Asia Pacific market set for growth and Solvency II dilemma, survey says
The insurance experts also predict that Solvency II will have a significant impact on the insurance sector in the region. Regulators will have to choose between an equivalent regulatory system or run the risk of arbitrage and market division.
According to the survey China is predicted to enjoy the most significant growth. Some 97% of experts surveyed believe that market will experience significant or very significant growth. India came second with 90% expecting the same level of growth over the two-year period. The figures fell slightly to 80% for Indonesia and 77% for Vietnam and Malaysia.
In those countries that still have strict regulations that govern foreign investment, growth is expected to be generated by joint ventures.
Those countries without such strict rules, which include Australia, Hong Kong, Japan, Singapore and Taiwan, will see growth through mergers and acquisitions, found the report.
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James Bateson, head of Financial Institutions in London for Norton Rose said that the sheer scale of opportunity means that new entrants and existing players that wish to expand in the region have to take strategic risks.
“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,” he added.
Some 42% of respondents believe that Solvency II will impact Asia Pacific significantly. Europe has made great strides in the regulation of the insurance industry regionally but from an analysis of the respondents it appears Asia Pacific regulators should consider aligning regulatory regimes regionally and with Solvency II, said Norton Rose.
“Asia Pacific regulators have a stark choice: implement a Solvency II-type regime that is viewed as equivalent and in line with the western world or go for light touch regulation and be exposed to the risk of regulatory arbitrage and a division of the market as western insurers will not be able to compete profitably in the region,” said Anna Tipping, head of the group’s insurance practice in Asia.
The Norton Rose Asia Pacific Insurance Survey 2011 sampled 92 professionals from the insurance sector including life, non-life, reinsurance, advisory and regulatory affairs.
To download the Norton Rose Group Asia Pacific Insurance Survey 2011 please click here.
