Tuesday, December 2, 2014: Management Conference

The Ritz-Carlton, International Commerce CentreHong Kong

Insurance Industry Asia 2015 –Strategic Priorities for Profitable Growth

Management Summary

Premium Partners

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InsuranceCom Asia 2014: Insurance Industry Asia 2015 – Strategic Priorities for Profitable Growth

InsuranceCom Asia Senior Executive Management Conference on December 2, 2014 in Hong Kong

The second InsuranceCom conference in Asia, Insurance Industry Asia 2015 – Strategic Priorities for

Profitable Growth, discussed the prospects of Asia as the world’s fastest growing insurance market,

and the emergence of rapid technological change and development. Besides addressing the important

macroeconomic and social developments shaping the region’s insurance industry, the conference was

dedicated to analysing the opportunities and challenges represented by the growth in digital media

and advanced analytics.

Moderated by Dr Kai-Uwe Schanz, Chairman and Partner of Dr. Schanz, Alms and Company AG, the

conference brought together decision-makers of the Asian and global insurance industry to exchange

insights into how to tackle these new regional and global issues with a view to better preparing

participants for the challenges ahead.

Factors Shaping the Global Insurance Industry

In order to set the stage Dr Kai-Uwe Schanz provided a high-level perspec-

tive on the factors currently shaping the global insurance industry. These

include the shifting global balance of power, the rise of big data, the

emergence of alternative sources of capital, and the tighter regulatory

framework following the global financial crisis. The many economic,

geopolitical, environmental, technological and societal risks present the

insurance industry with both challenges and opportunities. It is encouraging

to note that many of these global risks are insurable in principle. However,

Dr Schanz opined that the insurance industry is not currently doing enough

to capture the potential provided by these risks. As the gap between

economic and insured losses keeps widening and the industry arguably loses ground, global insurance

leaders will face a big challenge in preserving the sector’s relevance.

Dr. Kai-Uwe Schanz

Partner & Chairman, Dr.

Schanz, Alms &

Company AG

Conference Moderation

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The Gap Between Economic And Insured Losses Has Widened

Figure 1: Widening gap between economic and insured losses globally, 1980-2013

Accompanying the changing risk landscape is the rise of emerging insurance markets. While emerging

markets had merely roughly 5% of global share at the beginning of the century, they now have about

15%, a number that is expected to rise to 30% in a decade’s time. This offers great opportunities to

MNCs operating in high-growth areas, borne out by the spectacle of insurance players venturing from

mature markets to emerging markets.

Emerging Insurance Markets Are Rising Fast

Figure 2: Global share of life and non-life premiums by region, 1962-2023

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Another opportunity is presented by data fluency, which will transform the way insurers interact with

customers, assess risk and design solutions, and operate and recruit talent. A final major development

to watch is the entrance of alternative capital in the wholesale segment of the market. US$ 50 billion

has been allocated so far by institutional investors to insurance risk as a new asset class. However, this

alternative capital could grow to US$ 250 billion if pension funds globally commit just 1% of their

assets.

Moreover, the new regulatory paradigm that has followed the global financial crisis, accompanied by

the near-demise of AIG, has led to the tightening of regulations, notably the Dodd-Frank Act of 2010,

and the Financial Stability Board’s’s assessment of systemic risks associated with Systemically

Important Financial Institutions, which identified 9 insurance groups for higher capital and supervisory

requirements. Finally, the International Association of Insurance Supervisors (IAIS) is planning to

develop a first-ever risk-based global insurance capital standard, applicable to internationally active

insurance groups.

Hong Kong’s Role Amidst Global Insurance Trends

Guest of Honour Ms Au King-chi, Permanent Secretary for Financial

Services and the Treasury, the Government of the Hong Kong SAR,

emphasised the potential of Hong Kong as one of the most open

insurance centres in the world, with more than 150 authorized insurers,

including more than half of the world’s top 20 insurers. Despite being a

small city with only 7 million people, Hong Kong has achieved an

insurance density (annual premium spend per capita) of US$ 5,000,

ranking first in Asia and 6th globally.

