APAC Solvency report provides a guide for re/insurers looking to expand in the region
Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON), has launched its Asia Pacific Solvency Regulation report for 2016 outlining the latest non-life solvency requirements for 20 markets in the region.
Aimed at multi-national insurers and reinsurers, including firms looking to expand overseas, the reference guide provides an understanding and benchmarking of the existing methodologies adopted by regulators. Asia Pacific has been identified as an area of growth and, as new capital flows in, companies will continue to take advantage of opportunities so a clear understanding of the status quo and future regulatory changes is crucial.
The following 20 Asia Pacific markets are included in the report:
|Brunei||Indonesia||Malaysia||Papua New Guinea||Taiwan|
Key trends highlighted in the report include:
Risk-based Capital (RBC) trends continue: China has formally implemented its second-generation solvency regime, C-ROSS, which considers the breadth of risks an insurer faces (market, premium, reserving, catastrophe, credit risk etc). This is a significant change from the previous solvency requirement which was simply based on the size of the business and determined as a percentage of the insurer’s premium or incurred claims. RBC adoption is also being considered in India, Hong Kong and Labuan (a federal territory of Malaysia). Meanwhile, regulators in Singapore, Thailand and Japan are considering upgrading their existing RBC requirements to more accurately reflect the risks insurers face.
Enhanced catastrophe reporting: With the implementation of C-ROSS, catastrophe risk is now part of the solvency consideration for Chinese insurers. Regulators in Singapore and Thailand are considering adding catastrophe risk into solvency capital calculation as part of their RBC 2 initiatives. In New Zealand, the catastrophe risk charge in RBC is now calibrated at a 1 in 1000 years earthquake, up from previous 1 in 750 years requirement. These regulatory changes help motivate insurers to pay more attention to their management of catastrophe risk.
Strengthened enterprise risk management (ERM) requirement: Insurers in Singapore and Japan have just started filing Own Risk & Solvency Assessment reports for regulators to review. Meanwhile, Chinese insurers are having their ERM scrutinized by the regulator according to C-ROSS Pillar 2 requirement. The strengthened ERM requirements will help protect the interests of policyholders and promote the overall stability of the industry.
Sifang Zhang, Head of Aon Benfield Analytics’ Regulatory and Rating Agency Advisory team for APAC, commented: “The report is geared towards helping readers drill down to the information that is most important for them. Asia Pacific presents many opportunities, yet it is important to understand the regulatory evolution. The enhanced solvency and risk management requirements may change insurers’ risk appetite, which in turn may have an influence on their reinsurance decisions. While the regional trends are clear, there are differences between the 20+ markets which are each in different development stages. This report serves as a reference book providing handy information on each market’s capital requirements and the latest regulatory changes. The report’s standard structure will enable easy comparisons to be made when insurers are making strategic decisions.”