While the planned year-end timeline for 10 Southeast Asia nations forging ahead under a single, open economic market appears to be slipping, the region’s insurance industry has reached common ground on the benefits of operating beneath such a model, according to an A.M. Best special report.
The report notes that the free flow of services, including those from the financial sector, will allow insurers to build commercial presence and sell products on a more regional basis with professionals able to move throughout the countries comprising the Association of Southeast Asia Nations (ASEAN).
These countries include Brunei, Cambodia, Myanmar, the Philippines, Laos, Indonesia, Malaysia, Singapore, Thailand and Vietnam. The combined gross domestic product of this ASEAN Economic Community (AEC) stood at USD$2.4 trillion in 2013 and is projected to nearly double by 2020.
The Best’s special report, titled “Capitalizing on the Benefit and Opportunity in an ASEAN Open Market,” characterizes the shared benefits of building a stronger regional bloc to attract new business along with improved resilience to potential external shocks.
While it appears unlikely that the AEC will be in place by the end of the year, cooperation has been increasing among ASEAN regulators as member nations develop and upgrade their own frameworks, the report said. Movement toward the International Association of Insurance Supervisors’ core principles exemplifies another key area of conformity.
“As the markets develop and mature, the level of sophistication in the insurance framework is expected to increase,” said Moungmo Lee, general director, analytics. “Achieving an open market requires a leap forward towards building trust and cooperation among member nations, along with recognition of existing differences.”
Under the AEC blueprint, ASEAN member countries have identified insurance sub-sectors for liberalization by 2015. So far, only Indonesia and the Philippines have committed to opening their markets for life, non-life, reinsurance, intermediation and auxiliary services, the report said. However, there are substantial doubts on when, what, and how liberalization will ultimately take place.
There is some thought that the concept of AEC may skew too much of an advantage toward larger and financially stronger foreign players, A.M. Best said.
On the whole, A.M. Best believes that the growth in the insurance industry will benefit the AEC in the long run.
Source: A.M. Best Company
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