THE ASIAN INSURANCE MARKET

Roger WilkinsonChairman & CEO, Asia Pacific, Middle East and Africa

Willis International

DEMOGRAPHIC OVERVIEW

It’s bigger than Texas!

Area 44,579,000 km2 (17,212,000 sq mi)Population 3,879,000,000 (1st)Pop. density 87/km2 (225/sq mi)

30% of the Earth’s Land Area

60% of the Earth’sHuman Population

ASIA MARKET OVERVIEWAsian market has grown over the last decade

Full Range of products on offerSingapore is a hub, with large markets in

China, Japan, South Korea & India

● 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

● 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

SINGAPORE

● 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

A well established business hub for SE Asia

Large Insurers

Total Insurers

Property Capacity

Liability Capacity

Motor %

All the usual suspects

15162 Direct

65 Brokers

US $3.5 bn US $700 m -

CHINAChina is there for China!Highly Protected

Large Insurers

Total Insurers

Property Capacity

Liability Capacity

Motor %

3 Giants 5938 Domestic21 Foreign

US $1 bn US $10 m 74.4%

● 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

JAPANVery 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

Large Insurers

Total Insurers

Property Capacity

Liability Capacity

Motor %

3 Giants 50 US $850* m US $242* m 46.1

*Excluding Flood Earthquake, Tsunami & Special Risk

SOUTH KOREAVery 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.

Large Insurers

Total Insurers Property Capacity

Liability Capacity

Motor %

5 domestic multiline

199 domestic multiline,

4 direct motor,1 State owned credit

5 foreign

US $1.2 bn US $100 m 23.5

INDIAHighly 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

Large Insurers

Total Insurers

Property Capacity

Liability Capacity

Motor %

4 Large domestic

24 US $180 m US $50 m 40

MARKET TRENDS & CAPACITYBy 2015, approximately 39% of the world's economy is predicted

to be in the Asia-Pacific region1

1 Source: Ernst & Young Analysis – International Monetary Fund, United Nations Statistics Division, World Wealth Fund, Swiss RE Sigma 2005

● 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

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

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 RE2 & 3 Swiss RE – Sigma #2 / 20124 Towers Watson – Insights, Insurance Industry Impact and Risk Management Lessons