding value in re-positioning their activities to ensure that they have greater access to the emerging markets that are now providing all insurers with the most profound sales and earnings growth opportunities.

Companies active in the US health insurance sector have also put forth their third quarter earnings. This week, Aetna Inc reported US$490.4 million in earnings as well as a US$117 million after-tax gain for the period, due primarily to reduced claims exposure in the United States. The nation’s third largest health insurer noted that while revenue and medical enrolment dropped during the quarter (by about 1 percent to US$8.4 billion and 18.2 million policyholders), disciplined underwriting and cost management trumped performance expectations and have enabled the company to raise its 2011 earnings forecast. The company’s overall healthcare costs have in turn dropped by 5 percent to US$5.36 billion, mainly because insured Americans in general are choosing to file fewer health insurance claims.

The declining utilization of healthcare benefits in the US has been a recurring issue for the past few quarters as more Americans choose to abstain from elective treatment, doctors visits, and any other absence from work during these uncertain economic times. Aetna’s total medical-benefit ratio, which is the amount of premiums actually paid out in patient medical costs, has fallen from 81.8 percent to 78.9 percent this year. The ratio was aided by a considerably higher reserve development, which indicated that the company had overestimated what it would in fact be paying out in patient claims. Because this lower-than-expected claims ratio has not however put any serious downward pressure on premium pricing, Aetna and its health insurance competitors are able to keep turning in strong performances. Analysts expect Aetna’s 2012 operating earnings to further improve, due to an expected decline in medical claims trends coupled with constructive regulatory adjustments in medical claims expenses.

Aetna’s two largest rivals based on enrolment and revenue, WellPoint and UnitedHealth, have also reported better than expected third quarter earnings and have raised their 2011 earnings reports in tow. On Tuesday, WellPoint noted that company enrolment had increased by 2 percent to 34.4 million members amid strong revenue performance for the quarter, with particular growth witnessed its newly acquired senior business. The demand for Medicare-supplement insurance services offered by private companies will increase as the burgeoning ranks of US retirees have come to expect similar benefits to those they have enjoyed throughout their career and appear willing to pay for them. UnitedHealth were also able to beat quarterly performance expectations but warned that medical costs are expected to increase in the fourth quarter and will bite into earnings throughout 2012.

Insurance groups from America’s greatest economic partner and rival China also presented quarterly performance figures this week. China Life Insurance Co, The mainland’s largest life insurance firm, said that its net profits declined by 45.7 percent to CNY3.75 billion (US$586 million) during the third quarter. In a statement filing to the Shanghai Stock Exchange on Thursday, the company acknowledged that the decline in profit came as a result of declining investment returns and losses from asset devaluation. Overall, China Life’s profits for the first three quarters have dropped by 33 percent annually to CNY 6.72 billion (US$1.03 billion), according to Chinese accounting standards. As this has happened however, the company’s total insurance premiums have continued to rise, amounting to CNY262 billion (US$41.2 billion) at a 2.6 percent annual growth rate. China Life’s performance relies heavily on investment income and thus it is more sensitive to stock-market swings than some of its domestic rivals. Going forward though, low interest rates and national and global economic volatility will require the company to be more disciplined than ever in their underwriting and investment decisions.

Ping An Insurance, the mainland’s number two insurer, also reported a considerable 44 percent decline in third quarter profits this week. However, the source of these shortfalls was different to that of their big domestic rival China Life. According to a company filing, Ping An’s earnings were hit by the one time CNY1.95 billion (US$310 million) acquisition cost of Shenzen Development Bank(SDB). Ping An completed its restructuring with SDB in July, with the banking business now contributing CNY5.32 billion (US$840 million) in earnings during the reporting period. Excluding the cost of the acquisition, Ping An said it would have recorded a 29.1 percent year-on-year rise in net profits attributable to shareholders worth CNY16.47 billion (US$2.59 billion). Ultimately the acquisition could prove fruitful to Ping An as having a more diversified business portfolio will ultimately help protect the Chinese insurance giant from adverse global financial market volatility in the future.

