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Asia Pacific Sector Insights
| Navigating the AEC Landscape: Strategies for Insurers in ASEAN
Nevertheless, binding the Southeast Asian bloc
can induce progressive developments, not
dissimilar to increased FDI inflow
3
to Europe
after the formation of the EU.
The foreseeable interchange of expertise and
investments will help mature emerging Asia’s
financial frameworks. Increased intra- and
cross-border trade is likely to spur demand of
insurance coverage to rein in business and
credit risks. Economic prosperity can drive
income growth and herald a new wave of
affluent consumers with disposable income
— a core clientele for insurers.
Liberalization: Not a Uniform Market
Much of ASEAN’s discussions centered on
removing trade tariffs and promoting goods
flow, but liberalizing financial services is far
more complicated to achieve.
Recognizing member states’ financial sectors
are maturing at a different pace, opening up of
insurance markets means gradually taking down
barriers, which is not the same as creating a
uniform market. In fact, an entirely free market
may disrupt financial and social stability of
emerging frontiers.
This explains why some countries are ready to
go ahead first, while others join in later, as
illustrated in Figure 1.
The AEC is expected to substantially remove
restrictions in ASEAN’s financial services sector
by the end of 2020 and beyond. By far, life
insurance has the largest market share in ASEAN
5 (Indonesia, Malaysia, the Philippines, Singapore
and Thailand), while general insurance dominates
the insurance market in BCLMV (Brunei,
Cambodia, Laos, Myanmar and Vietnam).
Trade in Services
Liberalization of insurance services covers four
“modes” of supply for service delivery, which
are defined by the World Trade Organization as
“cross-border” in nature:
Mode 1: Cross-border supply
Delivery of a service from one country’s territory
into the territory of another nation (e.g. an
insurer based in one country writing policies for
policy holders based in another nation)
Mode 2: Consumption abroad
Supply of one country’s service to the consumer
of another nation (e.g. a person travelling
abroad buying a policy from an insurer based in
the country s/he travels to)
Mode 3: Commercial presence
One country’s service supplier provides services
in the territory of another nation (e.g. insurer
based in Singapore writing policies in Thailand
through the Singapore insurer’s Thai branch or
subsidiary)
Mode 4: Presence of natural persons
Services provided by a service supplier in one
country through the presence of natural
persons in the territory of another country (e.g.
insurer based in Singapore managing a claim
through an employee working in Thailand)
Liberalization of these modes is far from
complete in ASEAN. Cross-border supply of
insurance services under Mode 1 and cross-border
consumption of insurance services under
Mode 2 are still widely restricted in Asia.
In reality, Singapore’s insurance sector is the
most liberalized among the ASEAN members,
but restrictions remain in modes 2 and 3 for
insurance intermediation such as broking and
agency services.
3
Share of global FDI into
EU increased from 34%
during 1980 to 1992 to
41% during 1993 to 2007.
Figure 1: ASEAN Members’ Commitment to Liberalize Insurance Sub-sectors by 2015
Insurance Sub-sectors
Member States
Direct Life Insurance
Indonesia, and the Philippines
Direct Non-life Insurance
Brunei, Cambodia, Indonesia, Malaysia, the
Philippines, Singapore and Vietnam
Reinsurance and Retrocession
Brunei, Cambodia, Indonesia, Malaysia, the
Philippines, Singapore and Vietnam
Insurance Intermediation
Cambodia, Malaysia, Indonesia, the Philippines,
Singapore and Vietnam
Services Auxiliary to Insurance
Brunei, Cambodia and Indonesia
