Indonesia Health Insurance for Expats

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Introduction to Indonesia

Indonesia is a vast archipelago that contains the fourth most populous country in the world and the largest range of biodiversity on the planet. Rife with natural resources, investment opportunity, and fascinating culture, Indonesia's 17,508 islands have been attracting expatriates since its economy began to boom in the early 1980s. Located in Southeast Asia and bordering Malaysia, Papua New Guinea and East Timor, Indonesia is advantageously situated for travel and trade. With both a fascinating contemporary culture and a history that extends back 500,000 years to the time of “Java Man,” Indonesia is one of the most exciting places to visit today.

Some of the oldest Homo erectus fossils were unearthed in Indonesia and named the “Java Man”. The more recent peoples of Indonesia originated from an Austronesian race that likely migrated to the islands of Indonesia from Taiwan Around two millennia ago, Indonesia began to partake in the circuitous trade routes of Southeast Asia. First doing business with China and then with Indian and Middle Eastern merchants, Indonesia embraced outside cultural influences and therefore developed a fascinating culture that enlisted new ideas from all over the world.

Indonesia experienced a “golden age” between the 10th and the 13th centuries. Under a Buddhist and then Hindu leader, Indonesian culture and economy thrived. With Islamist roots that date back to the 13 th century, Indonesia is now the largest Muslim-majority country in the world. While the government emphasizes Indonesian national unity, the multitude of diverse native ethnic groups still maintain their traditions and languages.

European influence in Indonesia dates back to the 17th century, when Portuguese captain Francisco Serrao arrived in the “Spice Islands” seeking cloves and pepper. After the departure of the Portuguese, the Dutch were able to establish a very strong influence in the area, first as a territory of the Dutch East India Company and then as a Dutch colony. Dutch powers remained in Indonesia until World War II, at which point Japan occupied the islands from 1942-1945. After the Japanese surrendered, Sukarno, who had been the primary leader of the Indonesian nationalist movement, installed himself as president and declared independence from the Dutch. The Dutch did not officially cede rule until the end of 1949, after which Indonesia entered into the United Nations as an independent country.

Indonesia's history as an independent entity has been somewhat unstable. Sukarno suffered opposition from a number of political parties, barely surviving a failed coup in 1965. Finally, his main opponent, Suharto, pushed out the president in 1968 and asserted his rule. Since the establishment of Suharto's presidency and his “New Order” national rehabilitation plan, Indonesia has seen an almost uninterrupted period of growth and development.

A main component of Suharto's “New Order” plan has been to encourage international investment in Indonesian industry. Even though it is a Muslim-majority country, Indonesian cities are open and welcoming to Westerners. However, while many parts of Indonesia are accessible, keep in mind that there are still many ways in which Indonesia needs to develop.

In 2006, 17% of Indonesia's population was below the poverty line, and almost 50% lived on less than US$2 per day. The country's public services must vastly develop in order to live up to foreigners' expectations of care. If you are planning to relocate to Indonesia, it is important that you get international insurance coverage so you will be covered in the case of emergency. To receive care from an international medical facility can get expensive, but this is the safest option because some Indonesian hospitals are unable to provide up-to-par medical treatment. Having the security of global insurance will help you adjust to your life in Indonesia, giving you the freedom to explore everything there is to discover.

Moving to Southeast Asia may be daunting, and, for some international families, finding reliable healthcare facilities is the first concern. An international medical insurance plan from Pacific Prime will allow you to have Western-style healthcare that you can afford. The hospitals available for expatriates in Indonesia will provide you with just the type of treatment that you need.

We can give expatriates in Indonesia health insurance plans that will provide total cover in Southeast Asia and the entire globe. Most of our plans have a range of benefits that can be tailored to fit your international requirements. With options such as dental, maternity, out-patient services, and emergency evacuation, you know that you will receive high-quality care all over the world.

For more information about international Indonesia health insurance that we can provide, or to receive a free quote, please contact one of our expert advisers today.

Indonesia and Singapore: Hot Spots for Latest Insurance Developments

The Asian insurance markets continue to witness positive changes in the insurance industry in the form of Swiss giants Ace finalizing agreements for an Indonesian acquisition and the Aetna group expanding its products within the Singaporean market.

Zurich based Ace Group was established in 1985 when it was created by its policyholders to provide excess liability and directors and officers coverage. It has constantly evolved and expanded since then and now offers global public insurance to all corners of the globe.

Ace prides itself on the numerous insurance products it has on offer and, in 2009, the Ace Life sector of the group first opened up its wide range of life insurance products to the Indonesian market.
This week, Ace Life continues its Indonesian expansion and has agreed to acquire Jakarta based PT Asuransi Jaya Proteksi (JaPro) in a cash transaction of approximately USD $130 million which is expected to be completed within the third quarter of this year

Teaming up with local insurers is always considered beneficial to both local and international groups and as JaPro is amongst Indonesia’s top 10 general insurers, it seems only natural that such an acquisition would take place.
Established in 1963, JaPro already has an extensive distribution system throughout all of Indonesia and will undoubtedly assist Ace to further its expansion in the region.

The regional president of Ace Asia Pacific Damien Sullivan reported that “there is a good strategic fit between our companies” and it is thought that the acquisition will enable both groups to complement each other’s performance and allow Ace to diversify its current business by applying JaPro’s local expertise and strong customer service record to its current strategies.

Ace’s first quarterly reports have almost quadrupled compared to this time last year and it is hoped that this acquisition will continue to result in such positive reports for the future.

Meanwhile, in Singapore, American insurance giants Aetna have been granted a license to sell indonesian health insurance products for both group and individual coverage throughout the country.
Committing itself to creating a stronger global community, Aetna is one of the industry’s largest providers of international health benefits, and with Singapore growing from strength to strength and attracting increasing amounts of expatriates the approval of AETNA to provide Indonesia health insurance products comes as no surprise.

