Dec
6
AON Note Chinese Market Progress, Challenges
Filed Under China, China insurance, Reinsurance | 1 Comment
China’s share of the world insurance market has quadrupled over the past decade, owing to a strong economy, surging demand and evolving industry regulations. A new report published on Monday by Aon Benfield, the global reinsurance intermediary of Aon Corp, acknowledges the opportunities the Chinese market now presents to the international insurance industry as well as the challenges now apparent after years of rapid growth.
The Chinese insurance industry has experienced phenomenal growth over the past decade and still has much to look forward to due to favorable economic conditions and an under-penetrated market. China now represents close to 4 percent of all life and property insurance premiums worldwide at CNY1.45 trillion (US$226 billion), moving up from just a 1 percent share decade ago. Industry analysts in the world’s second largest economy are now targeting a 15 percent compound annual growth rate over the next five years.
Aon’s report, titled ‘The China Property & Casualty Insurance and Reinsurance Market Report,’ is chiefly concerned with the slow development of the Chinese catastrophe insurance and reinsurance sector, which has become particularly glaring given the country’s increased exposure to widespread catastrophic risk. Indeed, given recent events in Thailand and Japan, the potential for supply chain disruptions in China due to natural disasters has become a growing concern for executives at large multinational corporations. According to the report, China’s property and casualty (p&c) insurance market is now growing only at the same rate as GDP, whereas the insurance sector overall is still growing much faster. Over the last ten years, the Chinese p&c market had grown by over 20 percent annually, outpacing the country’s GDP growth in that period and reaching CNY402 billion (US$63.4 billion) by 2010. While this has occurred, Chinese government subsidies have also been working to support the growth of agriculture premiums and have doubled in size since 2005, now amounting to CNY13.6 billion (US$2.15 billion)). Aon observed a similar growth pattern in aggregate reinsurance premiums acquired by China’s p&c insurers, which have seen a 67 percent compound annual growth rate since 2005, now totaling CNY44 billion (US$6.9 billion).
Aon’s findings indicate that insurance will continue to be a necessity in the country. The China Insurance Regulatory Commission (CIRC), the Mainland’s chief industry oversight body, recognizes that the insurance sector will keep on facing structural challenges due to the tremendous scale of the market combined with the recent speed of its development, and is planning considerable action over the next five years to address this. Aon notes that China has been hit by 5 of the top 10 most deadly natural catastrophe events in history, with recent disasters (earthquakes, mudslides, blizzards) affecting more than 70 percent of the country’s total land area and over half the population in some way as well. The CIRC is aware of this persistent catastrophe protection risk shortfall and is thus establishing a national natural disaster risk transfer program (similar somewhat to Japan’s in design) as part of its upcoming 5-year plan. According to Aon’s report, this new risk pooling program could lead to a spike in the uptake of catastrophe insurance and reinsurance policies and work to better address overall protection issues in the country for years to come.
Commenting on their new report, Malcolm Steingold, Aon Benfield CEO for the Asia Pacific region, explained that while China’s insurance industry would no doubt continue to expand, being able to solve explicit coverage gaps in the market quickly would enable the country to realize its sizeable commercial potential. “Over the past 10 years, China has emerged as an insurance and reinsurance market that cannot be overlooked. However, when we look beyond the macroeconomic growth, underlying opportunities and challenges are not necessarily what they first appear to be. For example, a detailed analysis of the property market shows that growth has been more in line with gross domestic product than with the faster overall market growth, which is largely driven by motor business,” Steingold said. Indeed, China’s motor vehicle insurance market could be subject to its own revision efforts, with the introduction of foreign insurance players potentially on the horizon.
Ralph Butterworth, Partner at an Aon Benfield consulting division, added that the Mainland’s transition to more refined and comprehensive risk management strategies would work to the benefit of their overall marketplace. “The evolution of Chinese insurance regulation is bringing the market closer to international best practice. Over time this should support increased transparency and improved profitability, potentially hand in hand with the entrance of more foreign insurers into the Chinese market and the global expansion of Chinese reinsurers,” Butterworth said, adding that “expertise and experience accumulated and tested in the global market are still of much relevance to China as it targets further growth over the next five years.”