Describing the tremendous potential of the Asia-Pacific insurance market,

Ms Au emphasised that the total direct insurance premium in the Asia-

Pacific Region has grown from US$ 1,600 billion in 2003 to US$ 2,500

billion in 2012. She pointed out two trends in the insurance market: first, according to a report

published by the United Nations Development Programme, Asia-Pacific would comprise two-thirds of

the global middle class by 2030, representing a greater demand for health insurance, travel insurance,

and retirement planning products. Second, Asia’s younger generation, which has increasing economic

clout, tends to prefer simple products, transparent pricing and quick delivery of insurance products.

Miss Au King Chi

Permanent Secretary for

Financial Services and the

Treasury,

The Government of the

Hong Kong Special

Administrative Region

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The Hong Kong Government has unravelled a slew of policy initiatives to support the insurance

industry. For example, it is setting up an independent insurance authority to enhance policyholder

protection and maintain the stability of the insurance industry, as well as introducing measures to

attract new players, new products and services, and more liquidity to its market, with a view to

reinforcing Hong Kong’s status as a regional insurance hub. It is also providing tax and regulatory

concessions, and launching promotional efforts, to encourage more enterprises, especially those from

the Mainland, to set up captive insurers in Hong Kong.

Moreover, Hong Kong hosts the largest pool of RMB liquidity outside the Mainland, amounting to over

1 trillion RMB, which is able to support a full range of RMB products and financial activities. The RMB

insurance business, since its introduction in 2010, has become one of the major drivers behind the

long term growth of Hong Kong’s insurance industry, with about 190,000 policies issued with a total

premium of close to RMB 44 billion. The Hong Kong government has sought the People’s Bank of

China’s agreement to allow Hong Kong insurers to participate in the Mainland inter-bank bond market

for matching their long-term RMB liabilities. The Hong Kong government is encouraging

Mainland insurers to cede reinsurance in RMB in Hong Kong so that they can better manage their

currency risk by minimising their mismatch between reinsurance and underlying economic activities.

Hong Kong is also Asia’s largest asset management centre. Last year, its total assets under management

reached a record high of HK$16 trillion with 70% of the funds coming from overseas. In order to attract

more investment funds to domicile in Hong Kong, the Hong Kong government has introduced an open-

ended fund company structure through legislation, extended profits tax exemption to private equity

funds, and waived stamp duty for all exchange-traded funds. A related recent development is the

Shanghai-Hong Kong Stock Connect Programme launched in November 2014, which seeks to promote

the two-way opening up of the capital markets of Hong Kong and the Mainland. Under the Stock

Connect programme, investors in Hong Kong may invest directly in 568 Mainland A-shares, and

Mainland investors in 266 Hong Kong stocks.

Furthermore, the Hong Kong government is conscious of the need to attract more talent and skilled

personnel to join the insurance profession. Measures being undertaken include publicity drives on

financial careers and exposure schemes such as trainee programmes and internship networks in

collaboration with the insurers. Also, the government is formulating incentives for practitioners to

sharpen their professional skills and prepare themselves for senior corporate positions.

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Strengthening Investment Capability and Achieving Profitable Growth

Mr Liang Xinjun, Vice Chairman and CEO of Fosun Group, China’s largest

private conglomerate, provided an analysis of key macroeconomic trends

and investment opportunities in Asia and globally and elaborated on

Fosun Group’s investment strategies.

The low interest rate environment globally reduces the costs of liabilities

and increases pressure on earnings and assets. In particular, the

withdrawal of quantitative easing by the US Federal Reserve will lead to

an increase in interest rates and a rise in LIBOR. Conversely, the European economy is at its bottom

and will probably maintain a low interest rate in the medium term. Russia has recently faced the

pressure of a US$ 100 billion refund, providing Russian assets on the open market. In Japan, the highly

indebted government has a long-term incentive to maintain low interest rates. There will be higher

growth in local asset prices in the United States and Japan, as financial assets in Europe and Japan

have low finance costs. There will also be considerable growth in consumption in China and the United

States, and investment opportunities in Russia for the short term.