Aetna’s flagship International healthcare Plan (IHP) was developed with the expatriate in mind, and the group plans to introduce this line of products to the Singapore market with hopes of targeting customers who are working or frequently traveling outside their country of origin.

Aetna also chose Singapore as the place where it would debut its latest product – Aetna Healthy Aessentials – ahead of a worldwide release. There appears to be a gap in the Singapore market between the existing local and high-end global plans so Aetna created its latest product with hopes of bridging this gap and targeting those customers that require regional coverage.

Aetna has a solid 158 years of health care experience under its belt and can definitely offer a great deal of advantages to the Southeast Asian markets. General Manager of Aetna’s Asia-Pacific region Michael Elliot reported “Aetna aims to be the global leader in empowering people to live healthier lives” and this latest development in Singapore clearly demonstrates such a commitment.

Both Indonesia and Singapore are showing great promise in the financial world and with such opportunities for expansion; it is likely that we will continue to see such acquisitions and developments occurring in the future.

Indonesia Quakes Could Cause Coverage Concern

A massive undersea earthquake registering a magnitude of 8.6 struck off the coast of Indonesia’s Sumatra Island yesterday, causing tremors in nearby provinces and countries and triggering tsunami warnings across the Indian Ocean. Although the incident now appears to have produced little in terms of property damage or any casualties, insurers have once again been reminded of the sizeable risks that catastrophes can pose in the Asia Pacific region.

Risk management firms have been quick to assess the event. A statement released yesterday by catastrophe modelling firm AIR Worldwide put the centre of the 8.6M earthquake at 269 miles southwest of Banda Aceh, the capital of Indonesia’s Aceh province, and 598 miles due west of Malaysia’s capital city Kuala Lumpur. According to the United States Geological Survey (USGS), the earthquake occurred at 2:30 PM local time (6.30pm AEST) and struck at a depth of 20.5 miles below sea level. This main shock was followed by a series of moderate aftershocks at first, with a considerable 8.2 aftershock then occurring 384 miles southwest of Banda Aceh two hours later. Immediately after the main shock, the NOAA Pacific Tsunami Warning Center issued an Indian Ocean-wide tsunami watch for 28 countries bordering the Indian Ocean. This warning was later cancelled after scientists determined that the quakes had predominantly horizontal displacement rather than vertical. This would generally mean there was not sufficient displacement of water to generate a tsunami.

“Southeast Asia is one of the most complex, and fastest deforming, seismic zones in the world,” said Dr. Bingming Shen-Tu, senior principal scientist at AIR Worldwide, adding that “seismicity in the region mostly results from the interactions of two major tectonic plates: the Indo-Australia plate and the Eurasian (Sunda) plate, which are converging at rates of 5 to 7 cm per year.” Indonesia’s Sumatra island lies particularly close to this active subduction zone, with the Indian-Australian plate pressing into and under the Eurasian plate.

The USGS reported that the main shock could be felt by people as far away as Singapore, Thailand, Sri Lanka, Malaysia, Bangladesh and India. There were reports of panic in several of these affected markets as scores of people evacuated their offices and residences to access higher ground. Thailand’s National Disaster Warning Center issued an evacuation order to residents in six provinces along the country’s west coast. There were also reports of widespread traffic jams, loss of electricity and temporary suspension of rail service reported in Indonesia. Particularly cautious were people from nearby Banda Aceh, the place where over 170,000 were killed by the 2004 tsunami. On December 26, 2004 a 9.1-magnitude earthquake hit the same region and triggered a devastating tsunami. In all, that catastrophe resulted in roughly 230,000 deaths and over US$10 billion in economic damages across southern Asia. Insured losses meanwhile accounted for about US$1 billion, according to the Insurance Information Institute.

Despite the large seismic ratings, yesterday’s event is unlikely to become a significant insurance loss as the regions which experienced the strongest shaking are largely developing markets where insurance penetration is low. Added to this is the fact that the earthquakes have passed without any reports of casualties or major damage in any affected market thus far. In general, this event was met with much greater public awareness and effective preparation than 2004. AIR Worldwide noted however that more should be done to build upon this catastrophe cover progress going forward. According to AIR, high-rise office buildings in the affected region often have an ‘irregular floor shape’. This shape, classified as ‘asymmetrical torsion rigidity’, together with poor construction practices, inadequate materials and lax regulatory enforcement issues, increase the damageability of office buildings and other commercial constructions in Southern Asia considerably if and when earthquakes, tsunamis and hurricanes strike. With that said however, AIR acknowledged that due to the location of the earthquakes there was not expected to be “significant insured losses from this event.”

The Indonesia earthquakes come on the back of a particularly active month for property and casualty insurers however. Released last week, AON Benfield’s latest Global Catastrophe Report notes that severe weather in the USA has already cost insurers some US$1.8 billion in claims through the first 3 months of 2012. Of particular note has been the uptick in tornado damage across the middle of the country. The US Storm Prediction Center has already cited at least 65 tornado touchdowns this year, several of which have gone on to cause extensive damage. According to AON, economic losses from tornadoes are now estimated to be US$2.0 billion, with insurance expected to account for some USD1.1 billion once the reported 170,000 claims are duly settled.

Outside of the USA, the most expensive catastrophe event last month happened in Mexico, when a 7.4 magnitude earthquake hit the middle of the Latin American country and caused insured losses of MXN2.07 billion (US$163 million) from property damages and casualties. Chile were also affected by a 7.1 magnitude seismic event in March, although total economic losses are expected to finish below US$100 million, according to AON. China’s Xianjiang region meanwhile accounted for the third most expensive earthquake, with a 5.8 magnitude event causing direct economic losses worth CNY523.5 million (US$82.7 million). Cyclone and flooding events in Australia accounted for much of the remainder of Asia’s catastrophe damage portfolio for March.

