A.M. Best Report Highlights Opportunities and Challenges in Southeast Asian Insurance Markets

Insurance markets in Southeast Asia continue to offer tremendous opportunities for growth, but fierce competition could lead to serious casualties, a new A.M. Best Co. report reveals.

Analysis of the state of the insurance and reinsurance markets in Indonesia, Malaysia, the Philippines, Thailand and Vietnam finds these countries are set to attract increasing interest from international companies as the region develops its regulatory structures. Southeast Asia is also expected to recover more rapidly from the economic downturn than many of the world’s more mature insurance centres.

Yvette Essen, report author and head of market analysis for A.M. Best’s global financial services division, said Southeast Asian insurance markets offer formidable prospects for growth. “Southeast Asia is among the most exciting and rapidly developing insurance markets. It has weathered the economic downturn better than many other regions and has more fragmented insurance markets than some markets in Northeast Asia. It is no wonder that foreign insurers’ interest shows no signs of abating.”

Ms Essen said the markets in Indonesia, Malaysia, the Philippines, Thailand and Vietnam are set to expand as they are evolving. Takaful, and more recently re-Takaful insurance, is being increasingly offered as an alternative to conventional cover in some countries and the use of microinsurance and insurance pools, also aim to attract new policyholders.

However, she added that there were a number of challenges to both local and foreign insurers and reinsurers. “While these markets offer tremendous opportunities for growth, companies that do not maintain discipline may find that Southeast Asia’s allure conceals some unpleasant surprises,” she explained. “The shortage of industry talent, a dependence on agriculture and tourism, plus political uncertainties could also act as major hurdles.”

The report finds that the move by most Southeast Asian countries toward risk-based capital combined with changing foreign ownership rules could act as contributing factors to the creation of joint ventures and mergers and acquisitions in the region.

It also discusses the impact of the recent global economic downturn on Southeast Asia, and how each insurance market faces a variety of risks and is at a different stage of development.

To download a PDF copy of the full report at no cost, please visit http://www.ambest.com/research.

On Thursday, February 25th, A.M. Best analysts will discuss the Southeast Asia special report and will survey the state of the insurance and reinsurance markets in Indonesia, Malaysia, the Philippines, Thailand and Vietnam in a one-hour webinar set for 4 p.m. Hong Kong time.

Visit http://www.ambest.com/seasia10 to register for the webinar. There is no charge. In addition, a video from the webinar and a transcript will be posted to this same web site soon after the webinar for free viewing.