THE ASIAN INSURANCE MARKET

1
THE ASIAN INSURANCE MARKET

• Roger Wilkinson
• Chairman CEO, Asia Pacific, Middle East and
  Africa
• Willis International

2
DEMOGRAPHIC OVERVIEW
Its bigger than Texas!
30 of the Earths Land Area
60 of the Earths Human Population
3
ASIA MARKET OVERVIEW
Asian market has grown over the last decade

• Not very litigiousYet!
• Market growth in all classes but predominantly
  PC Market
• All major players represented (Ins / RE)
• Ace
• Allianz
• Chartis
• Zurich are some of the Global players

• Protected Marketplaces
• Markets and regulations differ across Territories
• Significant levels of underwriting autonomy
• Accelerating Inflation levels a threat to
  insurance profitability
• Big capacity in all classes in Asia the brakes
  are on since the Cat losses in 2011

Full Range of products on offer Singapore is a
hub, with large markets in China, Japan, South
Korea India
4
SINGAPORE
A well established business hub for SE Asia

• Big Reinsurance presence 28 Reinsurers - US
  2.6 bn
• Growth of Lloyds Asia Platform (Currently 22
  Syndicates and US 250-300 m of written premium)
  employing 200 people
• 61 Captive insurance companies
• GWP US 7 bn (Singapore and regional risks
  direct markets)
• A US 5 bn Property Risk (Full Value) 100 was
  recently placed

5
CHINA
China is there for China! Highly Protected

• Fastest premium growth (28)
• A full pipeline of infrastructure projects
• Foreign Companies still only make up 1.8 of the
  non life market
• Increasing interest in DO Mostly related to US
  IPOs

6
JAPAN
Very much their own market

• 1 in Asia for Total premium, 2 in the world
  behind the US
• 1 in Asia for Non Life premium, 3 in the
  world behind the US Germany
• Market share of the top 3 Insurance Groups 80
• Insurance losses were modest pre March 2011
  Tohoku Earthquake Household EQ Nuclear Losses
  will be largely covered by Japanese Government,
  Private Insurers face billions on Property and
  Business interruption claims.
• Reconstruction will aid economic growth
• Insurers taking stock and reviewing insurance
  coverage in light of CAT events

Excluding Flood Earthquake, Tsunami Special
Risk
7
SOUTH KOREA
Very much their own market Dominated by large
domestic insurers

• Market share of top 5 insurers 78 ( Samsung
  25.8, Hyundai 15.7, Dongbu 15.3, LIG 13.7,
  Meritz 7.5)
• GWP US 50 bn
• Recently introduced revised motor pricing scheme
  to reign in claims escalation
• Increasing demand for long term products has
  driven growth, in concert with growing industrial
  and commercial construction markets, a positive
  outlook for GDP growth and increased penetration
  of insurance products.
• The South Korean insurance regulatory authority
  introduced a new risk-based capital (RBC)
  solvency regime in April 2011 designed to
  increase insurance companies capital
  requirements, allowing them to assume higher risk
  and improve their financial stability.

8
INDIA
Highly regulated Future government divesting of
public insurers

• 4 State owned Insurers US 5 bn GWP
• Private Insurers US 3.5 bn GWP
• Foreign ownership cap of 26
• Solid year on year premium growth led by the
  strong performing motor and property businesses
• Foreign insurers reviewing market entry
• Slight hardening due to RI terms and regulatory
  measures

9
MARKET TRENDS CAPACITY
By 2015, approximately 39 of the world's economy
is predicted to be in the Asia-Pacific region1

• Huge capacity in the region
• Increased interest in liability coverage
• Improvements in domestic markets increased
  sophistication in regulation
• Expect expansion of some of the larger Chinese
  players (already amongst the worlds largest) both
  in Asia Pac and globally

1 Source Ernst Young Analysis International
Monetary Fund, United Nations Statistics
Division, World Wealth Fund, Swiss RE Sigma 2005
10
MARKET COMPETITIVENESS

• During the growth of the regional market in Asia
  it has often offered more competitive solutions
  than the international markets
• Asian clients like a quick turn-around in the
  same time-zone
• By being based in the region (Re)insurers can
  benefit from lower acquisition costs on some
  business
• Building local knowledge of risk profiles and
  business practice in the region can allow
  adaption of underwriting models to fit Asia

11
ECONOMIC LOSSES

• 2/3 of US 380 bn1 Economic Loss in 2010
  attributed to Japan Earthquake / Tsunami NZ
  Earthquake
• Japan may cost Insurers as much as US 35 bn2
  Huge amount of reinsurance protection high
  losses to property market
• Thailand Floods may cost as much as US 12 bn3
  This was a loss that was neither modelled nor
  anticipated Thailand was previously considered
  a Non CAT zone
• Zenkyoren the Farmers Mutual of Japan
  estimated losses US 7.9 bn4

1 Source Munich RE 2 3 Swiss RE Sigma 2 /
2012 4 Towers Watson Insights, Insurance
Industry Impact and Risk Management Lessons