While both the number and severity of global catastrophic events should only rise further as we approach Atlantic Hurricane season in the summer, 2012 will likely still finish far behind 2011′s record-setting catastrophe losses. Because of this, insurers are looking to recoup some of last year’s losses by upping their global property insurance premiums now. A new report by Marsh found that insurance rates in the US have already risen by over 10 percent for both catastrophe-exposed and non-catastrophe risks during the first quarter of 2012. Prices are on the rise elsewhere too, most sharply in countries that have had recent natural disaster like New Zealand and Japan. In addition, Marsh noted that changes in the way insurance companies model their exposure to risk going forward will likely see rates rise further going forward. “The global commercial property insurance market is continuing to show signs of upwards rate trends, especially for catastrophe-exposed risks,” said Dean Klisura, Marsh’s U.S. risk practices leader. “We believe that this trend will continue in the short term, with the average rate of increase continuing to rise month over month.”

Aviva Indonesia Targets Affluent Indonesians and Expatriates with International Coverage Offerings

Aviva Indonesia is introducing an International Indonsian Health Insurance product offering to the Indonesian market in response to a growing number of expats and well heeled local Indonesians.

The portfolio offers international health insurance coverage with limits between US$1-2 million, depending on the product, and will allow holders of a policy to travel internationally in order to receive qualifying medical treatment.

According to Aviva Indonesia’s vice president, Albert Wanandi, the products are targeted squarely at the wealthy Indonesian and expatriate market, with premiums starting at around US$ 1,360 per annum.

Aviva Indonesia hopes that strong demand and a relatively untapped market will enable it to boost its premium income by 30% this year, up from Rp 811 million (US$85,966) last year.
“The market has high potential because Indonesians travelling abroad will need Indonesian health insurance. Illness and sickness can strike at any moment. Today, a large number of Indonesians are going abroad purely for purposes of medical treatment.” remarked Mr. Wanadi.

Aviva will use its existing partnership with DBS in Indonesia to distribute and sell the product, alongside its other insurance offerings, such as Life and Pension plans. DBS claims to have approximately 20,000 high end clients in its current network, providing easy access to an appropriate market segment for the new Aviva offering.

Steffan Ridwan, Head of DBS Consumer Banking, said that he expects the partnership to generate approximately Rp100 billion (USD10.6 million) this year, of which 20% will be from the International Health Insurance product.

The bancassurance model is clearly working for this partnership, as Aviva and DBS have agreed to extend their partnership until 2015, and are looking to expand into more markets such as China, India and Taiwan. “Aviva’s research has found that consumers are worried about their financial situation in the current economic volatility. DBS and Aviva’s continued partnership will ensure that consumers have a range of quality insurance products to meet their evolving needs,” says Shaun Meadows, CEO of Aviva in Singapore and Hong Kong.

John McFarlane, recently appointed chairman of Aviva Plc, recently announcement that they were pulling out of some non-core markets, including South Korea and Malaysia, so that they could focus on segments with “unusually high return on growth”, such as life insurance units in Poland, Singapore and Turkey.

Aviva is currently selling off its Malaysian operations, and have shortlisted four bidders; Prudential Plc, Manulife, AIA Group Ltd and Sun Life Financial Inc for Aviva’s 49% stake in their joint venture with Malaysian lender, CIMB Group. The deal is valued at around US$500 million. Aviva and CIMB have struggled to make their partnership work, amid competition from Great Eastern and Prudential.

Other players in the market are also looking into bancassurance distribution channels, with Bank Danamon Indonesia having partnered with Manulife Indonesia to sell its life insurance and pension products through its network of 3100 branches and sales locations. Manulife has also packaged its life insurance with two of Danamon’s investment products, providing customers with life insurance and a variety of investment options. More than 300 Manulife personnel will be assigned to Danamon branch offices to market the products.

Some analysts estimate between 45 and 50 percent of new premium sales in Asia come from bancassurance channels, but there is room for improvement with historical rates in France and Spain having been as high as 80% at some points.

Malaysia’s Takaful Train Choo-Choo-Choosing Indonesia

Malaysia largest Islamic insurance companies are now planning on expanding their operations into neighboring Indonesia due to the country’s favorable population demographics, low insurance penetration levels and sustainable premium growth opportunities, which all look to far outpace the performance of their home market in the coming years.

Islamic insurance products, commonly known as takaful, are mutually beneficial coverage policies that cater specifically to Muslim communities looking for Shariah-compliant savings, investment and protection solutions. Takaful policyholders contribute their premiums to a collective pool managed by an Islamic insurer or bank. Funds are then used to pay off claims and any excess is returned to members sans interest. Indonesia, with a Muslim population exceeding 213 million, has proven to be one of the fastest growing takaful markets in the world, with sales expanding by 48 percent to IDR4.5 trillion (US$490 million) in 2010. While Malaysia still remains ahead of Indonesia’s market output for now, with a Muslim population of only 17 million, their Islamic insurance prospects in the long term are not quite as attractive.

Etiqa Insurance, a joint venture between Maybank and Ageas International, has been amongst the most prominent Malaysian takaful providers in expressing these sentiments as of late. In recent interviews, Etiqa officials have clearly earmarked Indonesia as the most likely destination of any upcoming acquisition activity, with the country expected to become part of insurer’s regional portfolio no later than 2013. Founded by a merger between Malaysia National Insurance and Takaful Nasional in 2007, Etiqa has been at the forefront of the Islamic insurance industry in Malaysia and could become the first company to exceed MYR2 billion (US$650 million) in annual takaful contributions this year. The company currently leads the domestic market with an estimated 45 percent share of the market and has also worked to set up takaful insurance operations in Brunei, Pakistan and Singapore over the past few years.

