Lim Hng Kiang, Trade Minister of Singapore, says that South East Asia has an urgent need for insurance coverage, and that international insurers stand to benefit from the region’s potential. His comments were made at the inaugural ASEAN Insurance Summit in Singapore.
Natural disasters have devastated some parts of Asia in the past three years. 2011’s Tohoku tsunami and earthquake in Japan is estimated to have caused US$210 billion worth of damage, which was 3.6% of the country’s total GDP.
Likewise, Flooding in 2012 caused US$30 billion worth of losses to Thailand’s economy – around 9% of its GDP.
However, ASEAN remains underinsured despite the region’s vulnerability to earthquakes, flooding, volcanoes and other types of natural disasters. Southeast Asia had an insurance penetration rate of only 3.4% during 2013, while the worldwide average was 6.3%, according to Lim. These numbers were even less for non-life insurance.
“The penetration rate for non-life insurance is under 1 per cent or one-third the global average of 2.8 per cent, and there is a dearth of reinsurance and specialty insurance cover for large complex risks such as catastrophe risks”, said Lim.
He believes that there several key areas that insurance companies should focus on developing. Catastrophe insurance is the first, which can help in lowering the economic impact of ASEAN’s natural disasters, as well as securing emergency funds immediately after their impact.
Another area of importance is Aviation, Maritime, and Transportation insurance. Lim explained that more transportation insurance will help to prevent disruptions in international trade.
There are still several challenges that must be overcome by both lawmakers and insurance companies. More consistency in regulatory frameworks within ASEAN will promote greater confidence in cross-border insurance services, and make individuals more likely to take up insurance coverage.
Lim also mentioned that Southeast Asia’s insurance industry needs to develop its expertise in risk assessment and underwriting capability, and that the regional as a whole suffers a shortage of professionals with a good understanding of country-specific risks throughout Asia.
“Effective risk assessment, management and transfer are necessary to insure our economic achievements, and the best way forward is to pool our strengths and expertise together in an integrated ASEAN insurance market”.