Asia Market Review 2018

Aon’s Fifth Annual Report on Insurance and Risk Trends

Contents
Headline

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

01 Market Review — Specialties

Aviation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Captives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Casualty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Default Risk – Structured Credit & Political Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Default Risk – Trade Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Financial Lines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Health & Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Marine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Mining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Reinsurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Terrorism and War. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Transaction Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

02 Market Review — Technology, Innovation, and Associated Risks

Innovation and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Cyber. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

03 Market Review — Countries

Macroeconomics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Indonesia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Malaysia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Pakistan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Philippines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
South Korea. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Taiwan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Vietnam. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Asia Market Review 2018 2

Introduction
Welcome to the 2018 Asia
Market Review, our fifth annual
publication providing you with
a comprehensive view of the
risk and insurance landscape in
the world’s most populous and
fastest growing region.
In this document, we review the major events
witnessed in 2017, and take a look ahead to 2018
and the key trends we expect to play out over the
coming 12 months and beyond. We cover the key
specialty lines of insurance, the majority of Asian
geographies, major technology and innovation
developments, and the regional macroeconomic
landscape in the following pages. In order to
provide you with the most complete view of the
region, we have once again enlisted the support
of some of the leading underwriters in Asia to
provide their perspective on the most significant
developments which are impacting businesses and
markets now and into the future.
2017 has been a year of both familiarity and
divergence for the Asian insurance market
when compared to prior years. We witnessed
a continuation of the softening market trend of
previous years as capital continued to flow into
the market, and a largely benign loss environment
within Asia for most classes of business. This ensured
that downward pressure on rates continued.
However, whilst regional loss experience remained
benign, 2017 was a year where increasing
globalisation and the interconnectedness of
global businesses and financial markets became
more tangible in Asia. The Asian market, which
traditionally has been highly insulated from external
shocks felt in other global markets, is now feeling
the effects of the losses incurred by international
insurers as a result of hurricanes Harvey, Irma,
and Maria. As the world continues to connect
with developments in information technology,
efficiencies in scale, and financial innovations driving
change, markets will converge further and faster.
As these changes continue to develop, the support
and direction of truly global risk and insurance
partners will become increasingly valuable.
In 2017, as in prior years, we witnessed a continuing
increase in the level of risk maturity in the region,
although there are a number of areas where
significant economic losses continue to be suffered
unnecessarily due to insufficient risk transfer
strategies. One such area is cyber risk, where clients’
exposures continue to grow exponentially, year
on year, whilst buyer behaviour lags behind that
of peers in other geographies. Given the pace of
technological development, adoption, and reliance
in key business processes, the impact of these losses
will begin to be felt at the most senior levels of
organisations if they fail to grasp the significance of
these exposures.
The increasingly tense stand-off between the United
States and North Korea is fast becoming the greatest
challenge of Donald Trump’s fledgling, controversial
presidency, and is an issue which impacts the entire
region. The significant exposure represented by
this historic challenge has been recognised by a
number of clients with operations in North and East
Asia who are seeking to transfer a portion of this
risk. The devastation that would be caused by any
conflict between North Korea, the United States,
and other regional and global powers raises a very
real challenge to the insurance market in terms of
the level of risk the insurance market is able to bear.
This acute issue of insurability has also raised wider
questions around policy wordings. We have seen,
and can continue to expect to see, underwriters
seeking to clarify what is covered under traditional
products, so as to prevent losses being picked up
which were not intended to be covered but must
be paid due to ambiguous policy language. In this
environment, the technical ability of the broker and
its consultancy skills are paramount. Clients must be
cognisant of this change in tack and confident in the
advice they are receiving.
Asia Market Review 2018 3
 In recent years, there has been a significant level of
focus on innovation, InsureTech and FinTech, and the
potentially disruptive impact technological advances
could have on the insurance industry. Whilst we
constantly see innovation impact our industry
and that of our clients, changes in the insurance
industry have been incremental rather than such as
those witnessed in the travel, real estate or private
transportation sectors, for instance. Client and
industry innovation can only be viewed as a positive,
and we continue to support this through our global
investments in data and analytics which are in excess
of USD350 million annually, as well as through our
global innovation centres, based in Singapore and
Dublin. Therefore, whilst I expect to see increasingly
sophisticated modelling techniques supporting
underwriting processes as the industry harnesses
the power of big data, I do not foresee any across-
the-board disruptive changes to the way we do
business in the near term, although we embrace
positive innovation for our clients.
I commented earlier that global insurance markets
are becoming increasingly interconnected, and in
2017, we began to witness a hardening in some of
the insurance markets in Australia, which could be
taken as an indicator of things to come elsewhere.
Geoffrey Lambrou
CEO, Specialty Broking & Operational Excellence, Asia
Aon
My view is that whilst the natural catastrophe losses
incurred in North America and the Caribbean will
be felt, there is still a global surplus of capacity in
the insurance market, and the losses incurred will
generally impact insurers’ earnings but not their
capital in 2018 in a significant way. Whilst there
will be concern from underwriters around natural
catastrophe exposed risks and default risk in 2018,
other classes of business such as Financial Lines
and Liability should be largely unaffected as the
region remains significantly less litigious than other
parts of the world. The net effect of this is likely
to be that the market will be largely unchanged
through 2018, with positive client results available
for well-managed risks. For buyers of insurance,
the importance of well-articulated and enacted
risk management plans, detailed and accurate
presentation of their risks, and sophisticated
insurance buying strategies will be key to achieving
the optimal risk transfer cost clients continue to
search for. At the centre of this equation is the
broker, whose role becomes more complex but
more valuable in evolving market conditions.
From everyone at Aon, we wish our clients and
future clients every success in 2018 and beyond.
Asia Market Review 2018 4
Headline

01
Market Review
Specialties

Asia Market Review 2018 5

Aviation

2017 Rate Movements 5–10%

Key Risks Affecting
the Aviation Sector
2018 Rate Movements 5% -5%
1. Cyber crime/
hacking/viruses/
Loss Experience malicious codes
benign moderate severe

2. Business
interruption
Global passenger and air traffic volume continued to increase in 2017,
primarily on the back of rapid growth in the low cost carrier (LCC) segment,
3. Major project
which has increased accessibility for both business and leisure travellers alike. failure

The Asia Pacific (APAC) region once again towards insurance purchasing with an
retained its position as the dominant increased number of clients procuring 4. Damage to
reputation/brand
region for air travel, commanding 35 coverage for previously uninsured risks
percent of the global market. Data from such as cyber.
the International Air Transport Association
2017 was another benign year for Aviation 5. Economic slowdown/
(IATA) also showed that air traffic for APAC slow recovery
airlines grew nine percent year-on-year in claims, with improvements in aircraft

August – a faster pace than other regions .
Whilst the industry in Asia continues
to experience growth as incomes and
living standards increase, airlines remain
under extreme cost pressure in an
ultra-competitive global market with
low entry barriers. Given the prevailing
competitive environment and low cost
model adopted by increasing numbers of
airlines, it is important that clients ensure
that they are protecting themselves
appropriately, rather than buying “cheap
cover”. The value of fit-for-purpose
insurance is even more greatly felt in low
margin industries such as Aviation where
uninsured losses have the potential to
significantly impact businesses. In 2017,
we saw growing maturity in the industry
1 technology and industry risk management
resulting in the safest year on record. The
6. Regulatory/
continuing benign claims environment legislative changes
resulted in further downward pressure
on rates, with clients enjoying reductions
in the range of five to ten percent on 7. Failure to attract/
average, with greater reductions on offer retain top talent
for well-managed risks. Whilst catastrophic
or large losses were absent in 2017, the
value of attritional losses increased. As 8. Political risk/
uncertainties
the value of aircraft continues to rise, the
value of everyday losses from bird strikes,
hard landings, and other sources of minor
incidents have increased in tandem. As 9. Property damage
the premium pool continues to shrink, the
cost of attritional losses will become more
of a concern for insurers as they begin to 10. Increasing
impact underwriting profitability. competition

Source:
1. “Traffic growth for Asia-Pacific airlines up 9% in August, outpaces other regions”, Nisha Ramchandani, The Business
Times, 9 October 2017 (URL: www.businesstimes.com.sg/transport/traffic-growth-for-asia-pacific-airlines-up-9-in-
august-outpaces-other-regions)

Asia Market Review 2018 6

Aviation fast facts Outlook

In 2018, Aon also expects to see

5.6%
increase in passengers
in 2017
Failure to attract and retain talent was
another concern for Aviation clients in
2017, as the industry continues to grow
and demand for key personnel, such as
pilots, continues to increase. Outside
the region, organisations like Ryanair
have experienced well-publicised
difficulties when they fail to attract and
retain talent, causing clear economic and
reputational disruption. The European
airline cancelled 18,000 flights, affecting
400,000 customers, when it did not
have sufficient pilots available to fly
27.8m USD125bn
total passengers earmarked for Asian
in 2017 airport infrastructure
improvement
a number of routes due to a holiday
scheduling mistake, and the airline found
itself without enough staff in reserve to
cover the shortfall. Currently, the global
Aviation industry employs circa 500,000
pilots, with that number expected
to grow to 1,100,000 in the next 20
years. As the labour market for key staff
becomes increasingly competitive,
employee benefits offerings will become
an ever more important talent acquisition
and retention tool.
an increase in seating density
on some flights as the low cost
model becomes increasingly
pervasive. The case for higher
seat-count configurations on
the A380 is growing as interest
in more dense arrangements
gain momentum among airlines
and lessors. Malaysia Airlines is
to re-configure its A380s in to a
700-seat layout for pilgrimage
flights, while an international
lessor is considering offering this
type of configuration for charter
operations. Increasing the seating
density, and therefore number of
passengers on each flight to this
extent, will significantly add to the
liability exposure which the flight
operator must bear and/or transfer
to the insurance market.
As tensions rise on the Korean
Peninsula, we expect to see more
scrutiny and interest in hull war
and allied perils cover as the threat
of war continues to intensify.
This trend has already begun to
emerge in the final months of
2017 and will only grow if the
rhetoric from each side continues
to escalate.

In 2018, we expect to see an

increase in the amount of private
business travel in the region, which
brings with it a slightly different
risk profile from commercial
travel, albeit one which is often
viewed favourably by the market.
We will also see a number of
construction projects as core
aviation infrastructure is upgraded
and regional aviation capacity is
“For over a decade and half, the Aviation insurance market has experienced year-on-year soft increased as it continues to chase
market conditions in every sector of our market. This has been driven by overcapacity, improving the continued fleet expansion of
safety records, and fierce competition in both the insurer arena as well as the broker arena. the region’s operators.

However, in 2018, we believe that the market will be taking a more cautious approach to Clients can expect some rate
renewals generally. This will be led by the airline market where we expect to see at least reductions in 2018, although we
a flattening of rates and a tightening in coverage, although small rate reductions may be do not believe these will be of
achieved on clean renewals with healthy exposure growth. The aerospace and general aviation the magnitude afforded to clients
market have their own dynamics, however we expect to see a change in the market resolve in in prior years. However, with
these sectors of the business as well. such low margins, there is now
greater scope for large swings
Every assured will continue to be assessed on their own merits, but the Aviation insurance in premiums for risks with poor
markets stance is changing. With a generation of buyers, brokers, and insurers who have never loss histories. Whilst we are not
experienced a firming market, 2018 will be an interesting year.” forecasting a hardening of the
market, the almost perpetually
David Boyle
soft conditions of prior years seem
Head of Property and Special Risks, South East Asia
unlikely to continue as per the
AIG APAC Holdings Pte. Ltd.
status quo, going forward.

Asia Market Review 2018 7

Captives

2017 Rate Movements 0–10%

2018 Rate Movements Flat

Loss Experience
benign moderate severe

Last year we commented that we may be approaching the bottom of a soft

market cycle, globally. It appears that this may now be the case, as years of
thin rates, compounded by large natural catastrophe losses in North America
and the Caribbean, has led to a hardening of the market in some territories
for some risks. Whilst more pronounced in the London market, we saw this
trend play out to an extent in the Asian market, as rate reductions for early
renewals in 2017 trended towards flat renewals or smaller reductions as the
year wore on. If this is a trend which prevails over the medium term, we
anticipate an uptick in the number of clients looking to captives as a key tool
to manage total cost of insurable risk. Asia still has some way to go in this
respect, with captive utilisation for established businesses in the region still
lagging well behind that of their peers in Europe and North America.

Property and Casualty remain the key
lines of business for captives, with
utilisation fairly similar in 2017 and 2016.
The historic, soft market conditions
which clients have enjoyed for a number
of years has meant that there has been
less impetus on clients to retain even
challenging risks, due to the over-
capitalised global insurance market.
However, in a market where there is less
appetite for certain risks, we may now
start to see an increase in the number of
businesses who either take larger self-
insured retentions, or incubate certain
new risks in their captives in order to
develop a track record which will later
support risk transfer.
In 2017, we saw an increase in interests
from captives wanting to write life and
Health & Benefits (H&B) business, two
classes which typically have not been
widely written in the region. Utilising a
captive for life and H&B provides clients
with a greater level of flexibility, rather
than buying an off-the-shelf product
from the insurance market. The tailored
solutions which can be created via a
captive vehicle also provides clients
with a-typical exposures who are
looking for highly specialised cover,
such as key man insurance, with a useful
alternative to purchasing traditional
insurance products.
In 2017, the Monetary Authority
of Singapore (MAS) made some
amendments to legislation regarding
the tax incentives scheme impacting
Singapore domiciled captives. In the
past, the captive tax incentives scheme
applied only to offshore business, but has
now been expanded to cover onshore
business as well. Companies have up
till 31 March 2018 to benefit from the
captive tax exemption scheme for a 10-
year period on qualifying underwriting
and investment income. A concessionary
tax rate of 10 percent will apply for
applications made after 31 March 2018.