After gaining almost half of the takaful market share in Malaysia it has become important for Etiqa to balance its Islamic insurance business through further acquisitions going forward, both locally and overseas. Indonesia offers the most pronounced business potential for takaful insurance products in the region due to its predominantly Muslim population and rising income levels. Etiqa’s expansion plans in Indonesia will be helped by their ties to Maybank, who have an established presence in the country. Maybank owns a full-fledged Islamic bank (Maybank Indocorp) and a commercial bank (Internasional Indonesia) in Indonesia. Through their affiliation with Maybank, Etiqa thus gains an extensive regional distribution network, which will surely assist sales of their bancassurance and takaful insurance products going forward.

Syarikat Takaful Malaysia, the country’s second largest Islamic insurance provider, has already made the move into Indonesia and expects the country to generate at least half of its profits and revenue base within the next five to seven years. The company’s Indonesian takaful operations have begun to rebound following a corporate restructuring effort in 2011 and account for roughly 5 percent of their revenue base at present. According to their annual report released last month, Syarikat Takaful Malaysia’s pre-tax profits grew by 55 percent during 2011 to MYR101.4 million (US$33.6 million), surpassing the MYR100 million (US$32.6 million) profit threshold for the first time since the company was founded in 1984. In order to maintain this considerable growth momentum going forward the insurer will need Indonesia to match or even improve upon performance of its home market. Company officials expect sales momentum in Indonesia to pick up in particular over the next one in two years, following moves made by the country’s regulator to clean up the Islamic finance market by abolishing ‘Islamic windows,’ or conventional insurers selling takaful services without a license. Addressing this issue should improve domestic Islamic finance business practices through the establishment of dedicated takaful companies.

Islamic insurance and banking will be critical to the development of Southeast Asian economies going forward. Muslims account for over 85 percent of Indonesia’s population of 248 million and 61 percent of the 29 million people living in Malaysia. The Malaysian Takaful Association (MTA) expects the country’s Islamic insurance sector to continue to grow, develop and improve upon its meagre 10 percent market penetration in 2012 due to rising income levels, still untapped rural customer bases and Malaysia’s strong micro and macroeconomic fundamentals. The further development of the Indonesian national economy should also benefit Malaysia’s takaful sector, as more insurers set up operations next door to tap into increased domestic demand. The MTA is working to draft a new risk-based financial framework, which should further aid the development of the domestic Islamic insurance sector by raising capital adequacy standards in line with other insurance segments and fixing previously insufficient investment instruments. These new guidelines, expected to come into effect within the next 2 years, together with the Malaysian government’s Financial Sector Blueprint (2011-2020), are also expected to drive the takaful industry onwards by promoting access to other financial services sectors and introducing best international practices to the market.

The global takaful industry currently accounts for only around one percent of the total international insurance market but this will likely soon change as highly populated, upwardly-mobile Muslim markets like Indonesia, Malaysia, Saudi Arabia and the UAE begin to spend more on insurance, investment and savings policies. Ernst and Young LLP estimated in their World Takaful Report last July that customers would contribute over US$12 billion to Islamic insurance policies in 2011, a 32 percent increase from a year earlier. Key takaful markets are often characterized by their low insurance penetration rates and high economic growth forecast rates. Major foreign insurers are now taking note of the huge business potential from this new type of insurance.

Bank Danamon Indonesia Partners Up With Asuransi Jiwa Manulife Indonesia

Bank Danamon Indonesia has announced that, in partnership with Asuransi Jiwa Manulife Indonesia, the bank will be offering new insurance and wealth management products.

The bancassurance deal, which is set to run for ten years, is a follow up of a partnership agreement between the two companies in October 2011. The agreement was to grow bancassurance in Indonesia, and has now come into effect a little under a year later.

Speaking about the new partnership, Alan Merten, the CEO and President of Manulife Indonesia was quoted as saying: “I am very pleased that the partnership between Danamon and Manulife is now officially launched! This is another significant step Manulife is taking towards realizing our vision to provide strong, reliable, trustworthy, and forward-thinking solutions to our customer’s most significant financial decisions.”

Manulife Indonesia is a joint-venture between Manulife Financial, and PT Tirta Dhana Nugraha, however Manulife Financial owns an overwhelming 95% of the company. The partnerships marks Manulife Indonesia’s 13^th bancassurance agreement with Indonesian banks, with Danamon joining the likes of ANZ, HSBC and CitiBank.

Under this new deal with Danamon, Manulife Indonesia will offer seven products to the bank’s customers. The products will be available at Danamon’s 500+ retail branches across Indonesia, and for the initial transition, Manulife Indonesia have provided 250 specialists and staff to provide advice to customers.

This deal comes as no surprise due to Indonesia’s extremely low insurance market penetration. Henry Ho, Danamon’s President Director, acknowledged the potential Indonesia’s market has: “Many people still don’t have insurance. This is a huge opportunity. One way to drive growth [in fee income] is through bank assurance.”

Danamon has been pursuing bancassurance deals in an effort to “meet our promise in providing Life Time Financial Support through wide range banking product including Insurance and Wealth Management” according to Michellina Triwardhany, Danamon’s Director for Consumer Banking. Following this latest agreement, the bank now boasts two Bancassurance deals. In 2006, Danamon signed a deal with Allianz Life Indonesia. The deal resulted in Allianz providing three bancassurance products to Danamon’s customers.

Speaking about Danamon’s agreement with Manulife Indonesia, Ho said the deal was based “on our [Danamon & Manulife] mutual intention to bring the benefits of world standard insurance and wealth management expertise to a much wider base of customers.”

Manulife Indonesia had a good year in 2011, winning several awards including the Best Life Insurance Company in 2011 in Indonesia from the ABAI as well as a “Very Good” rating for the 6^th time from infobank magazine. Combined with Danamon’s equally impressive credentials, including being crowned the Indonesian Bank Loyalty Champion, this new partnership should help Manulife achieve its goal of increasing its premiums by up to 20% throughout this year.