Describing the development model of Fosun Group, Mr Liang called his Warren Buffett-inspired model

“Insurance + Investment”, combining professional investment capability with insurance. Out of total

assets of RMB 313,314 million, the Group has 37% in insurance and the rest in industrial operations,

investment and asset management. The Group’s investments are diversified across a large number of

industries, regions and types, allowing its individual management directors to have their own

investment platforms. In terms of philosophy, the Group adheres to value investing and anti-cyclical

investment, and emphasises knowledge and understanding of newly-entered industries and regions

rather than instant achievements.

Fosun Group has an impressive track record of providing insurance companies with its skills in

investing in different markets. For example, Fosun has facilitated 32 investment projects for Fidelidade,

Portugal’s largest insurance company, and 57 for Peak Re, a Hong Kong-based reinsurer. Since many

insurance companies rely too much on rating agencies, Fosun’s strength lies in being able to go beyond

standard methodologies and understand the market to make investment decisions, thereby getting

higher returns.

Liang Xinjun

Vice Chairman and CEO,

Fosun Group

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In terms of global investment opportunities, Mr Liang advised that with the expected rise in US interest

rates, US opportunities are generally reliable, while consumption in Europe will take longer to recover.

Meanwhile, Russia presents a great opportunity due to refund pressures, although there remains a

risk of continued or even tightened Western sanctions.

There are three opportunities in China: the emergence of the middle-class means there is great

potential for products and services catering to them, such as tourism, high-end food and fine dining,

video and media entertainment. The rising use of mobile internet and combining mobile internet with

traditional industries also means there is great potential in investing in related industries and services.

Finally, the growing demand in China’s healthcare industry especially senior care and rising focus on

environmental protection and more carbon-efficient energy also means there will be growth in related

‘green’ industries, products and services. Mr Liang concluded by reiterating Fosun’s commitment to

continue investing in more insurance companies in Europe, Japan and the US, and develop its

insurance business in China.

Socio-Economic Challenges: Winning Strategies and Opportunities

Following from Mr Liang’s talk, Mr Robert Burr, Head of Life & Health Asia,

Swiss Reinsurance Company Ltd, discussed the socioeconomic factors

that are driving the region’s industry. He declared that life insurance has

changed: insurers are no longer dealing with the consequences of

premature death, but the consequences of extended life. To illustrate

this point, he emphasised that more than a million people in Asia turn 60

every month.

Although Asia is seen as a young region with a demographic dividend, it is also undergoing a demo-

graphic transition. In light of the impending ‘demographic tax’ it will have to bear, it is learning from

other parts of the world how to fund ageing. As rapid ageing drives significant economic, social and

political costs on Asia, there will be a gap between the financial life people expect and the financial

life they will get. One example is the ‘healthcare gap’ in Asia; even if governments and society continue

to fund healthcare at a stable share of GDP, there will remain a sizeable gap of US$ 197 billion by 2020.

Robert Burr

Head of Life & Health

Asia, Swiss Re

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The Asia Insurance Outlook – An Economic Perspective

Mr Clarence Wong, Chief Economist Asia, Swiss Reinsurance Company Ltd,

discussed how Asia’s economic outlook would affect the region’s

insurance market. He noted that slower economic growth had resulted in

slower global premium growth, since insurance premium growth is highly

correlated with the economic performance of individual markets.

Slower Economic Growth Has Resulted In Slower Global Insurance Premium Growth

Figure 3: Global insurance premium growth in industrialised countries and emerging markets (adjusted for

inflation, % change year-on-year)

In the US, the outlook is good and will be reflected in higher interest rates in 2015. In the Euro area, a

risk of deflation persists, and quantitative easing will be needed to stimulate the economy. In China,

growth is slowing and the People’s Bank of China will keep up with a loose monetary policy to support

growth.. In Japan, the sales tax hike has hurt growth, and despite high hopes pinned on Abenomics,

Japan is technically in a recession and needs additional stimulus to support asset prices and depreciate

the yen. Overall, the outlook is challenging, with the US improving but economic prospects every-

where else slowing.

Clarence Wong

Chief Economist Asia,

Swiss Reinsurance

Company Ltd.