Asia Market Review 2018 8

Captive domiciles by country
Singapore 71 Labuan 43
The MAS has been keen to develop the
insurance-linked securities (ILS) market
and recently announced the offering of
an ILS grant that will fund 100 percent
of the upfront costs incurred in issuing
catastrophe bonds in Singapore. Details
of the grant scheme have not been
announced, but the scheme is available
for catastrophe bond issuance from
1 January 2018.
Micronesia 18 Hong Kong 3 the region continues to increase,
Finally in 2017, Labuan, a domicile that is
typically focussed on domestic Malaysian
corporate business, marketed itself far
more aggressively in strengthening its
presence in the Asia captive market.
The territory is attractive to a number of
businesses as the only jurisdiction in Asia
that offers protected cell companies and
sharia-compliant captives.
Outlook
As the level of risk maturity in
we expect to see an increase in
the usage of captives as a tool to
reduce total cost of insurable risk,
manage attritional losses, prevent
dollar swapping with the market,
and to collect risk information
and data to improve risk
management processes.
A key trend exhibited by
businesses globally is the move to
break down silos, increase synergy
between different departments
and encourage business units to
work closely together. As such
initiatives continue to take hold of
organisations and the functions
of Risk Management, Finance,
and Human Resources become
increasingly intertwined, we
expect to see an uptick in the
number of businesses placing
Medical, Life, Kidnap and Ransom,
and other similar policies where
purchasing traditionally falls
outside of the risk manager’s
remit, into captives.
Asia Market Review 2018 9
Casualty

2017 Rate Movements Flat

2018 Rate Movements 0–10%

Loss Experience
benign moderate severe

With the rapid emergence of new technologies, clients in traditional

business sectors, such as manufacturing, are facing increasing pressure
to innovate in order to compete. As ever greater levels of automation
and digital technology are integrated into all businesses, supply chains,
operational processes, and production systems become increasingly
complex. For this reason, cyber exposure, supply chain disruption, and
brand and reputational damage – three often interlinked exposures – are
fast becoming key risks in the region. As the pace of technological change
continues to accelerate, these exposures will become increasingly acute.
We noted in 2017 that while Asian businesses are now becoming more adept
at managing their supply chain risks, cyber still represents a major coverage
gap for most organisations.

Increasingly, we are seeing Asian
businesses entering the European and
North American markets as they search
for growth opportunities overseas,
either by establishing a physical
presence, or by exporting. Whilst these
developed economies represent exciting
marketplaces for Asian businesses,
they also introduce new and more
challenging regulatory and legislative
environments. The increased exposure
to litigation in these markets brings
into focus the importance of public and
products liability covers, well-structured
international programmes with network
servicing, and international claims
handling as a key priority for clients.
2017 was another year where clients
enjoyed risk adjusted rate reductions.
However, while reductions were
achievable, the large reductions which
were readily available in previous
years did not materialise. Whilst we
did not witness a hard market in 2017,
there has been a tapering off in the
size of reductions available and the
behaviour of some underwriters is
starting to change. We saw a selection
of established liability players starting
to either walk away from risks, or
significantly reduce their lines if they
felt pricing levels were not sufficient to
deliver their target return on equity.
While there were no notable new market
entrants in 2017, those who entered in
2016 and other less established players,
conversely to some established insurers,
behaved extremely aggressively.
Some markets were willing to provide
significant reductions in rates and
deductibles, or in some instances at nil
deductible levels. This counteracted
the approach of some of their more
seasoned competitors, with the net
effect being improved terms for clients.

Asia Market Review 2018 10

Whilst casualty market conditions were favourable Outlook
for clients in 2017, businesses remain challenged by a
There has been significant
number of risks which are either partially insurable or
discussion whether the large
uninsurable, such as damage to brand and reputation, natural catastrophe losses
failure to innovate, and failure to attract and retain new sustained in the global property
market will have an impact on the
talent. In some cases, products are available in capital
casualty market in 2018. Whilst
markets which can support clients in mitigating these insurance markets are global,
risks, but in other instances, such as failure to innovate, insurance classes are linked,
and insurers’ cost of capital may
these exposures are pure business risks. The increased
increase slightly, we believe that
client awareness of and focus on partially insurable the abundant capital available
risks has driven some product innovation in the shape in the market will be sufficient
of hybrid products, which are blending elements of to prevent any hardening of the
Casualty market in 2018. Whilst
traditional insurance cover with non-traditional and
some insurers may be seeking
alternative capital deployment solutions. Given the to impose rate increases, there
challenging macroeconomic situation, competitive are a number of markets which
will emerge relatively unscathed
global environment, and low margin trading conditions
from 2017. Therefore, whilst
many clients find themselves in, effective balance conversations will be held on an
sheet protection becomes a key concern. Continuing individual basis, we believe that
there will not be widespread rate
the trend of increasing maturity in the Asian market,
increases in 2018, and that most
we saw a number of clients transferring previously clients will achieve some rate
uninsured risks, such as product recall, to the insurance reductions at next renewal.
market over the course of the year, whilst pricing
A gradual shift in the regulatory
remained attractive. landscape in Asia is beginning
to raise the awareness level of
environmental risk, as well as
the demand for environmental
liability protection. Asia as a
region still lags behind other
markets in this respect, where
environmental liability is
considered a core cover in high
risk industries such as Oil and Gas.
As the regulatory environment
in the region begins to shift,
environmental laws become
more onerous, and governments
become increasingly invested
in environmental concerns,
organisations will see their
exposures grow exponentially.
This change is already taking
place. In June 2017, the Chinese
government announced that it
will make environmental insurance
mandatory for businesses in
heavily-polluting industries,
such as mining, pharmaceutical
production, and hazardous waste
disposal. This change has already
taken place in South Korea,
where since 1 July 2016, the
purchase of environmental liability
insurance has been mandatory
for a number of industrial sectors,
although specifically in Korea,
government schemes reduce the
premium volume which enters the
commercial insurance market.
As exposures increase and
purchasing becomes mandatory
in some industries, the demand
for products which effectively
transfer environmental liabilities
will only increase. Closely linked
to this exposure and another key
risk for clients is the associated
reputational damage which
occurs following an environmental
catastrophe. There is significant
opportunity in this space for
product innovation from the
insurance market, and we expect
to see a continuation of the
trend of recent years of blended
risk transfer and alternative risk
transfer solutions.

“Casualty insurance has not been profitable on a global basis,
notwithstanding the recent large natural catastrophe losses. North
American Casualty has been particularly unprofitable, leading to some
insurers pruning their portfolio or exiting industries or lines of business.
Asian manufacturers’ Casualty programmes are driven by their
North American exports. The ‘America First’ attitude and increasing
protectionism has manifested in larger verdicts or awards against
Asian exporters. Further, the severe losses in North America are
increasing challenging Asian portfolios, which may lead to pricing
corrections in 2018.
Bodily injury awards in Asia have been increasing over the past years.
For example, in Singapore, the well-publicised SGD8.65 million
bodily injury award* in December 2016 represented an increase of
more than 200 percent over the prior maximum bodily injury award.
Increased bodily injury awards in Asia have not yet permeated into
pricing models.”
*Source: The Straits Times
Jim Amberson
Head of General Liability APAC,
Swiss Re Corporate Solutions

Asia Market Review 2018 11

Construction
2017 Rate Movements
2018 Rate Movements
Loss Experience
2017 saw a continuation of the softening market trend that had been
witnessed in 2016 and prior years. Sponsors, developers, and contractors
alike have enjoyed the benefits of a perpetual soft market cycle which has
offered an average alleviation in rates in the region of 10–15 percent for
projects reflecting similar risk profiles, compared to those that achieved
financial close during the prior year.
Whilst the claims environment for
construction risk in Asia during the
past 12 months was benign overall, the
construction market has, however, been
impacted during the course of the year by
estimated insurable losses in the region of
USD60 million as a result of Typhoon Hato.
Furthermore, significant natural catastrophe
events that have occurred outside the
region have impacted the global insurance
market. As such, these events may have
a bearing on how the insurance market
addresses natural catastrophe exposures,
as well as impacting premium levels for
catastrophe exposed risks as we move
forward into 2018.
Whilst the opportunity for investment is
ripe in a number of Asian territories, the
number of feasible and bankable projects
coming to fruition in 2017, compared
to earlier years has slowed, and 2017
was viewed as a faltering period for the
construction industry. A disproportionate
number of large and more complex
projects have been delayed or been
unable to achieve financial close in 2017.
This downturn in projects reaching
financial close was due to a myriad
of reasons, which include a general
economic slowdown within the region,
Key Risks Affecting
10–15%
the Construction Sector
Flat–10%
1. Economic slowdown/
slow recovery
benign moderate severe
2. Increasing
competition
3. Major project
failure
4. Cash flow/
liquidity risk
coupled with more local challenges,
such as environmental and land disputes, 5. Commodity
contractual delays, and other varied and price risk
more specific owner/developer issues.
Furthermore, whilst China’s much hyped 6. Regulatory/
“Belt and Road” Initiative has started to legislative changes
materialise and gain some momentum
within Asia, there has so far been little
7. Workforce
evidence of these projects entering the
shortage
regional market place, as for the most part
they have been handled at a local level
and generally remained firmly within the 8. Damage to
national interests of Chinese organisations. reputation/brand
In addition to the well-publicised “Belt
and Road” Initiative and other Chinese 9. Third party liability
foreign direct investment (FDI), we (incl. E&O)
have also seen a steady flow of Korean
and Japanese FDI funded infrastructure
projects entering the construction market 10. Failure to attract/
retain top talent
throughout 2017. These projects, whilst
prevalent throughout Asia, are also
springing up further afield in African and
Latin American countries. Participation
in these types of overseas projects
brings a myriad of risks to the numerous
stakeholders involved, with varying levels
of insurability, which our clients need to
be cognisant of relative to political risks,
terrorism, and currency risks.
Asia Market Review 2018 12
As we have seen in prior years, the
continued development of new and
enhanced power generation technology
has remained a challenge for a number
of insurers operating within the
construction and power sectors. Asia
has for some time been seen as the
go-to market for the original equipment
manufacturers when promoting their
new and enhanced power technologies,
as a result of the increasing demand
and investment that has been prevalent
in the region over the past few years.
Manufacturers aiming to promote
and sell their latest advancements in
gas turbine technologies have in turn
offered attractive incentives to owners,
who themselves have been seeking
competitive pricing and increased
efficiencies for the development of
power plants. These incentives, which
have included attractive manufacturers’
warranties, have proven to be an effective
sales tool in Asia’s price-elastic market.
Consequently, the insurance market’s
view and approach to some of the newest
technologies can be best described
as tentative, with underwriters often
struggling to accept and support the
insurability of unproven technology,
particularly when the projects employing
these technologies are marketed at
highly competitive terms and conditions.
Competitive terms are naturally to be
expected by developers and sponsors
entering a softening marketplace.
However, at times, this has presented
a challenge in completing some of the
placements where the deployment of
capacity has been limited due to the
perceived inadequacy of terms relative to
the risk presented by the project. Whilst
the use of unproven technology can be
viewed as less problematic during the
construction phase of a project, concerns
become more acute during the testing
and commissioning phase, and even
more challenging as the project moves
into its first year of commercial operation.
At this point, it becomes increasingly
important that owners have negotiated
robust manufacturers’ warranties,
which will enable them to more easily
achieve the requisite level of cover and
deductibles, as well as the competitive
pricing they desire when seeking terms
from the operational power market.
Outlook
In 2018, we envisage that we
still see a further softening of
the construction market as
competition for projects combined
with insurer growth aspirations
prevail, albeit at a slower rate than
we have witnessed in recent years.
Delay in Start-Up (DSU) remained
a relatively underutilised cover in
2017. Looking forward, we expect
to see the continued trend that
the key driver of DSU procurement
will be lenders’ requirements on
project financed deals. However,
it is Aon’s view that given the
potential financial exposure clients
face and the current soft market
conditions, opting for an owner-
controlled insurance structure
and transferring DSU exposure to
the insurance market is the most
prudent course of action for the
majority of projects.
Whilst insurers will no doubt
continue to view projects as
they have in the past i.e. in line
with their internal product line
approach, we do believe that as
the exposures and challenges
that developers are facing within
the Construction sector become
increasingly complex, it will also
become increasingly important
that the insurance market evolves
with our clients’ needs for greater
flexibility in their approach to
accepting risk. A more considered,
holistic approach to projects will
be an important step forward
for many, and the ability to bend
and flex to a client’s specific
needs will ultimately differentiate
these insurers from pure capacity
providers, and thereby enable
them to maintain and consolidate
a strong market position in the
coming years.