Increasing Activity in Asia from Zurich and Munich Re

Multinational insurance companies are continuing to look towards the Asia Pacific region for sustained premium growth and innovative new business opportunities to offset the more stagnant performance forecast for their home markets.

This week, representatives from Swiss insurer Zurich Financial Services Group told media that they were planning to expand their operations in Indonesia considerably over the next year, taking advantage of the country’s steady economic growth, rising household incomes and demand for protection products.

Martin Senn, Zurich Group’s Chief Executive Officer, told reporters at a press briefing in Jakarta on Tuesday that his firm expects to triple its market share and become one of the top six insurance companies in Indonesia within the next five years, with premium income from the group’s general insurance products to exceed Rp 2 trillion (US$234 million). Zurich is currently ranked 20 on the list of Indonesia’s top 50 insurance companies with a 1.2 percent market share. In 2010 the insurer reported general insurance premium income from Indonesia was Rp 407 billion (US$46.4 million) and that figure is expected to grow by a further 5 percent to Rp 450 billion (US$48.4 million) by the end of the year. If Zurich can effectively leverage its international insurance expertise and strong capital position further it should be able to join the upper echelon of insurance providers in Indonesia before long.

“We are very confident that this is achievable. With a population of almost 250 million, a growing middle class and a low penetration rate, naturally there’s a huge opportunity to benefit from these conditions,” Senn remarked.

Indonesia weathered the international financial crisis better than most and the development of the country’s insurance sector continues largely unabated. Between 2006 and 2010, the country life insurance premiums grew by 16.7 percent annually, now valued at US$7.2 billion, while non life premium growth rose 5.3 percent over the same period of time with a current market valuation of US$3.5 billion. The Indonesian government has anticipated the country’s gross domestic product will rise by 6.5 percent this year, up from a 6.1 percent growth rate in 2010, driven by strong commodity exports that have boosted per capita income in the country considerably. According to the World Bank, 56 percent of Indonesia’s population, around 131 million people, earned a monthly average of Rp 2.5 million (US$293) in 2010, entrenching the country’s status as a valuable middle-income country.

Mr. Senn affirmed that Indonesia’s fast-growing and sustainable market made it one of Zurich’s top priorities for investment. “Indonesia is a truly important economy as it has a growing middle class, rich natural resources and strong economic growth, so, we’re looking to expand here,” he commented. To achieve their performance targets, Senn said that Zurich would focus on both individual and small and medium-sized business lines in Indonesia to generate premium income. The company also plans to use its recent acquisition of an 80 percent stake in local life insurance firm Mayapada Life to develop its presence in the Southeast Asian country.

While Indonesia’s insurance market does present attractive opportunities, there are several challenges currently facing the companies looking to do business in the country. The first issue is infrastructure. The unusual geography of Indonesia and its many islands makes it necessary for insurers like Zurich to employ a large agency force to promote, sell and manage insurance products. These high operation costs are however slowly being solved by increased use of centralized promotion efforts like call centers and through effective tie-ins with existing banking networks to provide bancassurance products. The more difficult challenge for insurers in Indonesia has remained low general public awareness, with insurance still largely considered a luxury good by a majority of the country’s population. Only around 2 percent of Indonesians have insurance, compared to at least 8 to 12 percent of the population in more developed markets. The government has been taking to steps to educate people and certainly the aftermath of the 2004 tsunami, which made several million uninsured Indonesians dependent on aid, has also been a factor in addressing this issue in improving the general public’s perception of insurance. In the end however, Zurich and other insurers recognize that the greatest trigger for a rise in insurance penetration will be a continued growth in income, with people ultimately more likely to purchase protection and investment products if they have sufficient disposable cash with which to do so.

Zurich’s expansion in Indonesia is part of their larger overall strategy to create a more diverse international portfolio. By 2013, the Swiss insurance conglomerate wants its performance in emerging markets to account for 40 percent of all business operating profit, up from the 26 percent currently, as the ongoing financial crisis in the United States and the Eurozone continues to slow down growth in mature insurance markets. “Development in the US and Europe are challenged by economic crises and tightening regulations. For years to come we’re expecting that growth [in the United States and Europe] would be below potential… and companies might want to go to the East,” Mr. Senn concluded.

Asia is not only a target for premium growth and development work in times of hardship in the West, the region could also be the source of innovative new products for the international insurance industry. German reinsurance giant Munich Re has recently signed a cooperation agreement with China’s Ping An Property & Casualty Insurance, to jointly develop and provide insurance solutions for the mainland’s renewable energy industry.

China has become the leading manufacturer of renewable energy technology, accounting for almost half of the world’s production in 2010, and its market share is continuing to soar. Last year, the country invested US$ 50 billion in research and development for green energy projects, with plans to provide 500 gigawatts to China’s power grid through renewable energy by 2020. The insurance policies that are now being developed by Ping An and Munich Re will bolster the renewable energy sector, providing critical financial protection, limiting investor risk, and enabling manufacturers to properly engage their important large-scale technology projects. If these complex risk solutions are successful it could prove to be an important development in funding alternative energy projects all around the world.

Many multinational insurers are shifting their focus away from western hemisphere countries to the growth markets in Asia in order to capitalize on the increasing affluence in the region. China and India are leading the charge in economic expansion, with both Asian powerhouses reporting bumper growth in demand for insurance products; countries such as Malaysia, Vietnam and Indonesia are also developing quickly in concert with their regional powerhouse neighbors.

Survey Ranks Prospects For Insurers In Asia-Pacific Region

The results of a comprehensive survey into opportunities for insurance companies in the Asia Pacific region highlighted China and India – the two powerhouse nations in the region – as the markets with the most potential. Opportunities in Indonesia, Vietnam and Malaysia were the next highest placed in the survey conducted by the Norton Rose Group – a leading international legal practice.