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Despite the challenging economic outlook, fundamental drivers of insurance demand remain intact.

This includes the rise of the middle-income class and urbanisation. By 2030, two-thirds of the global

middle class will be found in the Asia-Pacific region. Urbanisation will be one of the key drivers of

economic growth and insurance demand. Moreover, the establishment of the ASEAN Economic

Community (AEC), though a work-in-progress, could potentially have a huge impact on insurance if

companies will be able to sell products cross-border.

The economic reforms pursued by various countries will also have an impact on insurance. In China,

the state policy of rebalancing towards domestic consumption from exports could result in slower GDP

growth. But rising household incomes and purchasing power could increase spending on services, thus

boosting insurance demand particularly in personal lines of insurance. In India, market liberalisation

and the government’s emphasis on ‘Made-in-India’ could create investment opportunities. The Indian

Cabinet’s endorsement of a proposal to raise the foreign investment cap in domestic insurers from

26% to 49% would benefit foreign companies entering the Indian insurance market. In Indonesia, the

newly elected government has promised to increase infrastructure investment to address the large

infrastructure gap in the country. This increase in infrastructure spending is likely to spur the growth

of commercial insurance in Indonesia, benefiting aviation, marine, engineering, construction and

liability lines.

Turning on to the region's demographic trend, Mr Wong noted that Asia is currently reaping a

demographic dividend, but different markets are at different stages of ageing. While Indonesia and

India still have a relatively young workforce, China is already past its demographic dividend peak, and

ageing will take place quickly, leading to a ‘demographic tax’. Thus, the insurance industry needs to

focus on ‘protection gaps’, especially the health protection gap.

Meanwhile, low interest rates keep pressure on profitability, in what Mr Wong described as the ‘new

normal’. Although the return on investment (ROI) of large life insurance companies has now stabilised,

it remains far below pre-crisis levels. Meanwhile, the capitalisation of life insurance companies has

increased significantly since the financial crisis. Mr Wong advised that relying on interest rate

normalisation is not an adequate strategy. Although economists have kept predicting a rise in interest

rates, this has not materialised. Structural changes in the global financial system are a reflection of

how the US Treasury has been moving in the last decade. Structural dislocations should be taken into

account in the new normal. He boldly predicted the onset of the “Asian Decade” – Asia is expected to

overtake North America and Western Europe by 2017 and become the biggest contributor to the

world insurance premium.

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The Coming of the ‘Asian Decade’: Asian Premiums Will Lead From 2017

Figure 4: Total premiums in Asia, North America and Western Europe, 2000-2024

China: Protection for Economic Growth and Social Stability

Dr Zhaoyi Meng, Executive Director and Deputy General Manager of

China Taiping Insurance Group Ltd and China Taiping Insurance (HK)

Company Limited, discussed China’s strategies to promote sustainable

economic growth. In a global context of slow economic growth in both

mature and emerging markets, China’s economy is being affected by

downward pressures after a period of rapid and persistent growth.

Moreover, growth in China has been uneven, with significant levels of

poverty remaining. Where will China go from here?

Firstly, China needs to pursue reform and open up and cooperate with

its international partners. In particular, China should focus on economic

restructuring and industrial upgrading, supported by fiscal, financial, investment and other policies,

and develop its tertiary (services) sector (currently only 46% of GDP).

Dr. Zhaoyi Meng

Executive Director and

Deputy General Manager

of China Taiping

Insurance Group Ltd and

China Taiping Insurance

(HK) Company Limited

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How can China implement economic restructuring? By using three methods: top-level regime design,

government support through specific policies, and involving society and the private sector. In

particular, China can further promote interest rate marketization and the internationalisation of the

renminbi (RMB) in order to provide financial support to the real economy and mitigate potential risks.

Interest rate marketization could support the growth of the real economy and impact the pricing of

insurance products, but would put pressure on the operations of commercial banks, making them

more vulnerable to market variations. The internationalisation of the RMB would boost bilateral trade

and cooperation, and have a positive influence on the insurance industry.

