asia, the new west

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Asia, the New West

GRM 010April 29, 2014


Claude F. GallelloManaging Director – Willis International/New YorkGlobal Network Practice Leader responsible for sales & servicing of cross-border retail accounts in 130 countries.

Reginald PeacockAsia Pacific Head of Customer, Distribution & Marketing – Zurich Insurance Company/Hong KongAn Asia market veteran, leading Zurich's Broker and Customer relationship management in Asia Pacific since the establishment of the Zurich Global Corporate business in AsiaPac in 2007.

Suresh KrishnanExecutive Vice President & Global Accounts Division Leader – ACE Group/New YorkResponsible for managing ACE’s large multinational Latin America & Asia Pacific clients with complex insurance programs


What to ExpectAt the end of this session, you will:•Know what the key Asian insurers, current market conditions and local policy issues are.•Understand what the key regulatory and compliance issues in Asia are. •Know how and when to utilize the local markets in support of a global program.


Asia Overview

Claude GallelloGlobal Network Practice Leader

&Managing DirectorWillis International


ASIA

Area 44,579,000 km2 (17,212,000 sq mi)

Population 14.2 billion

Countries 48

30% of the Earth’s Land Area

60% of the Earth’sHuman Population


CURRENT MARKET CONDITIONS

● Not very litigious…Yet! ● Market growth in all classes

but predominantly P&C Market

● All major players represented (Ins / RE)

• Ace• AIG• Allianz• Zurich are some of the

Global players

● Protected Marketplaces● Markets and regulations

differ across Territories● Significant levels of

underwriting autonomy● Accelerating Inflation

levels a threat to insurance profitability

● Big capacity in all classes in Asia – recovered quickly after the Cat losses in 2011


SINGAPORE

● Big Reinsurance presence – 28 Reinsurers - US $2.6 bn

● Growth of Lloyds Asia Platform (18 Syndicates) – staff 200 people

● 62 Captive insurance companies

● GWP US $10.4 bn (Singapore and regional risks – direct markets)

● Total insurers – 168

● Property capacity – US$ 3.5 bn

● Liability capacity – US$ 700 m

A US $5 bn Property Risk (Full Value) 100 % was recently placed

A well-established business hub for SE Asia

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Willis Perspective on Current Markets

Property & Business

Interruption

Workers’Compensation

Financial Lines/D&O

Casualty

Construction

Lead Markets Current Trends Opportunities

ACE, AIG, Generali, MSIG, QBE, RSA, Zurich

Continuously softening market driven by over capacity and competition in the Region

• Reductions in premium • Improved Terms and Conditions• Multi Year Placements• Low Claims bonus provisions

ACE, AIG, ASIA, MSIG, QBE, RSA, Zurich

ACE, AIG, Chubb, Liberty, QBE, RSA, XL, Zurich

ACE, AIG, Catlin, Munich Re, SCOR, RSA, Zurich

Market is hardening (5% plus increases), much higher if claims experience has been poor

Market is currently stable, awards are typically increasing so limits are under review

Market is stable, reductions available for proven Contractors

• Alternative placement structures ? • Self Insured Retention

• Premium reductions if warranted • Improved Terms and Conditions• Multi Year Placements• Low Claims bonus provisions

• Reductions in premium • Improved Terms and Conditions• CAR plus first year PAR / BI

available

ACE, AIG, Allianz, Chubb, MSIG, Zurich

Continuously softening market driven by over capacity and competition in the Region

• Reductions in premium • Improved Terms and Conditions• 18 Months Placements• Combined Policies for Crime and PI


Underwriter View – International Programs &

Structural Issues

Reg PeacockHead of Customer,

Distribution & MarketingZurich – Global Corporate in

Asia Pacific


Asia Pac remains leading Region for FDI

FDI Intelligence Report 2013•China & India are the two Regional leaders in that order•Indonesia & Australia are the most consistent, stable & growing Markets

Zurich’s Received portfolio reflects following leagues:

1. Absolute Nos:• China• Japan & India• Australia

2. 3 Year % Growth:• India• Singapore & Hong Kong• Malaysia & Indonesia


CHINA1. Contract Certainty• Good standard of Local Policies registered.• Exported Wording is allowed – ostensibly. It is subject to translation and

CIRC Approval and can take up to 6 months for a decision. Same applies for extensions

2. Non-Admitted / Reinsurance Restrictions• Non-Admitted is not permitted• Maximum cession of 80%

3. Tax• Insurance Premium Tax of 6.5% or 6.9519%

Comments• Tax and regulatory implications are serious, but limited application to date• Claims process on domestic programmes


AUSTRALIA1. Contract Certainty• Good standard of Local Policies registered.• Exported Wording is allowed, but significant regulatory challenges so

not preferred.

2. Non-Admitted• Non-Admitted is allowed for Corporations

3. Tax• Yes, and payable on non-admitted (OOT Tax)

Comments:• Tax compliance on OOT needs proper structuring, payment and audit

trail by your carrier


INDONESIA1. Contract Certainty• Good standard of Local Policies registered.• Exported Wording is extremely challenging. It is subject to translation

and Regulator Approval and can take up to 12 months for a decision

2. Non-Admitted Reinsurance Restrictions• Not allowed, but with some exceptions which – in turn – will impact

Risk Engineering and Loss Adjustment.

3. Tax• No direct premium tax, but there is stamp duty and reinsurance tax

Comments• New tariff and invigorated regulator.• Transfer pricing scrutiny can be a factor.


Lessons Learned and Trends Identified

Suresh KrishnanGlobal Accounts Leader

Asia Pacific—Latin AmericaACE Group


Trends Identified• “Redefinition”risk—intention v. interpretation?• Insurance Contract Certainty—Is course of conduct (behavior) consistent with terms

of policy? • Compliance—Regulatory and Tax Consequences?

Consider this REPORT when underwriting cross border insurance

-----------------------------------------------------------------------------------------------------

• R eputation—brand risk/headline exposure• E xecution—role of insured, broker, insurer• P lacement—need for local policy/excess policy—where?• O perations—policy obligations, claims adjustment and payment, local

certification—Accurate Documentation?• R egulation—insured, broker, insurer• T ax—premium tax, income tax


Lessons LearnedLesson—Identify where claim is best paid and not paid• Claims: Where do you want your claim paid? Property– 2011 Thai FloodsCBI--2011 Japan TsunamiLesson—Cover gaps in local policies even if locally compliant• Local Regulation: Use of local DIC-DILEnvironmental—2013 ChinaLesson—Insuring personal liability will be the key decision point for D&O• Asking the right questions for D&O indemnificationD&O—2013 IndiaLesson—Non-insurance contracts influence what is or is not covered• Contract Certainty: More than the insurance policyPolicy Interpretation—2014 USALesson—Beyond Property and Liability Insurance• Local Performance: Travel Accidental Death and Dismemberment local policiesBusiness Travel Accident—2014 Malaysia--China--------------------------------------------------------------------------------------------------------Point—Decision making team in multinational programs: International Broker, Risk Manager,

Treasurer, Tax, Compliance, International Insurer


Questions?


Contact Information***

Claude F. GallelloTEL: +1-212-915-7745

EMAIL: [email protected]***

Reg PeacockTEL: +852-2-977-0650

EMAIL: [email protected]***

Suresh KrishnanTEL: +1-212-209-2291

EMAIL: [email protected]

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