In conclusion, Henry To, CEO of Aon Benfield’s China division, expressed confidence in the Chinese insurance industry’s ability to overcome recent hurdles. The CIRC’s latest 5-year plan, which introduces the national natural disaster risk transfer system and improves loss models and underlying data, should encourage sound risk strategy and ensure more protection options are available before disaster strikes. “Over the years from 2001 to 2010, the Chinese insurance market (P&C and life) was the second fastest growing national market in the world behind Malta and now represents close to 4 percent of the world’s total insurance premiums – up from about 1 percent in 2001. Given the still low insurance penetration rate and China’s comparative economic outlook, this share can only be expected to grow,” To concluded.
Companies mentioned
AON Benfield
Aon is a provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. It is based in the Aon Center in the Chicago Loop area of Chicago, Illinois, United States. Aon bought Benfield in 2008. Aon Benfield Analytics is the industry leader in actuarial, enterprise risk management, catastrophe management, and rating agency advisory. Their track record of innovation and world-class position in analytics, modeling and client-facing technology helps companies to optimize their portfolios. Proprietary tools include ReMetrica, CatPortal, and ExposureView. Also, their Impact Forecasting team develops tools and models that help companies understand financial implications of natural and man-made catastrophes around the world.
Dec
5
Provisional statistics released this month by Hong Kong’s chief insurance regulatory body, The Office of the Commissioner of Insurance (OCI), show that despite recent financial market volatility, Asia’s premier insurance center has managed to keep pace with the double-digit growth rates experienced in several neighboring markets during the first three quarters of 2011.
According to the latest OCI figures, Hong Kong’s insurance industry recorded HK$172.8 billion (US$22.24 billion) in gross written premiums from January to September 2011, which represented a substantial 12.6 percent increase over the corresponding period last year. In the country’s general insurance business, gross and net premiums, rose by 12.5 percent to HK$27.4 billion (US$3.5 billion) and 10.1 percent to HK$19 billion (US$2.4 billion) during this 9 month period compared with same period in 2010 respectively. The OCI noted that while the number of claims in general has continued to rise in 2011, most insurance lines have been able to maintain an underwriting profit. Indeed, over the past year overall underwriting profit for HK insurers has increased from HK$1.7 billion (US$220 million) to HK$2.1 billion (US$270 million).
The report further shows that the gross and net premiums on direct business have grown by 7.9 percent and 7.3 percent annually to HK$20.5 billion (US$2.6 billion) and HK$15.1 billion (US$1.9 billion) through the first three quarters of the year respectively. The OCI has largely attributed this rise in general insurance premium levels to the strong performance of property damage business lines in Hong Kong, which have grown by 20.4 percent in the past year, from HK$5.1 billion (US$660 million) in gross premiums in 2010 up to HK$6.2 billion (US$800 million) by the third quarter of 2011. As the largest segment of the non-life insurance market, accident and health insurance businesses have also been key contributors to non-life sales, with gross and net premiums of HK$7.3 billion (US$940 million) and HK$6.1 billion (US$780 million) so far this year. Health and accident insurance sales are expected to continue by the OCI, due to rising care costs, the expansion of medical businesses, and growing public awareness about upcoming changes to the state’s healthcare system.
Hong Kong’s general liability and motor vehicle insurance lines have also contributed to the industry’s premium growth over the past year. In the report, general liability business, which includes the employee compensation market, recorded a double digit rise in gross and net premiums, now worth HK$5.3 billion (US$680 million) and HK$3.8 billion (US$490 million) for the year in that order. The country’s automobile insurance industry meanwhile recorded HK$2.5 billion (US$320 million) in gross and HK$2 billion (US$260 million) in net premiums for the nine month period. The OCI has attributed the motor insurance industry’s growth to premium rate increases levied on commercial vehicles over the past year.
The only line in Hong Kong that has experienced a significant loss in the past year, according to the OCI report, is pecuniary loss liability insurance, which experienced a 20.6 drop in gross premium levels as a result of the slowdown in property transactions occurring in the SAR.