Although China is moving towards an internationally-recognised insurance system, this will take a long

time. In the immediate future, China should focus on addressing its challenges such as investing in

infrastructure, funds and capital markets, developing e-commerce, and making use of big data.

Southeast Asia: Winning Strategies in Health, Life and Pension

Mr Charles Barrows, CEO, Aviva Hong Kong Limited, discussed the trends

shaping the Asian insurance industry, and how to use digital technologies

as a driver for growth. These trends include the rise of data, the power of

local and virtual communities, ageing populations, increased education

and awareness, disruptive technologies, and shifting wealth.

In particular, Mr Barrows noted that changing demographics in Asia

present the insurance industry with many opportunities. Insurers can

respond by changing their underwriting mindset, offering better pricing,

longer-term products, products with guarantees, and embedding retirement and health services to

truly serve customers’ health and retirement needs. Good investment vehicles are required to back

products being funded. Customers seek simplicity, value and reward for loyalty.

There are many opportunities presented by digitalisation in Asia in providing better customer service

and increased engagement. Given that the number of potential digital-banking consumers in Asia

could rise to approximately 1.7 billion by 2020, there is a need to have a genuine digital relationship

with customers. By 2020 there will be 50 billion connected services. This will present a great

opportunity for affinity partnerships, bringing data and analytics together in a digital ecosystem.

Charles Barrows

CEO

Aviva Hong Kong Limited

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Senior Executive Plenary Discussion: Market and Industry Trends

What is the impact of interest rate changes? What are the opportunities of ASEAN integration? How

can China increase its insurance penetration?

Panellists expected interest rates in the US will start increasing from mid-2015 due to the end of

quantitative easing, while interest rates in Europe, Japan, China and most of Asia could remain low. In

the area of insurance, the normalization of interest rates would increase competition but also help

insurance companies’ investment returns. From a customer’s perspective, persistently low interest

rates would mean that the pension gap would increase. Employees would need to work longer and

save more.

Although the ASEAN Economic Community (AEC) is not likely to be completed in the immediate future,

it will usher in important developments like regulatory convergence. Insurance integration could

follow the ASEAN minus-X approach: two members which are ready to open up their markets to each

other will do so first, and then other markets will join the group whenever they were ready. Thus the

AEC will be a great opportunity from a marketing and branding standpoint.

Regarding the prospects of insurance penetration in China, Dr Meng opined that premiums could

increase from 1.72 trillion RMB to 2 trillion RMB by 2020. China’s ambition to increase insurance

penetration to 5% is also possible given its annual growth of 21%. However, China will face difficulties

due to interest rate marketization and tariffs, bringing more competition to the industry, and causing

problems for SMEs to compete with bigger enterprises. Mr Wong commented that the Chinese

government is encouraging the insurance industry to help tackle major social issues like aging popu-

lation and environment pollution, but it remains to be seen how it will support the insurance industry

with policies such as mandatory insurance and tax benefits. With the potential blurring of the line

between private and social insurance, insurance companies will have to balance corporate responsi-

bility and commercial viability.

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Digital Business Models, Disruptive Forces in the Asian Industry

Graham Handy, Global Insurance Customer Leader of EY, discussed how

digitalisation had disrupted the insurance industry in Asia. Based on a

survey done by EY on 24,000 customers, he found that there were

significant relationship issues between customers and retail insurers, and,

in particular, a lack of interactions. In general, he said, “customers are

crying out for more contact and communication with insurers”. Digital

transformation could close this interaction gap, presenting opportunities

for customer engagement at reduced costs.

Figure 5: EY Global Consumer Insurance Survey 2014

Graham Handy

Global Insurance Customer

Leader

EY

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How Digital Thinking Can Transform Face-to-Face Insurance in Asia

Hugh Terry, Founder of The Digital Insurer, analysed the impact of digital

insurance in Asia. Seen as a cutting-edge topic two years ago, the digital

experiment had now produced success stories emerging in Asia. He

identified two digital megatrends: firstly, traditional business models are

being redefined by new technologies. Secondly, digital tools are based on

customer-centricity. As sellers of an intangible product, how can insurers

take advantage of this?

