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ASEAN FOCUS

Prospect of increased competition “It’ll be important to engage constructively with the
The introduction of a more liberalised market would regulators who will shape the emerging ASEAN sub-region,
improve industry standards and it would also increase the and build a deeper pool of mobile Asia executives capable of
competitive pressures with the likely influx of more foreign operating across borders in diverse market environments.”
players into Southeast Asia. The need to be proactive in the regulatory process was
“Markets which have historically been highly regulated also highlighted by Mr Alan Merten, Director, Insurance
and protected will most likely attract foreign competitors,” Consulting, Asia Pacific, Towers Watson, to ensure that
said Ms Sharon Ooi, Head of P&C Reinsurance (Southeast future rules are fit for purpose.
Asia) at Swiss Re. She added industry profits may come “CEOs need to stay abreast of developments and try to
under pressure as a result, but also sees positives for the work through their local industry bodies and with regulators
industry. and government to influence for positive developments and,
“Small insurers may be forced to merge with others or for example, to help to ensure that the practicalities of doing
close down, but on the other hand this is also a catalyst to business are taken into account,” he said.
improve market efficiency on a longer term base,” she said.
A more liberalised market will also make Southeast Asia Assessing strategies
even more attractive to foreign insurers, especially as they Mr Mohit Mehrotra, Deloitte Southeast Asia Financial
face slower growth opportunities in their home territories. Services Industry Strategy and Operations Leader, said
However on the flipside, analysts point out that the that over time, CEOs would need to reassess their business
anticipated integration will likely also result in greater model in light of the new realities which the AEC presents.
correlation between ASEAN nations in terms of business “A fundamental re-look at business model and operating
cycles. As such, insurers with revenues concentrated in the model will be critical to assess whether they should be in
region might experience greater volatility. defence or attack mode. What segments they should focus
on, which will be cross –border? What segments will be
Downside risks difficult for others to address given the unique capabilities
While there are many positives to be gained from the AEC, insurers might have and/or develop? Does it make sense to
there are also several downside risks facing insurers. One develop a regional middle-back office?” he asked.
example relates to a heightened Again, while the AEC
provides opportunities for a
level of enterprise risk which has more streamlined operation in
to be adapted to suit the different
context of each ASEAN country. the region, Ms Ooi emphasised
“A multi-location business is A more liberalised market the need to act local.
will also make Southeast Asia
much harder to supervise than “Products which sell in
home markets may not be
a single location business, so even more attractive to foreign popular or even accepted
there are heightened governance
challenges, both for management insurers, especially as they face in other countries, due to
differences in social and
and regulators. Another slower growth opportunities in cultural differences. Therefore
challenge lies in resolving the
tension between a preference for insurers need to examine the
a one-size-fits-all approach to their home territories. markets carefully and develop

governance and risk management tailor-made products which
suit local needs.”
across jurisdictions, with the fact
that ASEAN comprises a very
diverse spectrum of jurisdictions, Conclusion
The AEC’s impact on the
each with their own peculiarities which need to be addressed insurance sector is going to be gradual rather than
sensitively,” said Mr Dewhurst.
On the other hand, Mr Pirie pointed out to the challenges immediate. The extent and pace at which things would
in building up scale which requires the right skill to execute. occur remain unclear, such as when true cross-border
“There are evidently risks if one chooses to expand, insurance activities will be possible, the prospect
both from over trading and from missteps along the way. o f h a r m o n i s e d e n t r y r e q u i r e m e n t s i n t o A S E A N
There is also the real risk of diseconomies of scale where markets and the freedom of movement of talent across
bigger sometimes means less agile, more costly and less jurisdictions.
efficient,” he said. However, the goal towards greater integration
“The single market is a classic risk/reward scenario. Get provides authorities an impetus in raising the base
it right and you will benefit significantly; get it wrong and standard and efficiency in the region. It would also make
you could risk financial failure,” Mr Dewhurst concluded. the region a more attractive marketplace in the long run.
“In the near term, the AEC is unlikely to have a major
How can CEOs prepare? impact on market strategy decisions for direct writing
So how can industry leaders prepare as the region looks to insurers, but for those companies not in ASEAN today
enter a period of transition in an integrating marketplace? or those with only one ASEAN market in their portfolio,
And more importantly, how do they compete given the the attractiveness of an ASEAN investment boosted by
changing macro dynamics. the possible future opportunities from the AEC may
Mr Anupam Sahay, Head of Insurance Practice for Oliver mean that a hold and/or invest decision makes sense,”
Wyman in the Asia-Pacific said domestic insurers for a start said Mr Merten.
have to fully understand and prepare for potential changes From now on, every player would have to “up their
to the capital, regulatory, risk and competitive environment. game” , whether to defend home markets or leverage on
As for the international and regional players, he said: the AEC to expand within the region.

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