Global Risk Manager roundup: Asia

ASIA SEES GROWING DEREGULATORY MEASURES A number of deregulatory measures have been undertaken in Asia-Pacific countries in the last few years. Most recently, in March 2021, the Indian parliament approved a bill to increase foreign direct investment in the insurance sector from 49% to 74%, which would allow foreign investors to hold majority stakes in Indian-based insurer for the first time. The move was made on the recommendations of the local regulator, the Insurance Regulatory and Development Authority. The cap was raised from 26% to 49% in 2015. Also in March 2021, the China Banking and Insurance Regulatory Commission removed the 51% cap on foreign ownership of insurance companies, part of new rules amending the country’s regulations relating to foreign-funded insurance companies. China permitted foreign companies to own 100% of domestic life insurers in early 2020. Indonesia’s regulator, meanwhile, allowed foreign investors with an ownership stake of above 80% in a private insurer to maintain their ownership percentage despite additional capital injections. According to Fitch Ratings, India’s proposed relaxing of foreign-ownership caps on insurers, and the listing of the country’s largest state-owned insurer, will help the industry attract foreign capital, strengthen solvency and promote competition. The proposals could encourage global insurers to enter the fast-expanding Indian market, said Fitch. HONG KONG PUSHED AS CAPTIVE DOMICILE The Hong Kong Insurance Authority is actively pushing Hong Kong as a captive domicile, with a range of initiatives designed to build Hong Kong into the ideal global domicile for captives, an international risk management centre and a regional (re)insurance hub. Recent initiatives from the authority include legislative amendments expanding the scope of insurable risks of captives and providing a tax concession at 50% of the profits tax rate for specialty risk insurance and selected insurance brokerage businesses. The authority said that in the past year, it has formulated a framework for the issuance of insurance-linked securities, and has been planning the establishment of the Hong Kong Specialty Risks Consortium to facilitate deal matching for overseas project risks between captives, mainland enterprises, banks, insurance brokers and specialist (re)insurers for risk management and (re)insurance solutions. Hong Kong has also recently implemented a group-wide supervision framework, which commenced in March 2021. According to Fitch Ratings, this will improve the capital adequacy of Hong Kong-based insurance groups and will also enable the Insurance Authority of Hong Kong to align its supervisory practices more closely with international standards. FIRST-QUARTER PRICE INCREASES IN ASIA Insurance pricing in Asia in the first quarter of 2021 increased 8% year over year, down from 11%, according to Marsh’s Global Insurance Market Index. The report reveals that pricing in Asia was driven by property insurance and financial and professional lines. Property insurance pricing across Asia saw the tenth consecutive quarter of increase, although the increase of 10% in the first quarter of 2021 was down from the 16% increase in the fourth quarter of 2020. As for casualty insurance pricing in Asia, Marsh says this remained generally flat, as it has for more than three years. Financial and professional lines pricing across Asia saw the largest increase observed in several years (+23%) and the eighth consecutive quarter of increase, driven by stringent underwriting guidelines, reduction in capacity and heightened risk selection, particularly from global insurers. The cyber insurance market in Asia faced considerable upward pressure on rates and deductibles, with a reduction in capacity and narrowing of key coverages, with the premium increase up to 50%, on average, across all industries, says Marsh. The broker adds that insurers have also moved pricing in line with global cyber rates, given the perception that rates in Asia historically lagged.

Global Risk Manager roundup: Asia

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