Digital thinking has created three changes in customer behaviour. Firstly, customers conduct research

on-line and purchase anywhere, including for financial services. Secondly, customers act through

multiple channels, such as online for travel insurance and offline for retirement insurance. Thirdly,

customers have less trust in financial services brands. In this context, insurers should transform

existing face-to-face models, create or participate in new models, and manage existing models for

profit.

Having a digital strategy allows insurers to revisit their fundamentals, such as outsourcing customer

services to advisers, and presents opportunities to get more leads, better service, and better selling.

In particular, he advocated the use of point-to-sale tablet toolkits as the best opportunity to

commence transformation. The iPad is widely used and simple, and can help to improve sales, leads

and customer service. Moreover, tablet toolkits can be implemented without huge back-end system

disruptions. However, it is important to create a highly engaging tool that advisors would use, which

would achieve an increase in sales. Unless the last dot is connected, all other benefits would not

materialise.

Digital thinking has produced the success stories of FWD and AIA in tablet toolkit innovation, both of

which have achieved impressive levels of increased productivity. In the FWD case, using digital

technology in Indonesia helped the company attract talented advisors and make their service more

attractive and competitive. In the AIA case, the company managed to build and employ the iPOS

(iPoint of Sale) solution in 10 markets in less than 2 years, providing users with a ‘game’-like experience

on their tablet interface. The company achieved increased productivity and hugely transformational

secondary benefits, with more than 50% of advisors adopting the tool in 6 markets.

Hugh Terry

Founder

The Digital Insurer

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The Digital Transformation of Face-To-Face

Figure 6: The Digital Advisor Business Model

Lead generation often comes from an online and more professional sales force, as well as a revolution

in customer service. To be successful, insurers should establish initiatives as strategic priorities and

finance them; distribution leaders should lead from the front. Above all, it is not just about technology

but also about a need to invest in change management, communication and training to make sure

transformation is successful in practice. With the rise of digital technologies, the insurance industry is

at a big pivot point. Companies need to grasp opportunities or be in an expensive race to catch up.

How Telematics Can Transform Motor Insurance

Mark Grant, Member of the Board of Directors and Founder, Insure The

Box, presented a fascinating case study of using telematics to transform

motor insurance. His company was created in 2009 and has sold over

425,000 policies, making an impact on the UK insurance industry.

The UK motor insurance market is one of the most competitive in the

world because of its ability to price on a daily basis. More than 130

brands are competing for 21 million private consumers. The dominant

use of price comparison sites, false claims and unlimited liability have an impact on margins and make

the market even more challenging.

Mark Grant

Member of the Board of

Directors and Founder

Insure The Box

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In this context, Insure The Box provides a fully end-to-end direct insurance platform. Encompassing

the ability to use a wide range of digital devices and collecting more than 1 Billion miles of data per

year, it combines innovative technologies with an exceptional customer experience that encourages

users to drive safely.

Insure the Box collects data using a box bolted to the chassis on motor vehicles. The box uses 2G data,

sending data at intervals or in real time when an accident occurs. Box fitters are provided with tablets

with which they can record the vehicle’s condition. This gives the insurer powerful anti-fraud tools

and a successful method of recovering stolen vehicles. Moreover, the premiums are cheaper, the

claims service better, driving standards of customers improve, and lives are saved.

Telematics also provide a “Super Direct” customer experience. By using internet portals, social media

and live chat, it is attractive to younger customers. Information is fed back to customer at a regular

basis, incentivising them to drive safely. In the case of accidents, the information can also be used to

alert emergency services, helping to save lives. Some challenges of telematics include data protection,

privacy issues, building trust with the customer, building the infrastructure, collecting, storing and

analysing data, and regulatory compliance. However, given the value of telematics in providing

personalised services to customers, Mr Grant argued that it has a bright future ahead.

Lachlan Ma, Associate Director, Samsung Electronics H.K. Company

Limited, also showed how digital technology could offer benefits such as

increased mobility, lower operating costs, data protection, and privacy.

In particular, Samsung has proposed technology solutions to allow the

coexistence of mobility devices (phones and tablets) for personal and

corporate uses.