The survey took into account the views of 92 professionals from the insurance sector across the Asian Pacific region, taking into consideration their knowledge and practical experience in the insurance industry across the region in compiling of the report. The report named ‘Asian Pacific Insurance Survey 2011‘ focused on six key criteria taken into account by insurers in decision making; these included growth prospects, regulatory controls, solvency issues, risk management, capital input and claims procedures.

The findings showed that the Asian powerhouses and two most populous countries – China and India – offer insurers the most significant growth prospects within the Asian insurance sector over the next two years, closely followed by the insurance markets in Indonesia, Vietnam and Malaysia.

Participants in the Norton Rose survey rated China and India as having the greatest prospects for growth in the Asian Pacific region. Analysis of the respondent’s views found that 97 percent believe China offers a ‘very significant to significant’ prospect for growth in the insurance markets; China was followed by India, Indonesia, Vietnam and Malaysia at 90 percent, 80 percent, 77 percent and 77 percent respectively.

The general growth in the economies across the Asian Pacific region is expected to continue and develop as the wealth of the massive populations in these countries grows, creating an increased demand for insurance protection and wealth creation products.

Common characteristics between the five key countries revealed in the survey covered high populations, growing insurance markets, tight regulatory criteria and restrictions surrounding foreign investment.

Speaking on the survey results, Susandarini, Managing Partner, Susandarini & Partners said: “The prediction of significant growth prospects for Indonesia’s insurance industry over the next two years is arguably true given the size of Indonesia’s current population of around 240 million people. Furthermore, the low penetration in the Asia Pacific markets, especially Indonesia, as compared to the mature markets of Europe and North America, should be viewed positively by international insurance businesses looking to diversify their geographical portfolio to countries like Indonesia.”

While recognizing the opportunities present in the Asian insurance markets, the survey reflected on the hurdles insurers need to overcome to be successful such as restrictions on foreign investment and regulatory entry barriers to these countries, which can present a problem for foreign insurers wishing to gain market access.

However, even though there is some evidence of protectionism within the Asian insurance market, the significant opportunities for multi-national insurers wishing to enter or grow in the Asian insurance markets by means of joint ventures with local insurers is recognized. Insurers such as Aviva, Zurich, Generali, and Bupa have all established a presence in the lucrative Asian insurance markets by establishing joint ventures with locally based insurance companies in order to capitalize on the increasing demand for insurance products in the region.

The survey also included the insurance markets in Australia, Japan and Taiwan, where respondents thought that the prospects for significant growth over the next two years were limited due to the mature nature of the markets in these countries.

The prospects in Thailand were rated at sixth place despite the country being subject to political and social turmoil during 2010 with some uncertainty on these issues still prevalent.

The findings in the Norton Rose survey reinforce an earlier report released by Swiss Re, which highlighted the prospects for insurers in the emerging Asian markets in 2011. The Zurich based insurer predicted that the developing economies in Indonesia, Malaysia, Thailand, Vietnam and the Philippines – along with China and India – offered multinational insurers higher premium growth than European and US insurance markets.

The Vietnamese, Chinese and Indian insurance markets are expected to experience an increase in competition over the next two years as more insurers enter these growth markets and vie for market share. However the position in Malaysia is expect to be more stable.

It should be noted that the Philippines, New Zealand and Papua New Guinea were not included in the survey – an issue pointed out by respondents taking part in the survey.

Current regulations and foreign investment procedures within China, India, Vietnam and Indonesia present foreign insurers with an element of difficulty resulting in the preferred method of entering the market being through a joint venture with a local partner. However, a note of caution on adopting this initiative was stressed by Norton Rose, with insurers needing to consider the complexities of entering into successful joint ventures.

The Norton Rose survey has underlined the potential for growth for insurance companies in emerging Asian markets galvanized by a rapidly expanding middle class, particularly in China, India, Indonesia, Malaysia and Vietnam. The findings indicate greater scope for growth for multinational insurers in Asia’s fledgling insurance sector than that which exists in the mature European and American insurance markets.

Although there is some uncertainty surrounding local insurance and investment regulations and possible political issues in the Asian-Pacific region, these are considered to be over shadowed by the opportunities for insurers currently operating or seeking to enter the burgeoning Asian-Pacific insurance market. However, Norton Rose has stressed that diligence is required by insurers looking to enter these markets due to the need to comply with strict regulatory controls and the potential for changes arising from political issues.

Speaking about the overview of the survey, Norton Rose Partner, James Bateson, said: “That Asia is ripe for growth in the insurance sector is a given; just how and when that will occur is more uncertain. Political and regulatory uncertainty together with protectionist regimes are a barrier, but the pure scale of opportunity means that new entrants and existing players wishing to expand have to take strategic risks with those factors. Additionally, the desire and regulatory necessity for global players to maintain minimum standards and group capital, which for most European and US headquartered operations means standards higher than those imposed by local regulation, risks making these operations less competitive than their local peers and when investment opportunities arise, allows local acquirers/investors to offer considerably higher prices.”

Asian economies have been spearheading the global financial recovery, with the Chinese economy officially becoming the world’s second largest economy after overtaking Asian neighbors Japan. Along with China, the Indian economy has gained significantly since the 2007-2008 global recession. The output from China and India has underpinned growth across the Asian Pacific region, with the upward trend set to continue. Meanwhile, doubts exists in respect of the economies in Euro zone countries and North America as austerity measures begin to take effect.

Malaysia’s Etiqa Targets Insurance Growth

Etiqa Insurance, one of Malaysia’s largest composite insurers and takaful providers, is considering further merger and acquisition activity going forward to boost its business, both locally and overseas.

Etiqa is a joint venture insurance operation that was formed in 2007 by a merger between Malaysia National Insurance and Takaful Nasional. The company is 69.05 percent owned by Maybank, with Ageas Insurance International holding the remaining stake. Etiqa now distributes conventional insurance and Islamic takaful proucts under a unified brand name. The company has progressed quickly since its inception and now believes it could vie for the top spot in the Malaysian insurance industry.

