Above 90% of the measures for the financial services sector due under the AEC Blueprint have been implemented as of October 2013; this was revealed at the 14th CEO Insurance Summit in Asia, the first dedicated conference on the ASEAN Economic Community for the insurance industry. The Summit cut through the noise around the subject with an update on the progress made under the AEC Blueprint from ASEAN’s Secretary General, the plans of insurance regulators, and the thoughts of regional CEOs.
Notable progress has been made towards the establishment of the ASEAN Economic Community (AEC), said Mr Le Luong Minh, Secretary General of ASEAN, in his keynote address.
80% of AEC Blueprint measures implemented
“We are pleased to note that 79.7 % of the measures due under the AEC Blueprint have been implemented as of October 2013. Important gains include the implementation of measures to promote trade facilitation, capital market development, food security, pro-competition and intellectual property rights (IPR) rules and regulations, and infrastructure development,” he said. “Focussing on the financial services sector, the implementation rate was quite impressive and reached above 90%.”
In 2012, in line with the Phnom Penh Agenda for ASEAN Community Building, ASEAN Leaders adopted a list of “AEC’s Key Deliverables and Prioritised Measures for 2013 and 2015” to address the challenges and obstacles to AEC 2015. These included measures towards the establishment of a single market and production base by facilitating the flow of goods, services, investment, skilled labour, and capital in ASEAN.
“Specifically, to achieve a freer flow of capital, ASEAN endeavours to have substantial progress in the development of ASEAN Banking Integration Framework including harmonisation of banking standards and regulations; development of semi-integrated banking and insurance sector; and full implementation of ASEAN Linkages covering all stock markets in ASEAN,” said Mr Minh.
He also stressed that the insurance industry in the region has a critical role to play in providing security and safety to both individuals and business or industry against losses and risks. Thus, it is crucial for the insurance industry to remain resilient and competitive to contribute to the regional and national economies of ASEAN.
Reality waiting to happen
Many equate AEC for the insurance industry with Europe’s single insurance market, said Ms Evelina Pietruschka, Secretary General, ASEAN Insurance Council. “Although there are lessons that can be learnt, the objective and situation in ASEAN at this point in time is very different. ASEAN has 10 members with very diverse insurance market maturity and needs,” she said. “But still, we can’t sit and wait.”
Urging insurers to prepare for AEC and not be daunted by more intense competition, she said that ultimately, an integrated ASEAN will be good for both consumers and insurers. “Competition forces continual improvements in the industry. It is the very oxygen that drives businesses, otherwise, the industry and its growth will become stagnant,” she said.
Insurers should use AEC 2015 to prepare for the broader ASEAN Vision 2020. Continuous improvements and milestones are expected, she said. But more importantly, she said, an integrated ASEAN is not a pipe dream, but a reality waiting to happen.
Opportunities to move from local to regional player
“The regional economic integration in 2015, resulting in the ASEAN Economic Community, will certainly present us with some challenges but will also open the door to many more opportunities,” said Mr Rudi Spaan, Head of Broker & Client Management, AIG APAC Holdings.
An integrated ASEAN will boast a robust market of approximately 617 million people, US$2.3 trillion in GDP, and $114 billion in FDI with high return on investments – projected 11% annual rate of return.
“It will open borders for many companies resulting in a larger playground of opportunity,” he said. Many smaller companies would see this as a threat and more of an opportunity for the larger organisations but this certainly is not the case. AEC will provide local companies with opportunities to move from local to regional entities if they take on the challenge and absorb the opportunities, he added.
Finding your niche
The market always has room for companies that strive to compete on more than just price by offering covers, services and experiences to truly differentiate, said Mr Spaan. One such way is to focus on a niche, which is not necessarily small but rather specialised, requiring a specific skill set and knowledge, and providing growth potential for both large and small insurers, he said.
And construction risk is one such niche. Construction has boomed tremendously in the past decade, and according to a report by Oxford Economics, it is now a $9 trillion-dollar industry, and is set to grow to $15 trillion by 2025, he said.
Emerging markets are primarily responsible for this boom – in 2005, 35% of construction spend was in emerging markets. In 2013 it reached 52%, and in 2025 it will be over 60%. And Asia remains the fastest growing region, he added. “ASEAN Economic Community presents us with these opportunities and it is the companies that use their skills, experience and a drive to innovate where required that will benefit from the new united front.”
The two-day Summit with the theme “Getting ready to tap the huge potential in the ASEAN Economic Community”, was organised by Asia Insurance Review and The Geneva Association. Close to 150 delegates from 20 countries attended the conference with AIG as lead sponsor, MetLife as gold sponsor, QBE as silver sponsor and Great Eastern Life, Zurich and A.M. Best as sponsors.