Lachlan Ma

Associate Director

Samsung Electronics H.K.

Company Limited

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How Multinationals Can Win In Asia

In the last session of the day, Alpesh Shah, Senior Partner and Managing

Director, The Boston Consulting Group Mumbai, evaluated the

opportunities for MNCs in the Asia-Pacific region. He pointed out that

although Asia-Pacific is a rapid growth market, it is very diverse. For

example, the emerging ASEAN market currently has a low share for MNCs.

International Investors Face Significant Challenges in Asian Markets

Figure 7: MNC shares in selected markets

What are the elements that contribute to MNC success in Asia? Mr Shah opined that the most

successful companies bring successful businesses, rather than just planting flags, and often strike deals

(M&A, joint ventures, partnerships). In addition, MNCs should decide between local and regional

strategies. They should groom new local talent instead of taking from the same pool of global

executives. While keeping an eye on profits, they should dare to be different, and have a ‘right to win’

mentality.

Alpesh Shah

Senior Partner and Managing

Director

The Boston Consulting Group -

Mumbai

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How to Win? 3 Questions for Insurers

Figure 8: Winning strategies for multinationals in Asia

Marcelo G. Teixeira, Group Head of Insurance, HSBC, explained that HSBC

was not moving away from insurance, but needed to adapt to Basel 3

regulations by keeping their insurance business under 10%. He

emphasised HSBC’s strategy of building complementarities between the

manufacturing capability of HSBC and its partners.

HSBC’s objective is to fulfil the needs of 50 million customers; in Asia it

has currently 6 million customers. In addition, HSBC aims to go through 5

different needs (retirement, investment, protection, education, legacy

planning). Asia is lagging in the last 3 needs.

Marcelo G. Teixeira

Group Head of Insurance

HSBC Holdings plc

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David Fried, Chief Executive Officer, Emerging Markets, QBE Insurance

Group, said that the respective value of banks and other distribution

channels depends on each party’s value proposition. Relationships with

banks, agents, brokers and affinity groups are all important. Within the

commercial and specialty insurance space, the Group aims to be a leader

through various different channels, providing product expertise through

organic growth.

Geoffrey Riddell, Member of the Group Executive Committee, Regional

Chairman of Asia-Pacific & Middle East and Africa, Zurich Insurance

Group Ltd, felt that bank insurance is less important in Asia than

elsewhere in the world. While there is strong bank insurance in Spain,

Italy, Germany and the US, in Asia, success is achieved more through

focusing on customers and propositions.

The panellists generally acknowledged that developing local talent

remains a challenge for multi-nationals, which are generally feeding from

the same pool. Instead, they should focus on creating full mobility

through their networks, or bring people from other financial services

industries. However, one problem was the existence of mobility restric-

tions put in place by regulators, for example in Indonesia, that exacer-

bated the difficulty of hiring talented people from these countries.

With the rising ambitions of local and regional players, there was a consensus that the competitive

landscape of the insurance industry will have an increasing focus on conduct relative to solvency. With

Chinese, Japanese, Korean and ASEAN insurers and reinsurers expanding throughout the globe, there

will also be an increased focus on the influence of these players on the Asian and global market. Banks

owning insurance companies might find partnerships with third parties to be more capital efficient,

causing the dominance of a combination of multinationals and large regional players in a context of

fairly abundant capital. In addition, depending on the regulatory regime, a large number of non-

insurers and retailers might take the opportunity to enter the insurance market.

David Fried

Chief Executive Officer,

Emerging Markets

QBE Group

Geoffrey Riddell

Member of the Group

Executive Committee,

Regional Chairman of

Asia-Pacific & Middle East

and Africa

Zurich Insurance Group

Ltd.

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Finally, they established that “insurance is not static but forever evolving” – it is precisely the

emergence of new approaches that enables people to generate profits. In particular, Asia presents

opportunities for new approaches through distribution due to the high use of mobile phones and

social media, although this would also lead to the creation of new competitors. Finally, digitalisation

creates a need for complementary channels and delivery of the right products to the right channels.