“For construction, 2017 saw the continuation of the soft market cycle.
Particularly rail and wafer fab projects had very cheap rates. As we
end 2017, we still see broad coverages being granted by underwriters
in Hong Kong, even after the market suffered typhoon loss and a
possible USD240 million hotel fire in Macau. There were also a number
of mid size losses elsewhere throughout the region that didn’t jog
underwriters into corrective action.
Towards the end of the year, a number of projects have been pushed
into 2018 which may make some underwriters, who haven’t met
budget, desperate for any premium they can get. As a result, any
market pushback to cheap rates will be postponed to 2018.
2018 promises a number of large projects, including high speed
rail projects in Malaysia and Indonesia, Chinese backed projects in
the Philippines, and region wide power projects. Hopefully, more
premium in the market will allow underwriters to be more selective.
For operational power, 2017 saw underwriters getting squeezed
at both ends with rate decreases of 10–35 percent together with
increases for facultative reinsurance from the London market of 10–20
percent. Whilst QBE decided to come off some risks, there appeared to
be little shortage of others to replace us.”
Brendan Dunlea
Regional Construction and Engineering Manager Asia Pacific,
QBE

Asia Market Review 2018 13

Default Risk
Structured Credit & Political Risk

2017 Rate Movements 5%

2018 Rate Movements Flat

Loss Experience
benign moderate severe

Despite economic growth in most large Asian countries strengthening in the

first half of 2017, a modest recovery in commodity prices and world trade
appearing on track to expand at its fastest pace since 2010; a key theme for the
second half of 2017 was continuing volatility in intra-Asian trade and investment
flows resulting in subdued volumes of transactions requiring credit and political
risk insurance.

The outlook for Asian growth has
improved, largely spurred by an
improvement in the economic picture
in China, with better than expected
external demand leading the Asian
Development Bank (ADB) to revise
upwards its growth forecasts for this year
and next. However, amid the positivity,
most analysts agree that it is impossible
to make concrete predictions at a time
when geopolitical risk remains so high.
This includes rising protectionism,
economic nationalism, the risk of a trade
war involving the U.S. and China, and
the risk of conflict between the U.S. and
North Korea, which would be hugely
destructive to regional supply chains
and have a massive impact on regional
trade flow and economic activity.
According to the Asia Pacific Loan
Market Association, syndicated lending
in Asia Pacific, excluding Japan, fell by
16 percent to USD215.9 billion in the first
six months of 2017 compared to 2016
(USD256.6 billion), the lowest 1H level
since 2010 despite moderately improved
economic growth and M&A activity.
This comes on top of a nine percent
reduction in volume in 2016.
Crude oil prices averaging USD52/barrel
YTD 2017 have been insufficient to offset
reduced export activity from China as
the country continues to rebalance its
economy in its shift towards services and
technology, away from manufacturing.
Uncertainty over the timing of increases
in U.S. interest rates also continued to
weigh heavily on transaction flows in the
market in terms of transaction volumes,
government decisions on major
infrastructure investments, and delays in
reaching financial close.
Insurance enquiry volumes increased,
as did client demand for higher levels
of indemnity, as increased geopolitical
instability led an increasing number of
financial institutions and multinational
companies (MNCs) to explore the use
of insurance to manage their exposure
to emerging market risks and to achieve
better rates of return on capital. In
2017, insurers came under pressure to
offer increasingly lengthy policy tenors
in order to support longer bank loan
tenors. This trend is set to continue
in 2018 as long term Engineering,
Procurement, Construction (EPC)
contracts and infrastructure projects
connected to China’s “Belt and Road”
Initiative reach the insurance market.
Sovereign and sub-sovereignnon-payment
risk capacity rose to a notional USD2.8
billion per risk, while total credit risk
capacity rose to USD2.3 billion per risk.

Asia Market Review 2018 14

Claims Outlook
2017 has been characterised by a significant number of
The economic growth outlook
debt defaults by sovereign borrowers (governments for the region remains generally
of Gabon, Ghana, and Mozambique), credit defaults positive for 2018. The World
by state-owned enterprise borrowers and private Bank is projecting Chinese
economic growth to moderate
corporates as well as political risk claims across a wide to around 6.4 percent in 2018-
range of industry sectors (agri-commodities and 19 as the country continues to
metals, telecoms, construction, mining, power and rebalance away from investment
and external demand towards
logistics) and geographies (China, Colombia, Ethiopia,
domestic consumption. Malaysia
India, Indonesia, Mozambique, Thailand, and Vietnam). is expected to grow more rapidly
reflecting higher investment
In May, state-owned International Bank of Azerbaijan and the recovery in world trade.
Gradual increases in growth are
(IBA) defaulted on its USD3.3 billion of debt, and the
also foreseen for Indonesia and
bank’s subsequent restructuring, followed sustained Vietnam in 2018, the latter on the
low oil prices sent the country’s economy and back of strong export-orientated
manufacturing. Philippines is
currency reeling.
expected to continue to be the
fastest growing of the large
Insurers estimate that in 2017, approximately USD650
ASEAN economies.
million of political risk and structured credit risk claims
have been reported, are pending, or have been paid of However, this generally positive
outlook for 2018 will be subject
which USD250 million have been in Asia Pacific.
to the same significant downside
risks of uncertainty around trade
protectionism and escalating
geopolitical tensions which
persisted throughout 2017 and
led to low volumes of cross-
border trade, export and project
lending. Any sanctioning of
“Whilst attention has been focussed elsewhere in the China by the U.S. would likely
world as protectionism has grown strength over the past be hugely disruptive to Asia’s
few years, threats against foreign investors by a few Asian extensive hyper-connected
leaders at the start of 2017 demonstrated that the region supply chains and have a massive
isn’t immune from the trend. Furthermore, as geopolitical impact on regional trade.
tensions in the South China Sea have eased, we have seen
hostilities on the Korean peninsula take center stage, along Lower transaction volumes
with a pronounced increase in risk level in the Middle means the excess of (loan) supply
from lenders will continue to
East due to turbulence inside Saudi Arabia, regional
chase limited demand from
disagreements with Qatar and continued Sunni-Shia
borrowers in 2018, so we predict
tensions. These developments have spooked some of our
the overall quality and pricing
Asia clients and resulted in a notable increase in demand
of many transactions presented
for Credit and Political Risk insurance for exports, lending,
to the insurance market from
and investments into North Asia and the Middle East.
corporate and banking clients
2017 has, however, seen Asia (notably China) take the will be generally lower than in
lead in promoting global cooperation, starting with Xi 2016 and 2017, and there will be
Jinping’s firm defense of free trade at the beginning of an increasing number of cases
the year in Davos, and reaffirmed by his optimistic view where there is a misalignment
of globalisation expressed at the November APEC summit between client demand, bank
(in stark contrast to the words of his U.S. counterpart). market capability, and insurance
We’re confident this optimism will continue into 2018 market risk appetite.
with “Belt and Road” projects coming to fruition boosting
intra-Asian trade flows and beginning to fill the significant As the rising cost of capital,
increased compliance costs, and
infrastructure gap that exists in the region. Credit &
banking regulations continue
Political Risk insurance will continue to play a critical
to bite, an increasing number
role in facilitating, with increased cooperation between
of previously very active
private insurers and local Export Credit Agencies ensuring
international investment banks
capacity is available for increasingly large deals.”
are scaling back their long-term
infrastructure funding activities
Tim Warren
in Asia at a time when Asia’s
Head of Credit Lines Asia Pacific,
infrastructure funding gap is
Zurich
projected to be at its widest
for at least the next few years.
This is, to some extent, being
counter-balanced by increasingly
active development banks and
export credit agencies in the
region (public sector providers
of financing, credit and political
risk insurance, notably JBIC, NEXI,
Sinosure, KEXIM and K-Sure).
As far as regional security is
concerned, as we correctly
predicted last year, North Korea
increased the frequency of
provocative missile weapons
tests. However, the likelihood of
full-scale conflict between the U.S.
and North Korea in 2018 is low,
but isolated exchanges remain
likely and the risk of unintended
conflict has increased.
North Korea is likely to
intermittently “provoke” South
Korea and the United States
including by sending vessels over
the Northern Limit Line (NLL)
or carrying out cyber-attacks.
Should the Trump administration
back away from the nuclear
threat to South Korea and Japan
posed by North Korea, this may
increase the risk of a nuclear arms
race in Asia.
Asia will still remain the most
attractive region to foreign
investors, as it ticks a number of
boxes compared to Europe, Africa,
North America and the U.K.
As this recalibration of Asian
market growth continues,
increased geopolitical tensions
in the region could generate
volatility in global financial
markets that could cause capital
outflows for some ASEAN
economies, putting pressure
on the currencies of several
export-oriented emerging
market countries in the region
to continue to come under
pressure, for example, the
Malaysian ringgit, Thai baht and
Vietnamese dong.
We expect to see increasing
demand from both financial
institutions and corporate
clients for cover for sovereign
and sub-sovereign non-payment
risk and exchange transfer risk
(cover against currency controls
being implemented by certain
governments to prevent
capital flight).
Asia Market Review 2018 15
Default Risk
Trade Credit

Overall flat with some variations

2017 Rate Movements
in geography & sectors

2018 Rate Movements 0–5%

Loss Experience
benign moderate severe

In our previous report, we commented on how insurers had exerted a

great deal of effort in tidying up their existing books of business, and had
significantly reduced exposure in certain areas in order to prime their Asian
portfolios for growth in 2017. This trend did not bear out as predicted and
instead, 2017 saw a continuation of a number of trends exhibited in 2016.

Insurers continued to review their Commodity prices, whilst showing corporate governance, rather than purely
positions and reduce exposure to a some signs of recovery, were still as a risk transfer instrument.
number of industries and countries, depressed compared to historic levels,
particularly focussing on China, India, China’s economy exhibited slower than In 2015, 2016, and 2017, a number of

and hard commodities. The focus on usual growth as it continues to shift unexpected losses occurred which

Know Your Client (KYC) and the amount towards a service driven model, and shocked the market, with a couple of

of leverage in clients’ supply chains international trade was affected by a significant value (eight-figure sum)

continued to be a concern for insurers rising tide of protectionism and political defaults in Singapore and China. In both

and in particular the lack of transparency uncertainty. Driven by a consistently cases, businesses with strong balance

in some countries around buyers was poorly performing local economy and sheets suffered major defaults due to

a material challenge for underwriters. shrinking population, we continued to operational issues which were largely

Therefore, overall, the market was see significant Japanese foreign direct out of their control and which trade

relatively stagnant in 2017 with the lack investment in 2017. As Japanese, Chinese, credit underwriters did not foresee.

of growth representing the continuing and Korean firms continue to expand These high profile losses were another

concern over transparency and accuracy into and invest in foreign markets, we contributing factor to markets reviewing

of risk information. are seeing an increase in clients seeking internal processes and acceptable limits,

to utilise trade credit insurance as a and interestingly to CFOs, Treasurers,

Overall, trading conditions were mechanism to reduce their cost of capital, and CROs, reviewing the potential cost
challenging for Aon clients in 2017. increase free cash flow, and improve of default to their businesses.

Asia Market Review 2018 16

Trade Credit Underwriting Appetite Outlook
Attractive Cautious Adverse In 2018, we expect to see a
more stable trade credit market,
Country Industry / Sector Focus with insurers seeking to grow
their books steadily in a few key
Japan China Mining Hard Commodities
areas. Electronics and financial
institutions will be target areas
India Brazil Heavy equipment Automotive for a number of insurers and
procuring cover for Chinese and
Fast Moving
Russia Singapore Pharmaceutical Indian risks will continue to be
Consumer Goods
a challenge in the coming 12
Hong Kong Korea Food & Beverage Chemicals months, albeit overall we expect
the market to deliver coverage at
the required levels.
Electronics Financial Institutions
KYC and the quality of
Soft Commodities underwriting information
will continue to be a focus
for underwriters. Clients will
increasingly be expected to
produce registration documents
However, 2017 wasn’t doom and gloom financial institution facilities, are typically
and underwriters will ask for
for all businesses; the electronics sector in backed by Trade Credit insurance, an ageing of the ledger. These
Asia performed strongly and a number of allowing the discounter to provide funds are requirements which have
new FinTech platforms emerged offering to the supplier, secure in the knowledge been in place in mature markets
for a number of years, and are
innovative new services. One particular that its own shareholders are protected symptomatic of the tightening up
area of development was around against default risk. Whilst this trend of underwriting practices which
factoring, where bricks and mortar is not yet a head-on and immediate are occurring in Asia.

financial institutions are experiencing
competition from potentially disruptive
new blockchain based models. A number
of platforms emerged over the past 12
months, allowing suppliers to sell invoices
online through easy to navigate flexible
systems and products which provide
quick access and decisions regarding
invoice discounting facilities. These
platforms, as with many of the established
scaled-up threat to the operations of From a client perspective, in
traditional players in the factoring space, 2018, insurance product
FinTech platforms look primed to capture innovation will be a key focus.
Insurers who are able to offer
market share in the coming years. From flexible solutions which fit around
an InsureTech perspective, there has also clients’ businesses and online
been a considered and concerted effort platforms to support clients’
innovative business models,
to invest in artificial intelligence, big data,
transactional flows, and reporting
and modelling capabilities in order to requirements will find themselves
improve underwriting results. significantly better positioned than
those who cannot.

