The Association of South East Asian Nations (ASEAN) Economic Community (AEC) which envisions ASEAN as a single market that’s fully integrated into the global economy, will bring strong non-life insurance premium growth prospects, according to the ASEAN Insurance Pulse published by Dr. Schanz, Alms & Company and Malaysian Re.
The establishment of the AEC in 2015 represents a major milestone in the regional economic integration agenda in ASEAN, offering opportunities in the form of a huge market of U.S. $2.6 trillion and over 622 million people.
The report highlighted the attractive future growth prospects of the ASEAN region’s U.S. $23 billion non life insurance market – where strong premium growth momentum is expected to follow the AEC’s establishment.
The region’s low non-life insurance penetration, at about one-third of the global average, is seen as the AEC’s largest medium-term opportunity.
Almost two-thirds of executives polled expect ASEAN non-life premiums to grow in line or faster than the Gross Domestic Product (GDP) over the next twelve months.
For countries such as Indonesia, the Philippines and Vietnam premium growth is expected to continue outperforming the economy at large.
Currently non-life insurance premiums of the ASEAN markets amount to just 1% of regional GDP, only about a third of the global average.
“The ASEAN Insurance Pulse shows very clearly that the AEC integration is viewed positively by the ASEAN insurance community. The executives polled expect a major boost to their markets through enhanced competition, innovation and governance,” says Dr. Kai Uwe Schanz, Chairman and Partner of Dr. Schanz, Alms & Company and author of the study.
“Almost half of the executives we interviewed believe that AEC will be a positive development for their respective companies in the next five years. Another 40% agree in principle, but caution that a five-year time frame might be too short for such benefits to materialize.
“Nearly two-thirds of the participating executives anticipate AEC to profit their domestic insurance markets at large as innovation as well as customer awareness and satisfaction are set to improve.”
The ASEAN region’s rapidly growing middle class is expected to benefit personal lines of insurance, this will be compounded by cross-border expansion –facilitated by the AEC integration –creating additional opportunities.
“AEC is a huge regional growth project, not least for the ASEAN insurance industry,” said Zainudin Ishak, President and Chief Executive Officer of Malaysian Re; “in order to capture its full potential AEC depends on the active participation from the corporate sector together with the relevant regulatory bodies.”
Launched in 2015, the AEC aims to create a single market by 2025 to facilitate the free movement of goods and services, including insurance, among the ten ASEAN countries.
Against this backdrop, 86% of interviewees said they would welcome a common regulatory framework across ASEAN, believing it would counterbalance increasing competition brought about by the liberalisation measures envisaged.
