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THE ASIAN INSURANCE MARKET

THE ASIAN INSURANCE MARKET. Roger Wilkinson Chairman & CEO, Asia Pacific, Middle East and Africa Willis International. DEMOGRAPHIC OVERVIEW. It’s bigger than Texas!. 30% of the Earth’s Land Area. 60% of the Earth’s Human Population. ASIA MARKET OVERVIEW.

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THE ASIAN INSURANCE MARKET

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  1. THE ASIAN INSURANCE MARKET Roger Wilkinson Chairman & CEO, Asia Pacific, Middle East and Africa Willis International

  2. DEMOGRAPHIC OVERVIEW It’s bigger than Texas! 30% of the Earth’s Land Area 60% of the Earth’s Human Population

  3. ASIA MARKET OVERVIEW Asian market has grown over the last decade • 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 – the brakes are on since the Cat losses in 2011 • Not very litigious…Yet! • Market growth in all classes but predominantly P&C Market • All major players represented (Ins / RE) • Ace • Allianz • Chartis • Zurich are some of the Global players Full Range of products on offer Singapore is a hub, with large markets in China, Japan, South Korea & India

  4. SINGAPORE A well established business hub for SE Asia • Big Reinsurance presence – 28 Reinsurers - US $2.6 bn • Growth of Lloyds Asia Platform (Currently 22 Syndicates and US $250-$300 m of written premium) – employing ~ 200 people • 61 Captive insurance companies • GWP US $7 bn (Singapore and regional risks – direct markets) • A US $5 bn Property Risk (Full Value) 100 % was recently placed

  5. CHINA China is there for China! Highly Protected • Fastest premium growth (28%) • A full pipeline of infrastructure projects • Foreign Companies still only make up 1.8% of the non life market • Increasing interest in D&O – Mostly related to US IPOs

  6. JAPAN Very much their own market • # 1 in Asia for Total premium, # 2 in the world behind the US • # 1 in Asia for Non Life premium, # 3 in the world behind the US & Germany • Market share of the top 3 Insurance Groups = 80% • Insurance losses were modest pre March 2011 Tohoku Earthquake – Household EQ & Nuclear Losses will be largely covered by Japanese Government, Private Insurers face billions on Property and Business interruption claims. • Reconstruction will aid economic growth • Insurers taking stock and reviewing insurance coverage in light of CAT events *Excluding Flood Earthquake, Tsunami & Special Risk

  7. SOUTH KOREA Very much their own market Dominated by large domestic insurers • Market share of top 5 insurers: 78% ( Samsung 25.8%, Hyundai: 15.7%, Dongbu: 15.3%, LIG: 13.7%, Meritz: 7.5%) • GWP US $50 bn • Recently introduced revised motor pricing scheme to reign in claims escalation • Increasing demand for long term products has driven growth, in concert with growing industrial and commercial construction markets, a positive outlook for GDP growth and increased penetration of insurance products. • The South Korean insurance regulatory authority introduced a new risk-based capital (RBC) solvency regime in April 2011 designed to increase insurance companies’ capital requirements, allowing them to assume higher risk and improve their financial stability.

  8. INDIA Highly regulated – Future government divesting of public insurers • 4 State owned Insurers – US 5 bn GWP • Private Insurers – US 3.5 bn GWP • Foreign ownership cap of 26% • Solid year on year premium growth led by the strong performing motor and property businesses • Foreign insurers reviewing market entry • Slight hardening due to RI terms and regulatory measures

  9. MARKET TRENDS & CAPACITY By 2015, approximately 39% of the world's economy is predicted to be in the Asia-Pacific region1 • Huge capacity in the region • Increased interest in liability coverage • Improvements in domestic markets & increased sophistication in regulation • Expect expansion of some of the larger Chinese players (already amongst the worlds largest) both in Asia Pac and globally 1 Source: Ernst & Young Analysis – International Monetary Fund, United Nations Statistics Division, World Wealth Fund, Swiss RE Sigma 2005

  10. MARKET COMPETITIVENESS • During the growth of the regional market in Asia it has often offered more competitive solutions than the international markets • Asian clients like a quick turn-around in the same time-zone • By being based in the region (Re)insurers can benefit from lower acquisition costs on some business • Building local knowledge of risk profiles and business practice in the region can allow adaption of underwriting models to fit Asia

  11. ECONOMIC LOSSES • 2/3 of US $380 bn1 Economic Loss in 2010 attributed to Japan Earthquake / Tsunami & NZ Earthquake • Japan may cost Insurers as much as US $35 bn2– Huge amount of reinsurance protection – high losses to property market • Thailand Floods may cost as much as US $12 bn3 – This was a loss that was neither modelled nor anticipated – Thailand was previously considered a Non CAT zone • Zenkyoren – the ‘Farmers Mutual’ of Japan – estimated losses US $7.9 bn4 1 Source: Munich RE 2 & 3 Swiss RE – Sigma #2 / 2012 4 Towers Watson – Insights, Insurance Industry Impact and Risk Management Lessons

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