“2017 has continued to see both opportunities and challenges in
the Trade Credit space for QBE. While new business growth was
seen in a number of sectors including electronics, technology,
and financial institutions, those more traditional markets such as
commodities, construction, and engineering have continued to be
difficult, and 2018 does not indicate anything different based on
the macroeconomics flag seen in those markets. The development
of Fintech and blockchain platforms will continue to develop within
the market and the importance of knowing our customers and
understanding the true rationale in purchasing the product.
As we move into 2018, capacity is still available throughout the
region, and a stable balanced underwriting approach is needed with
closer focus on risk management and profitable business growth
through strong existing relationships and quality new business
coming into the region. The continuing difficulties of disclosure in
certain parts of the region will make this a challenge and therefore, a
tighter disciplined approach to on-boarding clients who have strong
relationships with their own customers is critical in moving the Trade
Credit product forward in Asia.”
Barry Robinson
Head of Credit & Surety Asia,
QBE

Asia Market Review 2018 17

Energy

Offshore 0–10% Key Risks Affecting

2017 Rate Movements
Onshore 5–20% the Energy Sector
Upstream 10% –10%
2018 Rate Movements
Downstream 10% –10%
1. Commodity
price risk
Offshore
benign moderate severe
Loss Experience
Onshore 2. Regulatory/
benign* moderate severe legislative changes

* some global losses of significance outside Asia

3. Political risk/
uncertainties
In 2017, the sustained depressed oil price continued to have a significant
effect on the oil and gas industry. Reductions in the cost of fracking, the
U.S. becoming a net exporter of oil, and a sluggish global economy all 4. Economic slowdown/
slow recovery
contributed to a continued lower commodity price. This resulted in over 50
percent of global jack-up capacity being laid up, and the oil majors diverting
expenditure to fracking in the U.S., or alternatively, turning to gas in Asia. 5. Business
interruption

Indeed, with the low oil price conditions
and ageing oil fields, the Asia region is
now seen as a mature, marginal field play
by many in the industry, requiring low cost
operations and financial security for end
of life abandonment. Whilst the prevailing
conditions are markedly different from
those five years ago, private equity firms,
the multiple stakeholders and service
providers in a decommissioning project,
but taking a liability rather than property 6. Environmental risk
focussed approach.
In 2017, Aon witnessed clients taking 7. Cyber crime/
an increased interest in risks which, in hacking/viruses/
malicious codes
previous years, had been described

banks, and smaller producers still have as “emerging” and “on the radar”

appetite to play in this space and are
snapping up the assets of traditional oil
and gas majors in the region.
In these conditions, there is evermore
impetus on clients to adequately protect
their balance sheets at reduced premium
levels. Furthermore, decommissioning
is increasingly becoming an issue
which the industry is forced to deal
with. Decommissioning carries with it a
number of risks, including Environmental
Liability, Removal of Wreck and Debris,
Employers and Public Liability, and
Financial Guarantees, and Aon is seeing
an increase in client enquiries regarding
specialist cover as a result. This presents
an opportunity for the insurance
market to innovate and come up with
new products to meet this client need
with Decommissioning All Risks style
wordings, which behave in a similar
way to construction policies, covering
but not necessarily key priorities. Aon 8. Damage to
fielded a number of enquiries around reputation/brand
cyber insurance and the extent to
which traditional coverage would
indemnify them in the event of a cyber- 9. Major project
failure
attack. Existing energy wordings are
currently considered to be insufficient,
and therefore clients are advised to
10. Increasing
purchase standalone cover for this competition
peril. In addition, contingent business
interruption (CBI) was an increasingly
important focus for clients, with the
market under pressure to provide CBI
extensions, contrary to previous years’
underwriting conventions. Along with
cyber and CBI, terrorism and political
risk emerged as additional key risk
themes for the year, particularly within
the onshore sector. Major infrastructure
remains a key target for terrorists, and as
the threat level intensifies in the region,
clients became increasingly cognisant of
their exposure.

Asia Market Review 2018 18

In addition to differing focusses on A key change is in the behaviour of Outlook
coverage, clients became increasingly Japanese and Chinese insurers, with
One of the key challenges to risk
concerned with insurers’ ability and an increased appetite for writing
professionals in the Energy sector
willingness to handle and pay claims. non-national interest business, which that we foresee in 2018 is the
This trend is expected to continue is significant to their respective nature of risk management roles.
The large premium reductions
and intensify further in coming years. domestic market places. Chinese
which have been available in
Specialist Aon-client claims advocates and Japanese insurers have also been previous years will not be on
continue to receive a greater volume looking beyond their borders for offer in 2018. We expect risk
of large and complex claims each year investment opportunities, representing managers will find themselves
under pressure to deliver added
from the Energy sector and elsewhere, an interesting new dynamic as these value outside of pricing reductions
as regulatory, legislative, and contractual markets now become direct competitors and to develop more advanced
environments become increasingly with markets that provide them with and strategic risk finance plans.
Procurement driven market
complex. Moreover, property claims reinsurance capacity. In addition to
quotation tender processes are
continue to increase in quantum with witnessing changes in insurer behaviour, unlikely to deliver the value they
the incorporation of new, expensive in 2017, Aon also witnessed changes in have done in previous years.
Therefore, we expect an increased
technology in client operations, and Japanese and Chinese client behaviour,
emphasis on tenders seeking
adverse weather events become with a number of previously domestic brokers’ intellectual property,
more frequent. placements now being placed, via a rather than simply ascertaining the
broker, directly into international markets market price.
Market news was fairly limited in 2017, in Singapore and London. This trend With global oil prices suppressed
but Ascot exited the downstream market, is expected to grow further in the for a number of years, refining
while AXA entered it, with AXA’s foray coming years. capacity is set to significantly
into the offshore market expected in increase in India, the Philippines,
Malaysia, Vietnam, and Indonesia.
2018. Zurich is also expected to re-enter
These new projects bring very
the downstream market in 2018. large risk exposures which must
be adequately addressed, and
possibly an increase in oil prices
in the medium-term. If the
global economy strengthens and
domestic demand in a number
of Asian countries continues to
grow, rising oil prices would also
foreshadow a number of currently
“2017 has seen a stabilising of commodity prices. This has enabled players in the upstream and
idle assets being reactivated. From
downstream energy industry to be more confident about forecasting future projects, and we’ve
an underwriting perspective, the
seen a positive trend towards new activities in exploration and expansion of production.
quality of these assets and their
In turn, this optimistic view of the future will, and is already translating into increasing demand crews will be a key concern,
for risk transfer solutions, not only for the standard product range, but also including requests with adverse loss experiences
for Cyber, Environmental Liability, Business Interruption, and Political Risk to mention a few. being anticipated.

At the same time, Energy insurance is still largely a global line of business with global markets As the losses from hurricanes
dominating the insurance panels. As such, we expect the recent catastrophe events in the U.S. to Harvey, Irma, and Maria, which
have a corrective impact on insurance terms and conditions, and in particular, for certain higher battered the Caribbean and North
catastrophe-exposed regions in Asia. America this past summer, are
felt, there may be an increased
As well as traditional covers, there is a trend to consider alternative risk transfer solutions, such focus on premium levels by the
as parametric solutions, to complement traditional insurance programmes and help plug the main insurers and almost certainly
protection gaps for hitherto uninsurable risks.” greater scrutiny on natural
catastrophe sub-limits.
Andre Martin
Head Engineering & Construction APAC,
Swiss Re Corporate Solutions

Hon Chan
Senior Underwriter Energy Offshore,
Swiss Re Corporate Solutions

Louise Wai
Senior Underwriter Energy Onshore & Utilities,
Swiss Re Corporate Solutions

Asia Market Review 2018 19

Financial Lines
2017 Rate Movements
2018 Rate Movements
Loss Experience
2017 was another year in which buyers of financial lines insurance enjoyed
further rate reductions. Whilst rate movements differed between insurance
lines and are risk specific, on average, we saw reductions of the order of five
to 10 percent for most risks. Loss experience could be described as benign
to moderate, with some notable large losses witnessed over the course of
the year.
FinTech, InsureTech, and other
technology disruptors have dominated
many of our client conversations over
the past year. However, whilst financial
institution clients are cognisant of the
potential opportunities and disruptions
presented by new market entrants in the
financial services sector, we are yet to see
these firms have a tangible impact. As
traditional financial institutions partner
with start-ups, we are seeing an increased
interest in hybrid, financial lines solutions
offering blended coverage to meet the
demands of the FinTech phenomenon.
Healthcare
The healthcare market in Asia remains a
market split between insurers offering
claims made and claims occurring
solutions, with more underwriting
aligned with the claims made portfolio.
Legal developments in the medical
malpractice portfolio show authorities
leaning towards a more patient-centric
approach, and away from a “doctor
knows best” attitude. The implication of
these developments is clear; maintaining
fit for purpose medical malpractice
insurance is essential for practicing
and retiring doctors. Hence with the
latter, the continued demand for claims
occurring insurance protection.
5–10%
Flat
benign moderate severe
To ensure safe and quality medical Interesting statistics from
care for the public, Malaysia’s Ministry The Association of Certified
of Health has amended the Medical
Fraud Examiners annual global
(Amendment) Act 2012 and Medical
survey of its members:
Regulations 2017, which came into force
on 1 July 2017. Under the new rules,
doctors must have insurance in place,
Typical
and attend continuing professional
organisation loses
development courses to upgrade their
skills, before they can renew their Annual 5%
of annual revenue to
Practising Certificates. This is just one
fraud each year
further example of the tightening of
regulation in the region and the
renewed focus on patient protection. Almost
1 in 4 (23%)
Crime insurance fraud cases caused
A key challenge with the crime insurance losses of at least
portfolio in 2017 was the extent to which USD1 million
losses resulting from cyber events would
be covered under crime insurance.
Frauds lasted an
Continuing with the 2016 trend, insurers average of
demonstrated an increasingly conservative
risk transfer appetite for the extent of
18 months
before being
cyber risk underwritten within their detected
crime portfolios. This became a more
pronounced issue for social engineering
risk, which in 2017 saw an increase in the 58.1%
level of sophistication of attack methods, of victim organisations
do not recover any
as too the frequency of attacks. Into 2018,
losses suffered
we expect this trend to continue, with due to fraud
underwriters attempting to further tighten
wordings and restrict cover.
Asia Market Review 2018 20
Professional Indemnity (PI)
As with other specialty liability insurance
portfolios, the 2017 Asian market
experience stood apart from global
claims trends. International PI portfolios
experienced a number of significant loss
events in 2017, whilst the Asian market
experience was significantly more benign.
For the large global insurers, we expect
more disciplined underwriting aimed at
achieving technical rate countered by a less
litigious regional environment, coupled
with strong competitive tensions by
regional and domestic insurance capacity.
Another notable trend in 2017 was an
increased demand for construction PI
insurance. Project owners and principals
are adopting a more comprehensive
approach to construction risk aimed
at addressing risk transfer gaps with
contractor and sub-contractor design
professionals. Such coverage is designed
to address, in a seamless manner, the risk
of financial loss, property damage, and
bodily injury arising from negligence and
other design errors on the part of third-
party consultants and contractors where
limited recourse is otherwise available.
Directors and Officers
(D&O) liability
A landmark decision involving Volkswagen
extended the jurisdictional reach of U.S.
class actions to companies with level
1 American Depository Receipt (ADR)
programmes. Recent rulings in the U.S.
have made it clear that all sponsored
ADRs are subject to U.S. securities laws
regardless of what level they fall into. The
Volkswagen opinion is significant because
it is the first to consider thoroughly how
the Supreme Court’s 2010 Morrison
v. National Australia Bank Ltd. opinion
should be applied in the context of
private federal securities claims under
the antifraud provisions of the Securities
Exchange Act of 1934 with respect to the
purchase of ADRs in the over-the-counter
(OTC) market in the United States. All
companies with sponsored ADRs need
to be aware of their exposure to U.S.
securities laws and should be purchasing
D&O insurance accordingly. Companies
should not be caught off-guard under
the prior held view that sponsored ADR
(level 1) is not exposed to U.S. securities
class action laws.
D&O rates softened for the first half of
2017 and then started to flatten in Q3 &
Q4. In Q4, insurers were more resistant to
coverage enhancements and there were
declining opportunities where technical
rate was not being realised, specifically for
the U.S. component of the D&O portfolio.
It is important to note with U.S. exposed
D&O risk, the Asian market has historically
been discounted to other U.S. exposed
risk, and therefore this trend is more of
an alignment rather than a correction.
However, the remaining component of
the portfolio, including those accounts
with attractive risk profiles, continued to
benefit from rate reductions.
Outlook
Social engineering fraud risk
will continue to be a challenge
for the crime portfolio, and
risk differentiation will be an
important strategy during renewal
negotiations. We have seen a
marked increase in demand for
social engineering risk management
services across our portfolio. This
type of activity can favourably
position clients in seeking optimal
coverage and maximising available
insurance limits.
The Australian financial lines
market, which is sometimes taken
as a forecast of coming changes
in the Asian market, has been
experiencing significant claims
activity, both in terms of frequency
and severity. Insurers have been
imposing significant premium
increases, reducing capacity,
and tightening coverage. These
hard market dynamics are set to
continue into 2018 in Australia.
Even though some of the global
insurers present in Australia
have Asia Pacific underwriting
portfolios, the events in Australia
are unlikely to migrate to the Asian
financial lines market.
Overall, we expect greater focus
on underwriting discipline
primarily driven by global
directives and a reduction in
aggressive underwriting tactics
to achieve growth. The financial
lines market is expected to
be flat on average, with rate
reductions available for risks that
can positively differentiate from
peers, and potentially some rate
increases for risks with distressed
risk profiles.

