While integration of insurance markets among the 10 member states of the Association of Southeast Asian Nations (ASEAN) has a long way to go, the prospects for closer connectivity in a region with vibrant growth give insurers and regulators incentive to focus on boosting competitive strategies.
This was the conclusion of an A.M. Best Special Report titled, “Market Prospects Improve for Insurers Ahead of ASEAN Integration,” which looks at the relative strengths of regulatory systems, new business and capital attractions and economic fundamentals, as well as prospects for success in terms of market and business competitiveness.
ASEAN is a geopolitical and economic organization comprising Brunei, Cambodia, Myanmar, the Philippines, Laos, Indonesia, Malaysia, Singapore, Thailand and Vietnam. The proposed ASEAN Economic Community (AEC) slated for 2015 aims to create a competitive economic region with a single market and production base by facilitating the free flow of goods, services, investments, skilled labor and capital.
“As the ASEAN market looks to be a production base for world markets, the ability to provide insurance capacity is vital for the industry across the region,” said Moungmo Lee, general manager at A.M. Best Asia-Pacific Ltd. in Hong Kong. “However, reaching full economic integration will still require a reality check, given the practical difficulties of attaining a single economic bloc comprising mature economies such as Singapore and newly emerging markets such as Myanmar and Cambodia.”
Regulations, economic conditions and ease of doing business differ greatly among ASEAN countries. That diversity extends to political systems, cultures, languages and religions, complicating the AEC project in practice.
In the longer term, less-developed countries may benefit from the accelerated pace of improvement in insurance regulation. A.M. Best said regulatory development leads to a stronger and more level playing field, which will create market consolidation and capital stress for some insurers on the way to achieving a well-functioning and standardized system.
Source: A.M. Best Company
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