Despite general insurance premiums levels increasing, the OCI noted that poor claims experiences this year had caught up with several non-life lines and had lead to a fall in underwriting profit for these sectors. Overall the underwriting profit of direct business in Hong Kong declined to HK$1.3 billion (US$170 million) in the first three quarters of 2011 from HK$1.4 billion (US$180 million) in the corresponding period of 2010. Motor insurance has so far been the most affected by a claims-heavy season, with underwriting profits falling from HK$125 million (US$16 million) down to HK$2 million (US$260,000) through the first 3 quarters of 2011. Accident and Health insurance and General Liability businesses have experienced a more limited shortfall, with underwriting profit falling from HK$388 million (US$49 million) to HK$292 million (US$37.5 million) and from HK$137 million (US$17.6 million) to HK$63 million (US$8.1 million) for the year respectively. The OCI report explained however that these losses could continue to be offset by the performance of the property damage business, where underwriting profits have risen from HK$211 million (US$27.1 million) to HK$370 million (US$47.6 million) so far this year.
Premium increases in the property damage business have also helped the country’s reinsurance industry, where gross premiums grew from HK$5.4 billion (US$690 million) to HK$6.9 billion (US$890 million) and net premiums grew from $3.1 billion (US$400 million) to $3.8 billion (US$490 million) in the first three quarters of 2011 over 2010’s results. This strong premium growth has also driven the reinsurance market’s underwriting profit to increase from HK$288 million (US$37 million) to HK$752 million (US$96.7 million). Property damage insurance and reinsurance companies in Hong Kong have benefited from a relatively uneventful year in comparison to their neighbors in Japan and Thailand.
While direct insurance lines have certainly grown this year, the OCI stats show that the long-term insurance market has been able to more than hold its own, with life insurance products continuing to be a major growth driver in Hong Kong. Office premiums for new individual life policies (excluding retirement scheme business) have increased by a considerable 33.4 percent to HK$56.6 billion (US$7.28 billlion) over the past nine months. Traditional life insurance and annuity policies, where insurers collect premiums from policyholders annually to invest with and pay dividends, increased by 21 percent to HK$96.2 billion (US$12.3 billion) in 2011. Sales of investment-linked life policies, in which buyers move their premiums into a number of investment funds at varying levels of risk and return, have risen by 33.3 percent over the same period last year, for a total of HK$16.9 billion (US$2.17 billion) in terms of new office premiums. The total revenues associated with long-term in-force business were HK$145.4 billion (US$18.7 billion) in the first three quarters of 2011, a 12.6 percent increase over the same period of 2010.
While there are no guarantees double-digit premium growth will persist in 2012, Hong Kong’s insurance market should continue to benefit from the tremendous business opportunities in the Asia Pacific region, particularly on the Mainland. According to the Hong Kong Federation of Insurers (HKFI), clients from Mainland China are expected to drive between 20 to 30 percent growth in new insurance sales over the coming years. Mainland activity has already been particularly apparent in new office premiums. According to the OCI report, new policies issued to Mainland visitors have totaled HK$4.6 billion in premiums (US$590 million) so far this year, which represents over 8 percent of all new office premiums for individual business in Hong Kong.
China is now the second largest economy in the world, with a growing middle class population ready to spend on insurance and investment-linked products. This emerging investor class presents significant opportunities to financial markets like those in Hong Kong that are both close geographically and particularly convenient to them culturally as well. While this close relationship between Hong Kong and China has presented some infamous pitfalls in the past, such as rampant maternity tourism, overall it will provide HK businesses with bountiful business opportunities going forward. Hong Kong-based insurance companies that can present innovative, stable and cost-effective insurance products and services not yet available on the mainland could attract a tremendous new client base.
Organizations Mentioned
OCI
The Hong Kong Office of the Commissioner of Insurance is a government body that works to represent the interests of policy holders and to ensure the continued stability of the insurance industry in Hong Kong.
The Hong Kong Federation of Insurers
The Hong Kong Federation of Insurers (HKFI) was established on 8 August 1988 as a self-regulatory body of insurers, designed to further the development of the insurance business in Hong Kong. The HKFI is recognized by the Government of the Hong Kong Special Administrative Region as the principal representative body of their industry.
Dec
2
Cigna’s Expatriate Business Expands into Brazil
Filed Under CIGNA | 2 Comments
Cigna Inc, a leading global expatriate benefits provider, is expanding its healthcare network in Brazil with the launch of a new CignaLinks program designed to provide simple, locally-compliant healthcare solutions to employers and their globally mobile employees in the populous Latin American country. Through an alliance partnership with Gama Saude, one of Brazil’s largest private medical operators, Cigna will provide customers with comfortable access to more than 20,000 doctors, hospitals and other quality healthcare services, all at competitive prices.