“Medical malpractice costs are expected to rise with increasing drug
costs, advanced treatments, and escalating medical inflation. In Asia,
an award of USD5–10 million on a medical malpractice case is not
uncommon. It is no longer the exception but rather the norm.
Increasingly, modern medicine has witnessed technological evolution
at a pace not witnessed before. These include mobile apps that are
revolutionising healthcare delivery, the advent of telemedicine, and
robotic arm technology.
Governments are responding with the introduction of safeguards.
Liability reform that caps non-economic damage awards can
only help to stabilise outcomes in the medical malpractice litigation
arena. Other notable risk management measures such as the
Apology Act in Hong Kong, and the advocating of mandatory
medical malpractice insurance purchase in neighbouring jurisdictions,
are prudent and welcomed.”

Undoubtedly, medical malpractice insurers must evolve from simply Kamal Hamzah
being capital providers to complete holistic solutions providers, Medical Malpractice Underwriting Manager, Asia Pacific,
arming their clients with knowledge on effective risk mitigation Chubb Asia Pacific
techniques, for instance.

Asia Market Review 2018 21

Health & Benefits

2017 Rate Movements 8–10%

2018 Rate Movements 9–11%

Loss Experience
benign moderate severe

Our review of the employee benefits market in Asia in 2017 begins with a key
statistic which impacts upon business sustainability. Employee engagement
across the region has slipped several points to 62 percent 1 with China
experiencing a 3 percent drop and India and Japan both registering a 2
percent decline. There are several reasons this Key Performance Indicator
(KPI) is significant.

The primary factor driving engagement
across the region is ‘Reward and
Recognition’2. In today’s market,
increasing remuneration or pay
represents the best opportunity to
engender an uptick in engagement. In
markets such as China, it is common
practice for employees to job-hop their
way to higher pay. But, it begs the
question, is this practice sustainable?
The obvious risk is that increased
competition for talent and wage
inflation will produce a higher cost
of goods and services, irrespective
of industry sector. The prevailing
macroeconomics trends, including
protectionism, suggest that Asia can ill
afford this inflationary outcome. Should
Asia stumble and lose its competitive
edge, Latin America is poised to benefit
from inflows of global capital.
This deterioration in engagement
coincides with the finding that 52
percent of organisations are committed
to exploring new benefits that meet
employee needs, a full 12 points up from
the previous year3. This is supported by
the concept of ‘Mass Customisation of
Rewards’, whereby “organisations that are
able to tailor their rewards programmes
to meet specific employee needs are
becoming increasingly successful at
attracting the hottest talent4”.
What does this look like and why is it
so important?
Firstly, let’s take a step back and address
what are continuing themes in this, the
Asian Century. Asia now represents 61
percent of the global population, but the
real story on population is that by 2020
54 percent of the world’s middle class
will live in this region5, and increasingly
concentrated in urban areas6.

2017 Aon Trends in Global Employee Engagement Survey

Engagement
Region Change Top Engagement Opportunities
Score
Global 63% -2% Rewards & EVP Senior Leadership Career Enabling
Recognition Opportunities Infrastructure
North 64% -1% Enabling EVP Rewards & Senior Leadership Performance
America Infrastructure Recognition Management
Latin 75% +3% Rewards & Senior Leadership Enabling Collaboration Career
America Recognition Infrastructure Opportunities
Africa 61% +2% Talent & Staffing Career Rewards & EVP Work/Life Balance
Opportunities Recognition
Europe 58% -2% Rewards & EVP Enabling Career Senior Leadership
Recognition Infrastructure Opportunities
Asia-Pacific 62% -3% Rewards & EVP Career Opportunities Work Fulfilment Senior Leadership
Recognition

1 Aon 2017 Trends in Global Employee Engagement

2 Aon 2017 Trends in Global Employee Engagement
3 Aon APAC Benefits Strategy Study 2017
4 Aon People Trends Report 2017
5 Global Economy and Development at Brookings Institute: The Unprecedented Expansion of the Global Middle Class: An Update (February 2017)
6 United Nations: World Urbanisation Prospects 2014 Revision: 50% of people concentrated in urban areas.

Asia Market Review 2018 22

OECD Out-of-Pocket (OOP) Costs
as Share of Total Expenditure
Country % OOP Cost
India 62.4%
Pakistan 56.3%
Singapore 54.8%
Philippines 53.7%
Indonesia 45.2%
Vietnam 36.8%
Malaysia 35.3%
China 32.0%
Japan 13.9%
Thailand 7.9%
Generally, urbanisation is characterised
by significant lifestyle changes which
results in a deterioration of health and
well-being set against the backdrop
of rising community expectations of
improved health outcomes.
Across the developed world and much
of Asia there has been a generational
change in the community disease
burden from communicable to non-
communicable in nature–due in part
to national government and non-
governmental organisation’s efforts
to largely eradicate the scourge of
communicable diseases such as malaria,
cholera and Hepatitis B. In their place
has come the proliferation of chronic
illnesses attributed to the adoption of
a western lifestyle. By 2020, 50 percent
of global healthcare expenditure,
approximately USD4 trillion, will be
consumed by the three leading causes
of death: cardiovascular diseases, cancer
and respiratory diseases7.
As we pivot back to Asia, healthcare
expenditure is forecast to reach 6.7
percent of GDP in 20178 and grow
in total to USD1.96 trillion by 20209
(Compound Annual Growth Rate
7 World Health Organisation “Top 10 Causes of Death”
8 The Economist Intelligence Unit forecast for Asia & Australasia
9 The Economist Intelligence Unit: World Industry Outlook, Healthcare and Pharmaceuticals, June 2016
10 OECD/WHO Health at a Glance Asia-Pacific 2016
11 Aon Global Medical Trends Report 2018
12 Aon Singapore Retirement Financial Wellbeing Survey 2017
13 Aon 2017 Global Risk Management Survey
14 Aon 2016/17 Trends in Global Employee Engagement
15 Aon 2016/17 Trends in Global Employee Engagement: 16% of respondents don’t gather employee feedback on benefits, 60% father data manually, in-house.
(CAGR) of five percent 2015-2020).
Aside from the expanding middle
class and rapid growth of chronic
diseases, it is an ageing population
and costly development of clinical and
pharmaceutical innovations that are
key drivers of healthcare expenditure. In
dissecting Asia’s healthcare expenditure
by payer source, governments
contributed 50.1 percent of total health
expenditure and consumer out-of-
pocket costs totaled 42.2 percent10 in
2014. The balance was funded by Asia’s
developing private medical insurance
market. Driven by an underlying
medical inflation rate of nine percent11,
this consumer co-pay to access quality
healthcare is forecast to significantly
outpace public health expenditure and
Consumer Price Inflation (CPI).
The funding of healthcare is not the only
rewards related area where organisations
explicitly recognise the yawning
gap that exists between current and
desired states. Improving the physical
and financial well-being of employee
populations is a trend that has been
emerging for several years but is now
resonating more strongly due to:
• An ageing workforce financially
ill-prepared for retirement
• Impact of chronic illness that
drives absenteeism and dilutes
productivity metrics
• Demand from Gen Y & Millennials
for health engagement tools
In Singapore, for example, there is a
sizeable gap between organisational
aspirations and the current provision of
financial well-being tools and resources.
Some 69 percent of employers want to
assist employees in setting their financial
goals yet only 25 percent provide
employees with the relevant tools12.
The over-arching challenge then
for many organisations is to affect
an orderly transfer of intellectual
property, satisfactorily addresses
multi-generational talent management
requirements, all the whilst avoiding
blowing up their cost base and losing
market competitiveness.
2018 Trends
Our world is experiencing unprecedented
levels of political, economic,
technological and social change, with
organisations facing the challenge of
disruptive technologies being one
of the top 10 global risks by 202013.
Organisational success is now driven by
the mantra ‘adapt or die’.
As organisations strive to attract and
retain the best talent in their quest to
drive growth in revenue, profits and
shareholder earnings, here are some of
the key trends that we expect to either
emerge or gather steam.
Data is king. With our focus on the
inter-dependency between talent
management, employee engagement,
employee well-being and cost
competitiveness, data is essential
to driving informed discussion. Yet,
today, 89 percent of organisations are
still surveying employee engagement
just once per year14. It’s a similar
story regarding employee feedback
on benefits15. Organisations that are
setting the pace in creating engaging
rewards programmes are gathering
demographic, benefits and claims data
real-time through digital channels. They
identify macro trends early and make
incremental changes to their benefits
programmes that drive improvement in
engagement scores.
Asia Market Review 2018 23
Top focus areas Past Future

Improve employee engagement and morale 59%

62%
Align with global or corporate benefits strategy 44%
45%
Explore new benefits that meet employee needs 40%
52%

Understand employee behaviour and preferences 36%

36%

Contain healthcare related cost increases 35%

34%

Streamline administration efficiency 33%

22%

Improve employee health and financial well-being 32%

42%

Partner with providers on innovative benefits solutions 26%

38%

Source: Aon APAC Benefits Strategy Study 2017

Digitisation is now. The digitisation of
healthcare administration and member
service is already in full swing across
much of Asia, in both emerging and
mature markets. Mobile applications
are allowing employees to lodge and
track their claims as well as accessing
information on clinic availability,
benefit limits etc. Insured benefits
broking and benchmarking is now
occurring in a digital environment that
drives transparency, cost-efficiencies
and timely outcomes. Availing these
operational efficiencies is critical to
both cost-management and employee
engagement objectives.
Mass customisation of rewards.
Resolving the intrinsic tension
concerning cost/benefit trade-offs
requires a clear understanding of
employee needs and how these align
with organisational talent and reward
objectives. Whilst there is evidence
that both the prevalence and scope
of employer sponsored medical plans
is expanding, that is only part of the
answer. In responding to an individual’s
health, financial and lifestyle needs
we forecast a rapid growth in the
distribution of voluntary insurance and
financial services that promote greater
flexibility, choice and cost-efficiency in
employee benefits expenditure.
Driving engagement through
communication. Consumers today
are exposed to up to 10,000 brand
messages a day and reportedly switch
between screens up to 21 times
an hour. By 2020, leaders will have
to communicate with at least four
generations with 50 percent of the
workforce being millennials. In Asia,
there are already 2.7 billion unique
mobile subscribers16 and 1.9 billion
internet users17. We forecast a significant
investment in resources to leverage
digital and social media channels
to create compelling content that
educates employees on their rewards
and recognition programmes and
encourages them to become strong
employment brand advocates.
Beyond work/life balance. The
World Economic Forum’s drivers of
change study found that the changing
work environment and flexible work
arrangements attracted top billing with
a 44 percent rating. Work boundaries are
blurring, as is the traditional employer-
employee relationship. Environmentally,
this will play out in the next generation
of workplace wellness programmes
along with other benefit programmes
including maternity/paternity leave, Paid
Time Off (PTO) etc. Facilitated by digital
communication channels, we forecast
a significant increase in the distribution
and utilisation of consumer health and
well-being engagement tools through
the workplace, including wearable
devices. These tools will drive changes in
employee lifestyle behaviours, improve
health risk and increase productivity and
engagement metrics.
It is people who create business value,
which is why attracting and retaining the
right talent is fundamental to building an
organisation’s competitive advantage.
Today, organisational thinking and
actions have to be nimble with data
assessed real-time to drive strategic
benefits direction. Digital channels must
be maximised for benefits administration
and communication purposes. Employee
benefits and rewards programmes
need to become increasingly agile and
flexible to drive engagement in a cost-
sustainable fashion.