Etiqa officials outlined the company’s business ambition through a series of media events in the past week. The Malaysian insurance conglomerate wants to become the overall industry leader by 2015 and intend to leverage their position as the country’s largest takaful distributor and to continue developing a fast growing conventional life insurance business to meet these objectives. Etiqa expect their overall gross written premiums to amount to MYR7.5 billion (US$2.37 billion) by 2015, up from the MYR4.3 billion (US$1.36 billion) projected for this year. Etiqa Chief Executive Officer, Hans de Cuyper explained to the press that hitting these premium targets was achievable given the Southeast Asian country’s growing appetite for insurance and investment solutions. “Based on our own extrapolation, we can be the largest insurer by 2015 by growing top line to MYR7.5billion from MYR4.3billion currently. That alone will be sufficient to be at the top,” de Cuyper said.

Etiqa’s current premium levels place them as the number two insurer in Malaysiam behind market-leading Great Eastern Life, who project MYR5.6 billion (US$1.77 billion) in gross written premiums for 2011. Despite trailing Great Eastern, Hans de Cuyper told reporters that there was plenty of space in the Malaysian insurance market to expand and that the company remained in a solid fiscal position to facilitate growth. “It is definitely an achievable target for us considering our solid financial strength and as we increase our GWP from MYR2.8 billion (US$886 million) in 2006 to MYR4.3 billion (US$1.36 billion) this year, making us a strong number two in the market,” he said. The sovereign financial woes affecting the US and the Eurozone are not expected to have a negative impact on the group’s investments.

Through 2012, Etiqa plan on gaining market share through the development and launch of various new life and family insurance products in Malaysia. This reflects an overall industry trend in the country, which has seen life and family protection products become increasingly more popular, as more people look to cost-effective savings and investment-linked solutions, over just general insurance. A new study released last month by ING Insurance Berhad revealed that 83 percent of all Malaysian consumers believe that there was a greater need to protect their lifestyles now than compared to just 12 months ago. Rising healthcare costs and lifestyle expectations has enabled the attitude towards and awareness of insurance to change quickly. Overall, the rise in income, healthcare, education and housing opportunities across most of Asia, have given families in the region greater access to a lifestyle they would now like to protect.

Etiqa is also working to upgrade its infrastructure, optimize operations and implement bold new marketing strategies to humanize insurance and takaful for a still largely unaware Malaysian populace. By year’s end, the company is also aiming to secure a wealth management license under the private pension framework, which was announced as part of Malaysia’s 2011 Budget. In addition, Etiqa remain open to growing their operations in Malaysia either organically or through mergers and acquisitions with smaller domestic players, but as de Cuyper explained, this would depend on market circumstances going forward. “If any potential acquisitions can add to our strength, fit into our financial ambitions and culture, then we may consider it,” de Cuyper said.

Any upcoming acquisition activity for Etiqa will likely come through the company’s dominant takaful branch. Etiqa Takaful has been at the forefront in the development of the takaful insurance industry in Malaysia, and could become the first company of its kind in the world to exceed MYR2 billion in annual Islamic contributions this year. Etiqa Takaful command roughly 45 percent of the domestic takaful market at present and have also now established Islamic insurance operations in Brunei, Singapore and Pakistan as well. According to Etiqa Takaful officials, Indonesia has been earmarked as the next likely destination, and could become part of the Islamic insurer’s regional portfolio by the middle of 2013. After gaining almost half of the takaful market share in Malaysia it has become important for the company to balance its insurance business through further acquisitions. Indonesia offers significant potential for takaful insurance products due to its large predominantly Muslim population. Etiqa Takaful will also be able to leverage their relationship with Maybank, who already have a significant presence in the country. Maybank owns a full fledged Islamic bank (PT Bank Maybank Indocorp) and a full fledged commercial bank (Bank Internasional Indonesia) in Indonesia. Through their affiliation with Maybank, Etiqa thus gains an extensive regional distribution network, to aid sales of their bancassurance and takaful insurance products. “With an institution like Maybank behind us, we are definitely going to achieve and maintain our leadership in takaful and insurance,” de Cuyper said.

The takaful insurance market has become an important business line for multinational insurance companies searching for new sectors and opportunities for growth. In April, Ernst & Young’s World Takaful Report forecast the takaful market to be worth US$12 billion in 2011, growing 31 percent from US$9.15 billion in 2010. Key takaful markets are characterized by low insurance penetration rates and comparatively high rates of economic growth. Major foreign insurers have duly taken note of the huge growth potential from this brand of products. While the outlook in more established international markets remains quite static, demand for takaful insurance products, targeted towards predominantly Muslim populations in Middle-East, North Africa and South Asia, has grown significantly, particularly in Indonesia, Qatar, Saudi Arabia, the UAE and, of course, Malaysia

Alan Merten Appointed New Chief Executive of Manulife Indonesia

Alan Merten has been appointed by Manulife Financial Group as the new Chief Executive Officer and President Director of PT Asuransi Jiwa Manulife Indonesia (Manulife Indonesia).

Alan Merten has over 20 years of experience working with life insurance, indonisia health insurance for expatriates, wealth management and pensions. His new position will see him take responsibility for growing Manulife Indonesia’s business by using their sales force, partnerships and bancassurance distribution channels to develop their individual insurance, group insurance, pensions and wealth management offerings.

Mr. Merten previously spent three years as the Chief Executive Officer of Manulife Provident Funds Trust Company in Hong Kong, successfully growing their Group Insurance and Provident Fund business to where it now manages USD 8 billion (EUR 6.3 billion) in funds for approximately 1 million customers.

Robert A. Cook, Senior Executive Vice President and General Manager of Manulife’s Asia operations, said “Alan has a strong track record in significant leadership positions since joining Manulife. His expertise and depth of life insurance industry knowledge are great assets to Manulife. His appointment as CEO and President Director will ensure that Manulife Indonesia will remain the leading choice for Indonesian customers for strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions.”