Insurance Companies Mentioned

MetLife

With over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.

ALICO

The American Life Insurance Company, known as Alico, provides a broad, innovative range of insurance and savings products for individual customers, corporate customers and high net worth clients. Their products include; health insurance, life insurance, savings plans, accident insurance, retirement planning and travel insurance among others services.

Aetna

Aetna international health insurance Aetna is a leading global diversified health care benefits company head-quartered in the U.S., serving approximately 35.8 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, group life and disability plans, medical management capabilities and health care management services for Medicaid plans.

WellPoint

WellPoint is the largest health benefits company in USA, with more than 33 million members in its affiliated health plans. As an independent licensee of the Blue Cross and Blue Shield Association, WellPoint serves members as the Blue Cross licensee for California; the Blue Cross and Blue Shield licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio, Virginia, and Wisconsin. In a majority of these service areas, WellPoint does business as Anthem Blue Cross, Anthem Blue Cross Blue Shield or Empire Blue Cross Blue Shield. WellPoint also serves customers throughout the country as UniCare.

China Life Insurance

China Life Insurance Company Limited (China Life) is a People’s Republic of China-based life insurance company. The products and services include individual life insurance, group life insurance, accident and health insurance. The Company operates in four business segments: individual life insurance business, group life insurance business, short-term insurance business, and corporate and other business.

Ping An Insurance (Group) Co. of China Ltd.

Ping An Insurance is the first integrated financial services conglomerate in China that blends its core insurance operations into services including securities brokerage, trust and investment, commercial banking, asset management and corporate pension business to create a highly efficient and diversified business profile. The group was established in 1988 and headquartered in Shenzhen, Guangdong Province, China.

Globalsurance International Health Insurance - Expat Medical insurance products for you and your family no matter where in the world you live.

Swiss Re Steps Up Microinsurance Initiatives in Developing Countries

Global reinsurer Swiss Re have added to their impressive international microinsurance platform this month with the announcement of a new three-year partnership with USAID to provide customizable, market-based insurance products for vulnerable communities throughout the Americas, Africa and Asia.

Microinsurance refers to insurance products designed to provide basic, inexpensive cover for low-income individuals and families who require protection for typical risks including the affects of severe weather conditions, healthcare, crop, life and non-life products. Microinsurance offers vital security options for populations that need insurance protection but until now have been unable, or even aware of, the ability to afford the relatively high cost of coverage. The premiums and coverage are kept at a low level in order to make the products affordable and attractive to these first time policyholders. For the insurers meanwhile, microinsurance presents a key commercial opportunity due to the high volume of available policyholders combined with low cost margins. Insurers also benefit from working with local partners in largely under-penetrated markets and through mircoinsurance they can establish a substantial market presence, putting them in a good position to sell traditional insurance policies going forward. According to a Swiss Re sigma study, the global microinsurance market is estimated to be worth over US$40 billion. The Asia Pacific region is cited as the fastest growing region for microinsurance development, with Africa and Latin America both having smaller, but growing, markets.

Swiss Re’s three-year partnership with USAID, a federally funded humanitarian organization, will target poor farmers in vulnerable communities on three continents. The two organizations will work together to develop cost-effective strategies that enable these farmers to prepare for and efficiently manage the cataclysmic impact that upcoming droughts, floods and other severe events could have on the livelihoods of themselves and their families. Overwhelming scientific evidence suggests that large natural disasters and other catastrophic weather events have and will become increasingly more common worldwide as a result of climate change. Unfortunately many of the areas that will be most affected by the considerable rise in worldwide temperature will be farming lands, and the communities that rely almost exclusively on them for subsistence. The results of climate change and extreme weather conditions are becoming apparent to insurers too, with floods, droughts, earthquakes, hurricanes and tornadoes all having had a significant impact on insurers’ claims and loss ratios over the past few years. It thus becomes incumbent on aid organizations and insurers to build resistance to climate change in these areas and reduce the future costs of natural disasters if possible.