There was a general agreement that the insurance market in Asia is under-penetrated. The industry is

likely to be driven forward by growing consumer needs, wealth, and awareness of insurance. However,

insurers have to come up with new technologies and products for risks which, although deemed to be

uninsurable today, might be insurable in the future.

Conclusion

Insurance Industry Asia 2015 – Strategic Priorities for Profitable Growth marked the second time the

InsuranceCom conference was held in Asia, reflecting the region’s growing economic and geo-political

clout. Asia as a whole is predicted to overtake Europe and North America by 2017, and become the

world’s largest insurance marketplace. Factors such as the end of QE in the United States, the

liberalisation of the Chinese economy, rapid urbanisation, the rising middle class and Asia’s changing

demographic structure, and an increased focus on energy and the environment provide huge

opportunities for the insurance industry.

Within this context, the rise of digital technologies also represents a significant disruptive force for the

industry. Consumers are empowered by these new technologies, and their expectations in terms of

products and services have changed considerably. While insurance companies need to adapt their

strategies to this new context, they should bear in mind that the fundamentals of insurance will not

change: winning trust, and providing sound advice and customer service.

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Speakers and Panellists:

Miss Au King Chi, Permanent Secretary for Financial Services and the Treasury, The

Government of the Hong Kong Special Administrative Region

Liang Xinjun, Vice Chairman and CEO, Fosun Group

Robert Burr, Head of Life & Health Asia, Swiss Reinsurance Company Ltd

Clarence Wong, Chief Economist Asia, Swiss Reinsurance Company Ltd

Dr. Zhaoyi Meng, Executive Director and Deputy General Manager of China Taiping

Insurance Group Ltd and China Taiping Insurance (HK) Company Limited

Charles Barrows, CEO, Aviva Hong Kong Limited

Graham Handy, Global Insurance Customer Leader, EY

Hugh Terry, Founder, The Digital Insurer

Mark Grant, Member of the Board of Directors and Founder, Insure The Box

Lachlan Ma, Associate Director, Samsung Electronics H.K. Company, Limited

Alpesh Shah, Senior Partner and Managing Director, The Boston Consulting

Group Mumbai

David Fried, Chief Executive Officer, Emerging Markets, QBE Insurance Group,

Geoffrey Riddell, Member of the Group Executive Committee, Regional Chairman of Asia-

Pacific & Middle East and Africa, Zurich Insurance Group Ltd

Marcelo G. Teixeira, Group Head of Insurance, HSBC Holdings plc

Moderator:

Dr Kai-Uwe Schanz, Chairman & Partner, Dr. Schanz, Alms & Company AG

Hong Kong, December 2, 2014

The next InsuranceCom Asia conference will be held on November 10, 2015 in Hong Kong.

21

Lector CLS Communication – the leading language services provider (write – edit – translate)

located in Asia, Europe and North America

Author Yvonne Guo, PhD Candidate, National University of Singapore and Executive

Assistant, St.Gallen Institute of Management in Asia

Host uvision develops and leads independent and sustainable executive management

communities in Central- /Eastern Europe and Asia.

Conferences: BankersCom, InsuranceCom, EnergyCom and PropertyCom

Forums: Swiss IT Sourcing Forum, Swiss Business Process Management Forum, Swiss

Information Management Forum

©Copyright uvision Ltd 2014 – Zurich, Switzerland. All rights reserved.

For further information please contact:

InsuranceCom Asia Michael Schaefer lic. oec. publ. Senior Business Manager

uvision Ltd Nordstrasse 9 8006 Zurich Switzerland

+41 44 260 10 60 michael.schaefer@uvision.ch www.insurancecom.asia, www.uvision.ch

Premium PartnersDebevoise & PlimptonEYSunGard Swiss Reinsurance Company Ltd The Boston Consulting Group

PartnersCognizantPactera Technology International Ltd.Samsung Electronics H.K. Company, LimitedSolution Providers

Global PartnerCLS Communication HK Limited St. Gallen Institute of Managemt in Asia Swiss International Air Lines

Organizer: www.insurancecom.asiawww.uvision.ch