16 GSMA: The Mobile Economy Asia-Pacific 2017

17 Internet World Stats

Asia Market Review 2018 24

Marine

Marine Cargo 10% Key Risks Affecting

2017 Rate Movements Marine Hull & Liability 10%
the Marine Sector
Protection & Indemnity (P&I) 5%

Marine Cargo 0–5% (segment

dependent) 1. Damage to
2018 Rate Movements
Marine Hull & Liability 5% -5% reputation/brand
Protection & Indemnity (P&I) 0–5%

Loss Experience 2. Increasing

benign moderate severe competition

3. Economic slowdown/
2017 was another challenging year for the maritime industry with slow recovery
continuing, depressed commodity prices, sluggish global trade, and
a wavering global economy. Buyers of insurance sought and achieved
4. Cyber crime/
premium reductions across the main classes of Cargo, Hull, and P&I, with hacking/viruses/
reductions on offer of five to 10 percent on average depending on the malicious codes

line of business, risk, and loss record. A benign claims environment in Asia
insulated insurers against another year of soft market pricing conditions. 5. Regulatory/
legislative changes

The spate of industry mergers and
acquisitions (M&As) witnessed in recent
years showed no sign of letting up in
2017. Asia’s largest container line, China’s
Cosco Shipping Holdings, announced
that it would pay more than USD6 billion
for rival Orient Overseas International,
which owns the world’s biggest vessel.
Denmark’s A.P. Moller-Maersk is also in
the process of acquiring Hamburg Sud.
In 2017, there was a tangible increase in
and appetite for these risks, with cars
particularly negatively affected. The poor 6. Failure to attract/
historic loss experience of the sector retain top talent
means that even automotive sector
clients who are willing to take large self-
7. Failure to innovate/
insured retentions face steep pricing and
meet customer needs
a dearth of capacity on offer.
Within the commodity industry,
several insurers suffered severe losses 8. Business
interruption
as a result of misappropriation, which

the number of M&A transactions across potentially have values running into

all industry sectors where Warranty and the hundreds of millions of dollars. The
9. Cash flow/
Indemnity (W&I) insurance often plays influence on premium appears limited, liquidity risk
a key facilitating role. W&I benefits both but as a result, insurers moved to exclude

parties in an M&A transaction and the cover, sub limit cover, and impose large

popularity of this type of cover is set to aggregate deductibles.

grow exponentially in the coming years.
Cargo
The cargo market in Asia remained soft
in 2017 with premiums decreasing in
combination with the widest covers we
have ever seen, whereas London has
experienced some levelling off in the last
quarter of 2017.
Cars, pharma, and commodities were
segments hit by losses globally and as a
result, we saw a withdrawal of capacity
10. Property damage
2017 was also a year of increasing
maturity in the market. We saw more
clients enhancing their existing cargo
programmes, and achieving coverage
and pricing improvements by utilising
more sophisticated stock throughput
(STP) programmes, rather than covering
cargo through supply chain under
separate property and cargo programmes.
Although commonplace in many
developed markets, STP programmes are
still underutilised in Asia.

Asia Market Review 2018 25

For 2018, we still see reductions possible
for good performing and well-managed
risks; however, in specific industry
segments like cars, pharma, and
commodities, we expect more restrictive
underwriting by insurers.
Hull & Machinery (H&M)
The status quo continued in Asia during
2017 as owners continued to enjoy
modest reductions alongside broad
cover and low deductibles. Whilst
underwriters lamented what they
saw as an unsustainable position, the
relatively low incidences of loss and the
continuing influx of capacity supported
the incessant drift of this soft market.
The international H&M market continues
to talk of a coming ‘hardening’, and
whilst evidence of this in practice so far
is scant in Asia, the logic is hard to refute.
Hull insurers, who are for the most part
commercial entities, are simply not
making enough money from this line.
International Union of Marine Insurance
(IUMI) and The Nordic Association of
Marine Insurers (CEFOR) data continue
to show that many insurers are writing
a breakeven at best book, with no room
for larger losses, and even less room for
further reductions in premiums.
Aon continues to monitor the situation,
but we anticipate that, as we head into
2018, we are approaching the bottom of
this soft market.
P&I
The P&I Clubs that make up the
International Group continue to sit on
an embarrassment of riches, with over
USD5 billion in the collective treasuries.
This is due in part to the still benign
claims experience, but also to a pleasing
investment return for the year ending
20 February 2017, which brought in an
additional USD368 million.
Clubs might point to an increase in the
Combined Net Ratio, which rose on
average from 91.36 percent to 94.39
percent. However, this is not indicative
of a worrying trend, but instead, the
result of waivers of calls and returns of
premiums that a number of the Clubs
have made this year.
From a P&I perspective, however, the
soft market still appears to have some
way to run, and even a number of high
profile Pool claims this year will fail to
trouble the Club boards as they meet
in the coming weeks to agree on their
General Increases.
Aon wonders however, whether
‘General Increase’ is an appropriate
consideration in the current market and
perhaps a ‘General Decrease’ would be
more fitting! On the face of it, this might
seem amusing. However, should a Club
actually be brave enough to consider
a uniform reduction in rates for its
Members, this is sure to be much more
welcome than the token credits on past
years that Clubs have tried to appease
Members with of late.
The Britannia’s ‘membership dividend’
is to be applauded, as is the Gard’s
cancellation of last year’s 25 percent
deferred call. The Swedish Club has
also shown some innovation (and
confidence!) with its four percent return
on the current year. However, these and
other concessions are, in the scheme
of the Clubs’ collective progress, fairly
insignificant, and a General Decrease
would be more readily welcomed by the
majority of risk managers and owners
that we have spoken to.
Also on the agenda this year is a
potential extension of cover to include
ground-up P&I war risk, which is
currently insured by most owners
under their H&M/War policy to hull
value, and in excess of that with the
P&I Clubs. Provided that Clubs can
bear the cost of this additional cover,
we are all in favour of this move, and
it would perhaps remove some of the
uncertainty which abounds in this area,
for example, regarding the passenger
liability regulations, where Clubs issue
certification from ground-up regardless.
Asia Market Review 2018 26
Marine Liability
In 2017, the size and insured values
of Ports and Terminals in the region
continued to increase, as did the size and
value of ships and cargo. As this trend
continues, clients faced with increasing
aggregation of risk will be keen to ensure
that they are buying sufficient coverage.
Within the traditional logistic insurance
market, the majority of insurers in Asia
still provide limited and restrictive
liability covers. In 2017, we saw insurers
being more willing to insure “full value”
liability for their clients, empowering
clients with wider and more flexible
insurance solutions.
Increasing cyber exposure
Container shipping company A.P.
Moller-Maersk was also affected by the
NotPetya cyberattack in August, with
Business Interruption (BI) loss suffered by Outlook
Maersk forecast to be as much as USD300
Looking ahead to 2018, we do
million in lost revenue1. The cyberattack
not foresee the large premium
caused outages of Maersk’s computer reductions which have previously
systems across the world. Maersk’s been available to clients in prior
years, although savings may
port operator, APM Terminals, was also
still be possible for risks which
affected with a number of hard drives present well. Clients may well
rendered inaccessible by ransomware. look to rearrange their existing
A number of high profile losses have programmes in order to seek
efficiencies in their insurance costs,
begun to crystallise cyber risk in the mind if they do not think a standard
of Aon clients across multiple industry renewal approach will be effective
sectors. The Marine and Logistics sectors – consider STP arrangements
rather than traditional cargo and
can be especially exposed due to the
property covers.
increasing use of technology in complex
supply chains. The extent of BI coverage In 2018 and beyond, digitisation
and technology will have an
available to clients under traditional
even greater impact on the
Property Damage & Business Interruption maritime industry. E-commerce
(PDBI) policies is an area of contention, will continue to become
and therefore clients are advised to clarify
increasingly pervasive and
digitised supply chain technology,
their existing coverage position and as an such as blockchain, will offer
optimal solution, to buy standalone cover increasing opportunities to the
for this risk. sector. Whilst digital technologies
and connected devices enhance
the ability to record and share
information, reduce errors and
omissions (E&O) exposures,
and streamline procedures,
they also bring increased cyber
risk. As reliance upon digital
technologies increases and the
levels of automation in the
sector rises, clients who do not
purchase bespoke cover will
leave themselves open to
significant losses.

Source:
1. “Maersk says June cyberattack will cost it up to US$300m”, The Business Times, 16 Aug 2017
(URL: http://www.businesstimes.com.sg/transport/maersk-says-june-cyberattack-will-cost-it-up-to-us300m)

“2017 continued to be a challenging year for the marine market with As the insurance market becomes more global and the Asia market
excess capacity and rates continuing to reduce. This trend did start matures, we will start to see business from further afield being
to change towards the end of the year following a difficult natural underwritten and reviewed in Asia, as well as the more complex
catastrophe season and discussions on treaty renewals. business not just simply going to London because it always has done.

There was an increase in broker innovation with a shift from separate The increasing use of risk management and technical expertise will
cargo and storage policies, to stock throughput polices. The marine allow the market to adapt to the ever changing risk profile to ensure
market, rather than the historical property market, started to absorb that we meet the needs of our clients.”
excess storage capacity, as insured and broker needs changed. We also
saw further product innovation in the marine liability space with Asian Harry Taylor
markets adopting package business which historically would have Head of Marine, Singapore
been offered from London or European markets. AIG

Asia Market Review 2018 27

Mining

Key Risks Affecting

2017 Rate Movements 5–10%
the Mining Sector
2018 Rate Movements 0–5%
1. Commodity
price risk
Loss Experience
benign moderate severe

2. Regulatory/
legislative changes
The mining industry seems to have dug itself out from one of the worst
troughs in recent memory in 2017 after enduring a sustained slump that
3. Political risk/
lasted almost five years marked by challenging macroeconomics conditions, uncertainties
diminished opportunities and overall lacklustre global demand. Over the
past year, commodity prices stabilised, cash flow improved, some delayed
mining projects came back online, and miners generally experienced a 4. Economic slowdown/
slow recovery
tentative return to form.

Industry sentiment was cautiously
optimistic, with increased levels of
mining activity seen particularly around
iron ore as mining companies sought
to take advantage of the opportunities
presented by the rally in raw material
prices, and a restructuring of China’s
steel sector which boosted demand
for higher-quality ore, primarily from
Australia. In its outlook released in 2017,
the World Steel Association has indicated
not be acceptable. The coverage clients 5. Business
interruption
enjoyed remained largely stable in
2017, although, where non-damage
coverage had been included in Business
Interruption policies in prior years, some 6. Environmental risk
insurers started to challenge its inclusion
towards the end of the year.
7. Cyber crime/
Another key trend witnessed in 2017 was hacking/viruses/
China’s shrinking coal consumption as malicious codes
it embraced cleaner sources of energy

that it anticipates a cyclical upturn in in a bid to reduce global greenhouse 8. Damage to

gas emissions and combat the effects of reputation/brand
steel demand through to 2018 with
continuing recovery in the developed climate change. This is driven primarily

economies and an accelerating growth by Chinese government officials as

momentum in the emerging and
developing economies1.
On the back of poor underwriting results
in 2016, insurers (and reinsurers) were
less prepared to support large rate
reductions as focus shifted to portfolio
profitability from market share. In difficult
cases, the market had to consider if they
were prepared to walk away or not renew
policies should terms and conditions
policymakers try to steer the nation 9. Major project failure
increasingly away from a reliance on fossil
fuels. After hitting a peak in 2013, China’s
coal consumption has since dropped
10. Increasing
7.3 percent, according to government competition
statistics compiled by Rock Environment
and Energy Institute, a Beijing-based
think tank. Some other regional miners
and producers were also expected to exit
the coal sector.

Asia Market Review 2018 28

Against this backdrop, in a seeming Claims Outlook
paradox, some Chinese companies 2017 has seen significant frequency
2017 saw a significant number of
funded new mining and construction of natural catastrophe events, both natural catastrophe events, both
projects overseas, in an attempt to locally and overseas, further affecting in Asia and outside the region
diversify their businesses and exploit underwriting profitability. North causing in excess of USD100
billion of insured losses. Global
other opportunities within Asia. An American exposed risk in particular has insurers with North American
example of this can be seen in China’s been the hardest hit due to the Mexico catastrophe exposure were
investment into coal developments in the earthquake and hurricanes Harvey, particularly affected by hurricanes,
Thar region of Pakistan2, as part of the earthquakes, and wildfires. Whilst
Irma, and Maria, although this has not
the mining sector was largely
China-Pakistan economic corridor. significantly impacted mining operations. spared, the global nature of
insurance and capital markets
However, such foreign direct investment means that mining markets will
(FDI) initiatives leave companies exposed still experience somewhat of a
ripple effect. Whilst some global
to a number of risks including terrorism,
insurers have suffered capital
political risk, regulatory risk, foreign losses as a result of these events,
exchange risk, and natural catastrophe there is enough unaffected
risk in some host countries. capacity in Asian markets to
prevent any significant hardening
of the market.
In 2017, the regulatory and political
challenges of operating overseas were Therefore, the general consensus
evidenced once again. At the beginning as we enter 2018 is that most risks
will achieve small reductions,
of 2017, the Indonesian Minister of Energy
between five percent and a flat
and Mineral Resources (MEMR) issued renewal, depending on how the
significant new legislation impacting individual client has performed.
The most effective driver of
the mining industry which stipulated
premium savings in 2018 will be
that every producing mine in Indonesia well-managed risks with adequate
(whether under a Contract of Work or flood protection, strong asset
‘IUP’ Mining Business Licence) must management and effective health
and safety regimes. Those that
become at least 51 percent Indonesian- maintain their insurer relationships
owned. The exceptions which previously will be well placed to withstand
allowed foreign control of underground any market pressures for increases.

mines and mines with processing and

refining facilities have been scrapped.
The clampdown in the Philippines of
several mines discovered to be flouting
environmental legislations also means
that it is not easy getting an approved
mining permit to operate in the country.