Both Swiss Re and USAID recognize that providing farmers in poor areas with the appropriate tools and information to manage risk will enable them to more easily obtain the loans necessary to invest in technologies that improve their crop yields and productivity, a considerable benefit to the whole community. Swiss Re has agreed to contribute its substantial risk management expertise towards assisting two ongoing USAID initiatives in particular. Swiss Re will first address weather-related risks through The Global Climate Change Initiative, which focuses on resisting extreme climate events and accelerating the global transition into a more sustainable low-carbon economic environment to reduce the occurrence of natural disasters in the future. The world’s largest reinsurer will also work with USAID on the United States Global Hunger and Food Security effort, which helps emerging market countries develop more stable and productive agricultural sectors to deal with the root causes of widespread hunger and mal-nutrition. More resilient farming systems are urgently required due to the predicted increasing preponderance of extreme weather events and the instability that reaps on agricultural output.

Swiss Re’s partnership with USAID has come amid a flurry of similar venture activity for the company. In September, the reinsurance group announced two new microinsurance initiatives at the Clinton Global Initiative (CGI) Annual Meeting in New York, USA. At the meeting Swiss Re outlined plans for a new cholera insurance scheme for female entrepreneurs in Haiti, which is designed to tackle the outbreak of the disease on the island nation. Working in conjunction with a local Haitian operation, Swiss Re will offer insurance policies that provide a guaranteed payout once certain health and sanitation conditions are met. It is hoped this policy will build off an effective catastrophe microinsurance scheme developed by Swiss Re earlier in the year.

The second plan outlined at the CGI is designed to protect farmers in Senegal from potential crop losses due to climate change and other adverse weather events. To accomplish this, Swiss Re has partnered with Oxfam America, the World Food Program and USAID again, to establish an innovative ‘insurance for work’ scheme that would give farmers the option to pay for their insurance premiums with their hard labour instead of cash. The initiative was first brought into Ethiopia earlier in the year and is part of Swiss Re’s overall US$1.25 million commitment to reinsurance in the region. Participants in the program will work on irrigation and forestry projects in the local area, which are intended to ultimately reduce the impact of climate change and strengthen their communities.

Other multinational insurers have come to recognize the importance of microinsurance and want to capitalize on this relatively new line of business for the mix of opportunities it offers, both in business and, of course, in ethics. Canadian insurer Manulife recently announced its intentions to expand its microinsurance operations in Vietnam, a product line that has become integral to their success in the Southeast Asia country. To date Manulife has already sold around 80,000 microinsurance policies in Vietnam, far exceeding the company’s expectations. Microinsurance alone made up 6 percent of Manulife’s total sales in Vietnam last year. German insurance giant Allianz has also had success in the region, securing over 230,000 new Indonesian customers with microinsurance policies last year. Insurers clearly have the opportunity now to develop policies to meet the protection needs of the more vulnerable element of the world’s population. As Michel Liès, Swiss Re’s chairman of global partnerships, explained, there is an obligation to increase insurance penetration across the world as it is a frequent contributor to overall economic development.“Insurance is a cornerstone of economic growth and stability, and [we at] Swiss Re are proud to contribute our expertise so that even the poorest farmers and their families can cope when crops are ruined by drought, flood or other climate related impacts.”

Companies Mentioned

Swiss Re

The Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life and health insurance as well as special lines such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.

Allianz

Allianz Insurance is one of the leading global services providers in insurance and asset management. With approximately 153,000 employees worldwide, the Allianz Group serves approximately 75 million customers in about 70 countries. On the insurance side, Allianz is the market leader in the German market and has a strong international presence.

Manulife in Vietnam

Manulife Vietnam was the first 100 per cent foreign-owned life insurance company in Vietnam, beginning its operations in September 1999 as a joint-venture called Chinfon-Manulife Insurance Company (CMIC). Manulife in Vietnam has grown rapidly to become a world class company providing a competitive array of financial protection products and services to Vietnamese customers. Since commencing operations, Manulife has helped more than 300,000 middle to upper-income Vietnamese plan right for their life