GFIA highlights increasingly protectionist environment
The annual report of the Global Federation of Insurance Associations (GFIA) has highlighted that an increasingly protectionist environment threatens open trade and market access in (re)insurance.
In an article in the report, Brad Smith, chair of the GFIA trade working group and chief international officer at the American Council of Life Insurers, writes that global trade dynamics have changed in recent months, with traditional free-trade champions re-evaluating previous agreements and policies, and becoming more protectionist.
“Faced with this change, GFIA has continued to call for the removal of protectionism in its many forms and the opening of markets for the international (re)insurance players, which can be such key contributors to countries’ economic and social development. While some positive developments have been seen in key jurisdictions such as Argentina and, in some respects, India, protectionism remains on the rise,” he states.
Mr Smith also notes: “Overall, the Insurance Regulatory and Development Authority of India has continued to propose and/or implement regulations that directly undermine the effects of the 2015 opening of the Indian (re)insurance market. One such regulation is the ‘order of preference’, which introduced a four-tier system in January 2017 under which Indian insurers should cede risk to reinsurers according to a prescribed order of preference that favours Indian reinsurers over foreign reinsurers’ branches. These discriminatory provisions have faced significant international resistance.”
He adds that GFIA has stressed to the Indian authorities the severe negative effects of such detrimental regulatory treatment of foreign market players, whose capacity and expertise are crucial for the sustained development of the local insurance market and serve to reduce the concentration of risk.
Nevertheless, he acknowledges that there are some positive signals with several international reinsurers successfully having established, or being in the process of establishing, branch offices in India following the opening of the market in 2015.
In the article, Mr Smith points out that Malaysia and Indonesia recently started to discuss foreign direct investment caps for (re)insurance companies. Indonesia is discussing lowering the current 80% limit on the foreign ownership of insurance entities, while in Malaysia, the government is enforcing a previously unenforced policy that foreign companies owning 100% of local insurers must cut their stakes to no more than 70%.
In a more positive note, he highlights developments in Argentina, with measures announced last year to gradually open Argentina’s (re)insurance market. This was followed this summer by a resolution that extends the scope of the reforms and speeds up the pace of liberalisation.