Source:
1. “We believe in 2017 and 2018 we will see a cyclical upturn in steel demand”, Mining Journal, 24 April 2017 (URL: http://
www.mining-journal.com/commodities/iron-ore/we-believe-in-2017-and-2018-we-will-see-a-cyclical-upturn-in-steel-
demand)
2. “China kickstarting new coal boom in Pakistan “, Climate Home, 17 March 2017 (URL: http://www.climatechangenews.
com/2017/03/17/china-kickstarting-new-coal-boom-pakistan/)

Asia Market Review 2018 29

Power

Outlook
2017 Rate Movements 10–30%
In 2018, capacity will remain
largely unchanged. In general, we
2018 Rate Movements 10% –10% anticipate that rates, deductibles,
and coverage will remain
largely stable whilst reinsurers
Loss Experience evaluate and respond to the
benign moderate severe
losses sustained globally, with
reductions achievable for risks
which present well.

However the Q4 natural

The first three quarters of 2017 saw a continuation of the previous years’ soft
catastrophe events (earthquakes,
market: global operational power capacity was at a historic high in excess of hurricanes and wildfires) in North
America, the Caribbean, and
USD4 billion, and the largely benign loss environment in the region meant that
Asia may have a knock-on effect
clients benefited from increased underwriting leniency with rate reductions, for natural catastrophe exposed
locations where reinsurers will
lower deductibles and broader coverage on offer. However, significant natural
seek to impose rate increases as
catastrophe losses in the Americas and Asia in the fourth quarter of the year saw their natural catastrophe treaty
prices are pushed up.
a reduction in the softening of the market as re/insurers took stock of their cost
on capital. Asia’s commitment to a sustainable
future powered by renewable
energy has become a focus area
It became apparent in Q4 that lenient point regarding what they can accept in of many markets, globally, as
underwriting processes were in decline terms of rates and deductibles for certain mentioned in the retrospective
as underwriting methodologies attracted risk profiles, and therefore, tangible section of this report. Government
and private spending in the
greater due diligence. Double digit differences in what is offered between
renewables sector is likely to run
reductions were generally only offered on international and domestic insurers in some into the many billions of dollars
risks that were well-managed with above markets may start to emerge. At this point, in the coming years, and as an
average loss ratios. In addition, long-term risk managers have difficult choices to make increasing number of green power
agreements were more challenging to secure regarding how comfortable they are with projects come on line, demand
due to the uncertain nature of the market. insurer panels, backed by unrated or less for bespoke solutions to the
solar, wind, and hydro sectors in
secure capacity.
Asia remained a popular testing ground particular will be in great demand.
The shorter construction periods
for new gas turbine technology in 2017, There has been a continued focus from
of renewables projects than other
continuing the trends witnessed in prior insurers on developing their technical forms of power production will
years. Such technology remained a key underwriting capabilities in Asia. Singapore mean that this trend will accelerate
underwriting concern for the power and Hong Kong are now established global rapidly in 2018 and beyond,
market with newer, unproven, or enhanced insurance hubs, and in recent years, we becoming a key focus for the power
technologies initiating some hesitation from have witnessed a ramping up of the number market, with global capacity now in
markets to commit to both competitive rates of risks which are written purely in Asia by excess of USD4 billion.
and/or low deductibles in 2017. Warranties underwriters who are more receptive to Cyber risk currently still represents
offered under operations and maintenance the expectations of Asian clients. A notable a significant coverage gap for
(O&M) are sometimes ignored or example of this trend was the establishment the power industry as a whole,
overlooked, meaning some clients continue in 2017 of a number of specialist renewable with take up of standalone
to seek to transfer the risk of failure of new power teams within prominent international solutions in Asia still lagging well
behind other geographies. As
technology to the insurance market. As the insurers based in Singapore.
the number of high profile cyber
speed of new technology released outpaces
incidents continues to increase
the re/insurance markets ability to digest and Integrated policies are also becoming more
and core infrastructure becomes
analyse new technology, we are likely to see common place and acceptable, especially an increasingly targeted sector,
further disinclination to offer rate reductions on renewable energy placements, with we expect to see an upsurge in
and coverage enhancements. various markets endorsing these innovations the take-up of this product in the
both as a lead and follow markets. As the coming years.
The gap between the terms offered renewables industry in Asia continues to be
by domestic and international markets a major focal point of most governments
continued to widen through the year as in the coming years, the power market
the domestic markets in many territories will also seek to grow with it. Aon is at the
continued to deploy more capacity and forefront of this trend, working with the
retain more risk onshore. Some international market to develop tailored solutions for
markets are now approaching saturation the industry.

Asia Market Review 2018 30

Property

Natural catastrophe exposed 0–5%

2017 Rate Movements
Non-catastrophe exposed 10–15%

Natural catastrophe exposed 0–5%

2018 Rate Movements
Non-catastrophe exposed 5–10%

Loss Experience
benign moderate severe

In 2017, the property market continued to soften, with premium rates

continuing to fall across most countries in the region. Non-natural
catastrophe exposed businesses experienced rate declines of between
10–15 percent with five to 10 percent reductions available for natural
catastrophe exposed risks.

While there were no significant new
entrants to the market in 2017, there was
a significant amount of insurer activity
as industry consolidation continued.
A number of notable acquisitions took
to expand their international presence
through acquisition.
Loss experience in 2017 was
characterised as moderate. Whilst there
policies also restricted BI cover to fire,
lightning, explosion, aircraft (FLEXA)
only or named suppliers only which
resulted in a number of uninsured losses.

place in 2017, including Mitsui Sumitomo were no market changing events in The impact of the storm was less

Insurance Company Ltd’s (MSI) recent Asia, there were a number of notable severe on insurers, with moderate

purchase of Singapore’s First Capital losses, including the Resorts World impact on earnings but limited effect

Insurance Ltd for USD1.6 billion from Manila attack in June, Typhoon Hato on their financial strength, given their

Canada’s Fairfax Financial Holdings, in a which struck Hong Kong, Macau, and conservative reinsurance arrangements,

bid to gain market share and strengthen Guangdong in southern China in August, low penetration of natural catastrophe

its competitive position. This acquisition and severe flooding which swept across coverage on personal lines, and robust

marks the biggest takeover by a Japanese large parts of south Asia during the same capitalisation. Therefore, effects were

insurer in South East Asia, potentially period. These events shone a spotlight mainly locally contained to domestic

representing a ramping up of the trend, on coverage gaps in some organisations’ markets with no substantial impact felt

which has been witnessed over a number policies, where business interruption (BI) regionally.

of years, of Japanese insurers seeking cover had not been purchased. Some

Asia Market Review 2018 31

Clients’ businesses across the region continue to Outlook
automate and integrate digital technology at an
In 2018, we anticipate a growing
unprecedented pace. As businesses continue to
disparity between what local
become ever more reliant on technology in their markets will do and what
production processes and supply chains, clients are international markets want to
charge. International markets in
becoming increasingly cognisant of the scale of their
Asia may now find themselves
cyber exposure. Client concern around the extent in situations where their global
of cyber coverage afforded in existing BI wordings headquarters start to mandate
presents a challenge to the market which underwriters that rates cannot be further
significantly reduced, due to
must meet. In addition, clients are increasingly loss experience outside Asia.
concerned about the possibility of property damage The 2017 North American and
resulting from a cyber event – something which until Caribbean natural catastrophe
losses may be the initial catalyst
recently, was only the subject of science fiction.
for this. Given this potential
two-speed market, clients are
cautioned against being overly
reliant upon local capacity which
is priced attractively but does not
bear the same financial security
as the capacity which is offered
by international markets.
Notwithstanding natural
catastrophe losses in North
America and the Caribbean,
in recent years, a number of
international markets have
withdrawn or reduced Asian
property capacity and therefore
their Asian property exposure.
However, we believe that there
would be enough innocent
capacity waiting on the sidelines
to prevent a significant hardening
of the market in the near future,
unless a massive catastrophic
event were to take place.
Clients will continue to be price-
focussed in 2018 and will seek
further rate reductions from
insurers. In terms of coverage
changes, there has been notable
demand from real estate clients
for non-damage BI cover and we
expect this trend to continue
to be a feature in 2018. With
the exception of non-damage
BI, markets have been, on the
whole, unwilling to grant further
wording extensions to clients.
This has resulted in the majority
of buyers purchasing stand-
alone cover for perils such as
cyber and terrorism, the latter of
which was historically covered
under property policies. This
low innovation environment
presents both a challenge and
an opportunity to insurers. One
way in which Aon is supporting
clients and markets in this area
is the development and delivery
of alternative insurance and
capital products such as weather
derivatives with parametric
triggers, which are used to
transfer risk from clients to
reinsurance and capital markets
and pay out a pre-agreed amount
within a short timeframe on the
occurrence of a defined weather
event, regardless of actual loss to
the client.

“Our view of the market place concurs with Aon’s observations.
The dichotomy of the local and international markets allows buyers to
make choices, but we would agree with Aon that clients should not
be driven by price alone.
The long-term financial security of insurance companies should
be a buyer’s top priority, and this can only be guaranteed by
allowing capacity providers to charge a fair price for the
capacity deployed.
has seen the largest drop in premium rates over the past six years and
this is where urgent action is needed.
Underinsurance of Business Interruption (BI) continues to be a
problem due to a lack of understanding of the real exposures or
misunderstandings about the cover actually purchased. This could
be due to numerous causes: inadequate Indemnity Period purchase,
trends in the business, supply chain issues, etc. Again, further
education is needed.

This has not been the case for at least six years now in Asia. We
advocate for working with our broker partners to help educate the
industry in this respect and other common market misconceptions,
such as rate decreases because of increasing volumes and lack of loss
activity on excess layers.
Cyber and non-damage BI will continue to be big topics in 2018.
As these exposures continue to increase, insurers will want to
ring fence them in stand-alone policies with well-defined triggers
including parametric insurance solutions. We see this as a fruitful area
for innovation.”

In Asia, clients have benefited from unusually low natural catastrophe Stanley Cochrane
activity for many years and even when there were larger isolated Head of Property Asia Pacific,
events, there was no market response. The large corporate segment Swiss Re Corporate Solutions

Asia Market Review 2018 32

Reinsurance

2017 Rate Movements 0–15%

2018 Rate Movements 0–15%

Loss Experience
benign* moderate severe

*Depending on country

2017 saw three globally significant wind natural catastrophe events as well
as a major bush fire, which impacted the reinsurance and insurance markets,
the effects of which will continue to reverberate into 2018. Hurricanes
Harvey, Irma, Maria, and the Californian Wild Fires resulted in over USD100
billion of insured losses, with significantly greater economic losses incurred.
Insurers and reinsurers have suffered earnings erosion as a result of these
events, with some loss estimates running into double digits relative to
equity. The Retro market was also heavily affected with a significant amount
of capital impacted, including a considerable amount of “insurance-linked
securities” capital being lost or trapped.

The four major U.S. events were
compounded by the accumulation of
year-long attritional loss events including
earthquakes Chiapas and Puebla in
Mexico, and in Asia Pacific specifically:
Cyclone Debbie in Australia, Typhoon
Hato in Hong Kong/Macau, Sri Lankan
and Malaysian floods, and several
typhoons in Japan. Additionally, in Asia
Pacific, the loss catalogue was further
impacted by the Australia PI/D&O
ultimately, taxpayers. Sadly, this is just
the latest manifestation of a global
protection gap – a trend which is
exacerbated especially in Asia. Economic
development and demographic trends
in the region are generating new
concentrations of exposure, often in
areas prone to natural catastrophes and
at a time of increasing frequency.
Regulatory Movements
aiming to enhance supervision rules,
complete the execution mechanism, and
strengthen supervision collaboration. In
the Philippines, the regulator announced
that its RBC 2 took effect for non-life
insurers and reinsurers. In India, the
regulator has formed an RBC steering
committee and aims to implement RBC
by 2021.
The RBC frameworks are also seeing

market dislocation, and also significant Across the region, we see continued enhanced catastrophe reporting criteria.

risk losses that affected the Garment, efforts of introducing or enhancing Risk Hong Kong RBC will include catastrophe

Tyre, Waste, and Petrochemical sectors Bearing Capacity (RBC) requirements to risk charge, although it is not included

in Asia, further impacting insurers and bring Asian solvency standards in line in the first round of QIS. Regulators in

reinsurer’s balance sheets.
There is a very human dimension
to many of the natural catastrophe
disasters, given the low proportion
of policy holders in the affected areas
that have insurance cover for flood.
Beyond the immediate financial distress,
it is clear that economic losses have
far exceeded insured losses. As a
result, the burden will ultimately fall
mainly on the individuals affected and
with the Insurance Core Principles (ICPs)
specified by the International Association
of Insurance Commissioners (IAIS). Three
years after issuing the RBC consultation
paper, Hong Kong started the first round
of Quantitative Impact Study (QIS) in
2017 and the second round of QIS is
expected to start in mid-2018. In China,
after successfully implementing the
China Risk Oriented Solvency System
(C-ROSS) in 2016, the regulator recently
announced the C-ROSS Phase 2 project,
Singapore and Thailand are considering
adding catastrophe risk into solvency
capital calculation as part of their
RBC 2 initiatives. In the Philippines,
the RBC 2 that took effect this year
includes catastrophe risk charge, and
the calibration level will progressively
increase by 2019. These regulatory
changes help motivate insurers to pay
more attention to their management of
catastrophe risk.