CignaLinks is a specialized health admin program designed by Cigna to simplify the varied and often complex claims and payment procedures that can occur for globally mobile clients, their employees, and their families, when receiving medical treatment in a foreign country. The program works to address local compliance issues unique to the market a policyholder is filing a claim in, which is particularly useful in a country like Brazil where government regulations can affect benefit offerings as well as access to care for expatriates.
By increasing their footprint in Brazil, Cigna reaffirms their commitment to developing its expatriate healthcare business in promising international markets. Tim Blevins, Senior Director for Cigna International Expatriate Benefits, explained in a press briefing today that the expansion of the Philadelphia-based health insurance company’s network in Brazil meant that Cigna’s customers would now have access to more than one million medical specialists and a comprehensive range of hospital and medical facilities worldwide. “The key advantage of using the CignaLinks network is that it provides our globally mobile customers with an easy, administration-friendly process to accessing high quality local health care systems around the world.” Blevins said, adding that “Our CignaLinks customers receive locally-compliant solutions and always have access to our 24/7 International Service Center.”
Cigna’s chief partner in Brazil is Gama Saude, one of the country’s largest hospital networks. Over the next few years, Cigna will look to build upon this relationship, gradually integrating it international expatriate benefit coverage network with a greater proportion of administrative services and medical facilities in Brazil. According to the insurer, policyholders should look to benefit from this extended partnership directly, “by receiving substantial discounts when accessing the local network for care and by reducing their out-of-pocket costs at the time care is delivered.”
Entrance into the Brazilian insurance market has been a priority for Cigna for some time and will enable the company to respond more effectively to the local market as well as internationally. Brazil is by far the largest insurance market in South America, encompassing more than 40 percent of the gross written premiums in the region. Recent economic stability, positive credit trends, and regulatory reforms that have stabilized the currency and promoted domestic savings, are producing sound growth and a demand for coverage across the insurance industry in Brazil. Despite protracted regulatory hurdles, large multinational insurance companies cannot ignore the market’s size and growth potential and will be looking to invest themselves further in the country, as well as other emerging economies, to offset the stagnant business forecasts in their mature North American and Western European home markets. In 2010 the Brazilian insurance industry outpaced the country’s gross domestic products, growing 16.6 percent, with gross written premiums amounting to R$ 99.4 billion (US$ 62.7 billion). The country’s burgeoning export-led economy also presents further avenues for growth in the expatriate medical insurance field. Brazil now hosts many prominent multinational companies that need coverage options for their employees, many of whom are globally mobile. Cigna recognize this business opportunity.
Latin America is far from the only region offering pronounced investment opportunities for multinational insurance companies during these volatile macroeconomic times. Indeed, several insurers, most notably Nordic and ING, have decided to leave the continent to focus on the Asia-Pacific region, which offers even more robust prospects. In the past year Cigna has made similar moves into Singapore, Turkey and most recently India. Cigna has consistently been one of the most proactive American insurers looking to develop its presence in emerging economies, along with Aetna and MetLife. These firms have all been seeking to increase their footprint in global insurance markets in order to offset the relatively low premium growth forecast in the USA, in addition to the continued unrest surrounding the 2010 US Health Reform Law, which could have a far-reaching impact on the industry and comes into effect in 2014. Furthermore, many insurers are looking to diversify and potentially become larger insurance conglomerates to better absorb upcoming changes in the once lucrative US market. This was demonstrated in Cigna’s US$3.8 billion purchase of Medicare carrier HealthSpring Inc in October.
International insurance markets offer enticing post-reform growth opportunities for US based insurers. As BRIC economies further develop, Cigna plans to be at the forefront with an aggressive strategy to take advantage of the projected increasing demand for insurance policies that will provide better coverage than the government provided coverage plans in the region. Industry analysts predict Cigna’s international operations could grow to become a third of the company’s total business within the next three to five years.
Insurance Companies Mentioned
CIGNA
CIGNA Health Insurance is a global health service company dedicated to helping people improve their health, well being and sense of security. CIGNA Corporation’s operating subsidiaries provide an integrated suite of medical, dental, behavioral health, pharmacy and vision care benefits, as well as group life, accident and disability insurance, to approximately 46 million people throughout the United States and around the world.
Dec
1
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.
Join us on Google +
