Predictions For Chinese Year Of The Snake 2013

1. Hong Kong insurance industry pays higher price for regulation

   The introduction of the proposed new Independent Insurance Authority (IIA) will significantly increase the costs to insurers and insurance intermediaries of meeting more stringent regulation.

   While the consultation phase for the new regulator is under way, 2013 is expected to see the introduction of legislation that will make significant changes to the regulatory environment in Hong Kong. Like other sectors of the economy, insurance in Hong Kong has traditionally been subject to the principle of minimum intervention.

   However, the new independent insurance regulator (due to come into force in 2015) will have strong powers to regulate and supervise across the market, and will include conduct of business requirements. In light of the enhanced oversight powers and duties, the IIA may be more vigilant in its supervision of industry practitioners.

   All of this - plus new privacy and personal data obligations - will place a high, and increasingly costly, administrative burden on the insurance industry over the coming year.

2. International insurers seek new best friends in Myanmar

   The opening up of the insurance sector in Myanmar to local private operations has created considerable interest in the international insurance community who are targeting local firms for co-operation and alliances.

   The international insurance market is focusing on Myanmar, with insurers such as Tokio Marine, Sompo Japan, Mitsui Sumitomo and United Overseas Insurance already establishing representative offices there. These, and other international insurers, are after a deeper understanding of the country with a view to accessing one of last untapped insurance markets in Asia Pacific.

   Even once the restrictions are lifted, it may still not be possible for any of these international insurers to apply and obtain a licence to write insurance business in their own name. We believe that international insurance carriers will only be permitted to enter the market in conjunction with local private insurers, so each of the existing 12 local partners can expect plenty of attention from potential 'new best friends'.

3. Significant increase in investment by Asian insurers outside domestic markets

   In saturated insurance markets, such as Japan, South Korea and Taiwan, regulators are loosening the rules on outward investment by domestic insurers to make it easier for them to capitalise on opportunities elsewhere in the world.

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