Zurich, Manulife International Operations on the Rise

Multinational insurance companies have found themselves in an acquisitive mood in the past month as firms look to tap into emerging markets to offset the limited growth prospects in their home countries.

On Wednesday, Zurich Financial Services Group, Switzerland’s biggest insurer, expanded its presence in the promising South America market with the acquisition of a 51 percent stake in the life insurance, general insurance and pension operations of Banco Santander in Brazil and Argentina. The deal comes as part of a long-term distribution arrangement between Zurich and the Spanish banking giant in Latin America, which was agreed to earlier this year.

In February 2011, Zurich announced that they would pay Santander an initial US$1.67 billion to enter a 25 year strategic alliance. Santander may also receive additional annual payments over this period, provided certain performance targets are reached. As part of the deal, Zurich acquires a controlling interest, 51 percent share, in Banco Santander’s Latin American insurance arm, which covers operations in Argentina, Brazil, Chile, Mexico and Uruguay. Under the terms of the deal, each local insurance company, country by country enters into an exclusive bank distribution contract with Santander’s respective local banking unit, all subject to local regulatory requirements. The announcement of Wednesday only relates to operations in Brazil and Argentina, with regulatory approval still pending for the other aforementioned countries. Both parties expect the transaction to be fully completed, with the remaining Latin American countries in tow, before the end of the year.

The joint-venture between Santander and Zurich will make the Swiss insurer the fourth largest insurance company operating in Latin America. Zurich will gain access to Santander’s extensive distribution network, which features 5,600 bank outlets and a total of over 36 million customers throughout the region. The newly formed partnership between the Swiss insurer and Spanish financial services conglomerate will create a new company called Zurich Santander Insurance America S.L with the holding company based in Madrid. Zurich will be responsible for the management of its Latin American business. If the Swiss insurer can effectively leverage its international insurance expertise and strong capital position it should be able to maintain its position amongst the upper echelon of insurance providers in Latin America.

Martin Senn, CEO of Zurich, explained back in February that the partnership with Santander would be integral to their further development of their insurance business in the Latin American region. “This alliance with Banco Santander is another milestone in the implementation of Zurich’s emerging-market strategy in both Global Life and General Insurance. It significantly expands our presence in Latin America with a well-established insurance business,” he said.

With their expanding commodity and export-driven economies and low insurance penetration rates, Latin America’s markets offer considerable opportunity for sustainable premium growth; and none more so than Brazil. Brazil is by far the largest insurance market in South America, representing 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 continued regulatory hurdles, large multinational insurers cannot ignore the market’s size and growth potential. In 2010 the Brazilian insurance industry outpaced the country’s GDP and grew 16.6 percent, with gross written premiums totalling R$ 99.4 billion (US$ 62.7 billion). Zurich is also planning to establish a separate reinsurance unit in the country to take advantage of the almost US$1 trillion worth of infrastructure projects now underway to host the 2014 FIFA World Cup and 2016 Olympic Games. This investment, largely made through public money, is expected to provide a huge boost to the Brazilian insurance market and boost the demand for risk coverage considerably.

Latin America is far from the only region offering pronounced investment opportunities for multinational insurers in these troubling economic times. Last week, Zurich completed the acquisition of Malaysian composite insurer Malaysian Assurance Alliance Berhad (MAAB) to reaffirm the firm’s commitment to the lucrative Asia Pacific region. MAAB features a strong management team and a robust distribution platform with over 7,800 multi-tied agents distributing life and general insurance products throughout Malaysia. By the end of 2010 MAAB reported gross written premiums of US$ 476 million. Through the acquisition of MAAB, Zurich has gained a valued presence in one of the most productive insurance markets in the Asia Pacific region, one that could help position the Group for sustained premium growth in the future.

Going forward, Zurich has also expressed interest in expanding its insurance operations in neighboring Indonesia, taking advantage of the country’s steady economic growth, rising household incomes and demand for coverage against risk. Zurich is currently ranked 20 on the list of Indonesia’s top 50 insurance companies with a 1.2 percent market share and Rp 407 billion (US$46.4 million) in gross written premiums. The firms expects to triple its market share and become one of the country’s top insurance providers within the next 5 years, with premium income topping Rp 2 trillion (US$234 million). To achieve these performance targets, Zurich are focusing on both individual and small and medium-sized business lines in Indonesia to generate quick premium income. The Swiss insurer also has plans to use its recent acquisition of an 80 percent stake in local life insurance firm Mayapada Life to further develop its operations in the Asian country.

Zurich will face competition in Indonesia from Manulife, Canada’s largest insurer, who are undertaking their own expansion plan for the country. This week, Manulife Indonesia opened a new marketing branch in Jakarta. The new marketing office is part of Manulife strategy to support future business growth in Indonesia. Manulife’s Indonesian subsidiary has a presence in 24 cities in Indonesia and has 1.5 million in-force insurance policies. In addition to a new expansive customer service centre, the marketing office also features a state-of-the-art education facility to support the insurer’s growing domestic agency force. The number of licensed agents has increased by 32 percent in the past year; from 5,214 agents in the second quarter of 2010, to almost 7,000 agents by the end of June 2011. Manulife Indonesia’s human resources have risen in accordance with the firm’s remarkable business activity. Premium income has risen by 51 percent to Rp 3.5 trillion in the first half from the corresponding period last year. Manulife’s businees in Indonesia operations now account for one-third of their cumulative premium income for the entire Asian region.

Many multinational insurers have been shifting their focus away from western hemisphere countries to the growth markets in Asia in order to capitalize on the increasing affluence in the region. China and India are leading the charge in economic expansion, with both Asian powerhouses reporting bumper growth in demand for insurance and investment-linked products; countries such as Malaysia, Vietnam and Indonesia are also developing quickly in concert with their regional powerhouse neighbors.