Asia Market Review 2018 33

Modelling Enhancements
RMS released the South East Asia (SEA) Earthquake
Models in RiskLink v17. This includes re-developed
models for Indonesia and the Philippines, and new
models for Malaysia, Singapore, Thailand, and Vietnam.
CoreLogic expanded their Asia Typhoon model to
include the territory of Vietnam. In addition to this,
the hazard component of the model was updated to
include recent high intensity typhoons experienced in
this area since the previous release.
Aon Benfield’s catastrophe development team, Impact
Forecasting, also released a new model for Malaysia
Flood, which incorporates both riverine flood caused
by monsoons and flash flood by thunderstorms. They
also released new models for assessing flood, typhoon,
and earthquake risk in Vietnam, and a fully probabilistic
flood model for Jakarta.
Looking ahead to 2018, RMS will be updating their
other earthquake models in the region for India,
Taiwan, and Japan. In addition to these updates, they
will also be releasing new models for India Flood and
Agriculture, South Korean Flood, and Philippines
Typhoon. CoreLogic will also be updating their suite
of earthquake models in the region, while Impact
Forecasting will be releasing a new Thailand Flood
model. As insurers and clients gain access to more
accurate information on natural catastrophe risk,
pricing of insurance will become more accurate and
clients will gain access to information which will
support the removal of coverage gaps.
Outlook
Heading into 2018, the major
losses incurred by the reinsurance
market as a result of all of the
catastrophe losses will continue
to impact the direct market
and end buyers of insurance,
as reinsurers re-evaluate the
cost of renting their diversified
capital. However, the fact that
multiple events occurred close
together and impacted the same
areas in some instances added
complexity to the situation and
created some confusion in 2017.
The actual magnitude of some of
these events is lower than initially
anticipated, and so whilst there
will be some price pressure, in
Asia, this will be portfolio and
client specific. Overall, we do not
foresee a long term hardening
of (re)insurance markets, unless
there is a continued sequence of
loss events in 2018.
On a global basis, emerging
areas of risk such as cyber are
presenting the insurance industry
with new challenges which
are commented on in other
sections of this report. Yet, the
insurance industry is widely
held to be over-capitalised
and new investors are actively
seeking access to diversified
insurance risk. In fact, the first
half of 2017 was notable for a
renewed surge of alternative
capital, which impacted 2017
mid-year reinsurance renewals
and is now finding its way into
the primary market. Sustained
growth in reinsurance demand
is dependent upon increasing
the relevance of insurance to
the global economy. Although
alternative capital is not
immediately expected to have a
material impact on the protection
gap referenced earlier in this
piece, it potentially presents
an opportunity to grow what
is insurable and create new
products that can address some
of the underlying issues Aon
clients face. In the meantime, in
2018, reinsurance will continue
to prove its worth as a means
of mitigating earnings volatility,
controlling peak exposures,
addressing reserving risk
and providing capital relief
to insurers, which ultimately
benefits direct buyers of
insurance. There is every reason
to believe reinsurance will have
a growing role to play, as capital
becomes better matched to risk
in the region.
Asia Market Review 2018 34
 Terrorism and War
2017 Rate Movements
2018 Rate Movements
Loss Experience
2017 saw a handful of macro trends playing out across the region and the
world. The increasingly volatile political situation on the Korean peninsula
has captured the attention of political commentators, businesses, and the
general public alike.
As the rhetoric and military posturing
ratcheted up, we have seen a significant
uptick in enquiries regarding war
coverage from clients with operations
in South Korea, Japan, and Guam
in particular. Whilst nuclear war is
uninsurable, and war policies also
include a “five powers” exclusion which
would prohibit payment of claims if, for
instance, the United States and China
were to go to war, there is still significant
transferable risk in relation to the current
situation in Korea. Events such as a
North Korean test missile accidentally
landing in a populated area, some form
of military miscalculation, or minor
Attacks by sector
Police and prisons
13.3%
Peacekeeper
1.87%
Military
19.48%
Government and political
figures and institutions
6.22%
Educational figures and institutions
1.12%
Business—Extractives - Oil
1.45%
Business—Construction
0.83%
10%
Flat
benign moderate severe
retaliation following a targeted surgical provides a propaganda tool for Islamist
strike against North Korea, would still be terrorists. We have also witnessed an
counted as an insurable loss. increase in self-radicalisation through the
internet, with this trend also emerging
The second macro trend which we are in Europe. With the increase in terrorist
witnessing is the intensification of the activity in Asia, we are now seeing IS
terrorism threat in Asia. Last year, we producing Asia-specific propaganda and
predicted that as Islamic State (IS) was inciting specific attacks on targets in Asia.
rolled back in the Middle East, a ripple
effect would be witnessed in Asia with The recent propaganda has also
returning jihadists carrying out attacks indicated a potential change in narrative,
closer to home. Sadly, this trend has more encouragement is given to
borne out in 2017, with numerous attacks individuals unable to travel to Syria/
in the Southern Philippines, Jakarta, and Iraq, inspiring them to conduct attacks
Bangladesh. This is further exasperated at “home” with particular emphasis on
by the Rohyinga crisis in Myanmar, which South East Asian nationalities.
Terrorist incidents in
the Philippines 2017
Private citizens and Property
30.8%
Public gatherings
11.82%
Religious figures and institutions
2.02%
Transportation—Land
1.14%
Other
9.95%
Asia Market Review 2018 35
The third trend which we are seeing client and market approach to insuring Outlook
is an increased client interest in full this risk. Clients have rebalanced their At the time of writing, the outlook
political violence (PV) cover, rather focus from solely protecting property and for the market is somewhat
uncertain, as the full effect of the
than just traditional terrorism insurance. revenue against terrorism, to placing an
losses from the North American
Traditionally, PV cover was mainly increased emphasis on protecting their and Caribbean hurricane season
procured by Thai companies following the people and reputation. In turn, markets play out in global insurance
riots in 2010. However, we are now seeing have adapted their offerings to meet this markets. Following significant
loss events such as September
an increased take up for full PV cover, demand with new blended solutions, 11 and Katrina, there have been
for two main reasons. Firstly, because which combines traditional insurance temporary hardening of global
property programmes are increasingly coverage with access to specialist insurance markets, but these
trends have been short lived in the
excluding strikes, riots, and civil consultant services and close support in
past 20 years.
commotion along with terrorism, notably the event of emergency situations.
in territories where political unrest is The ongoing benign loss
In 2017, we saw a slowing down in pace environment in the terrorism
prevalent. Full PV covers a broad spectrum
market and the relative profitability
of perils eliminating any uncertainty of the softening in the terrorism market in
of terrorism in comparison to other
that may surround the proximate cause Asia, which in recent years has provided classes of business means that the
of a loss, for example, terrorism, riots, buyers of insurance with significant rate market will remain attractive to new
reductions year-on-year. This smoothing entrants. The insurance market also
insurrection, or civil war. Secondly, remains driven by capital markets,
given the perceived increase in political of the market trajectory is consistent and with insurance companies
instability in several countries across the with what has been seen regionally and still representing an attractive
globally across most classes of business. investment for banks and interest
region, a number of clients feel their rates remaining low, we do not
exposure has increased materially enough However, the loss environment for
foresee a significant withdrawal of
for them to purchase specialist cover. terrorism risks remained benign again capacity from the market. In 2018,
in 2017 and therefore we feel that this we foresee further rate reductions
available for clients, but not of the
Last year, we also discussed how today’s is a reduction in the pace of softening
magnitude offered in previous,
terrorist threat was shifting from a witnessed in prior years, rather than a recent renewal cycles.
property damage risk to a people risk. In hardening of the terrorism market.
In terms of the terrorism threat,
2017, we witnessed a tangible change in
2017 saw a number of more
sophisticated attacks within
and outside the region using
explosives, “daisy chain” bombings
and coordinated attacks, such
as in Marawi, Mindanao in the
southern Philippines. We expect
this trend to continue into 2018 as
“‘Belt and Road’ infrastructure projects in Asia, Middle East, and Africa regions are driving the Philippines becomes a major
higher demands for insurance. With higher risk awareness of geopolitical uncertainty around training ground for regional and
project sites, Chinese contractors and investors of these projects are keen to understand risk potentially global aspiring Islamist
solutions and are seeking out experienced brokers and insurers. Those risks are often arranged fighters. Indeed, whilst IS has been
alongside Construction All Risks and Property All Risks policies. almost completely rolled back in
the Middle East, it will be a number
Specifically in Asia, we have seen broader demand from the Philippines on Terrorism &
of years before the threat level in
Sabotage and Political Violence coverage this year, following the declaration of Martial law in
Asia is significantly reduced.
southern Philippines. Non-traditional Terrorism/Political Violence markets like Japan, Korea,
China, and Cambodia are also taking up new policies this year, reflecting the changing regional The political situation in the Korean
risk profile and higher risk awareness among local clients in the region. Peninsula will remain a key focus in
2017 as the U.S. and North Korea
Insurance buyers are, and will continue to be, more proactive in seeking solutions to address
continue to escalate the situation
the protection gap, including different classes of insurance policy and wording enhancements.
with potentially catastrophic
Terrorism risk is evolving, as evidenced by the recent vehicle attacks in Europe and shooting
consequences. We do not envisage
incident in Las Vegas. With this in mind, more clients are now looking into Active Assailant
a full scale conflict; however, it is
policies and non-physical damage loss insurance solutions to address the potential coverage
possible we could see a repeat of
gap in a traditional property terrorism policy.”
the Yeonpyeong island incident
which occurred in November 2010
Carrie Huang
– a scenario where small scale,
Underwriting Manager, War, Terrorism & Political Violence, Asia
limited conflict occurs which has
Crisis Management
the potential for large property
XL Catlin
damage and organic casualties.

Asia Market Review 2018 36

Transaction Liability
Warranty & Indemnity (W&I) Insurance and related product lines

2017 Rate Movements 0–5%

2018 Rate Movements 0–5%

Loss Experience
benign moderate severe

2017 saw a continuation of the upward trend in the use of W&I insurance in key
jurisdictions across Asia, particularly in Singapore, Hong Kong, China, South
Korea, and Japan. We also experienced a flurry of European/U.S. acquisitions
by Asian-based clients, resulting in an increased volume of cross-border
W&I insurance placements handled by the Aon Transaction Liability team.
Historically, the use of W&I insurance was primarily driven by private equity
firms as sellers who require clean exits. However, in 2017 we witnessed an
uptick in the use of W&I insurance by corporate clients on non-private equity
deals due to increased education and awareness of the product, as well as a
growing awareness of how W&I insurance can be used as a deal facilitator.

Not only did the volume of W&I business
transacted increase in 2017, but the
size of limits deployed grew as well. We
surpassed our record for 2016 by placing
the largest W&I insurance policy in the
region (by limit) on a Korean transaction,
and led the placement of one of the
largest cross-border transactions seen by
the market by an Asian-based corporate
client into Europe. As Asian firms continue
to seek to grow overseas through
acquisitions, and as the W&I market in
Asia develops, we expect to see this trend
increase in coming years as the amount of
W&I business conducted increases.
Along with the uptick in premium
volume witnessed in 2017, we also
noted that there was a tangible increase
in appetite and interest from London-
based W&I insurers in quoting on Asian
appetite to write Asian risks, 2017 was
the first year that saw reducing premium
rates in the W&I market, particularly
for conventional transactions involving
traditional or perceived lower risk
industries such as real estate.
The Increasing Take-up of
W&I Insurance
Furthermore, as Asian buyers are quickly
catching onto the strategic uses of W&I
insurance in merger and acquisition
(M&A) transactions, particularly when
Global Limits Placed
600
500
participating in auction processes,
we have seen a slight shift in focus by
savvy clients when making purchasing
decisions. Whilst cost has traditionally
been the key driver behind insurer
selection and programme design
decisions, inclusion of key coverage
enhancements such as “New Breach
Cover”, and a reduced application of the
disclosure exclusion under the policy,
just to name a couple, even at the cost of
additional premiums, are now becoming
key considerations.
Corporate Policies Non-Corporate Policies
Corporate Limit Non-Corporate Limit
$16.00
$14.00
Limit (in USD Billions)

deals. Based on our experience, the $12.00

number of insurers writing primary 400
# of Policies

$10.00
and/or excess W&I insurance for Asian
300 $8.00
transactions has increased by more
than 50 percent in the last two years as $6.00
200
insurers in London, Europe, Bermuda, $4.00
and the U.S. become more receptive to 100
$2.00
undertaking Asian risks. As a result of
0 $0.00
the increased capacity in the market and 2014 2015 2016

Asia Market Review 2018 37

W&I Underwriting Appetite
Jurisdiction
Japan Hong Kong
Singapore South Korea
Thailand Philippines
China India
With softening rates, we have seen
an increase in appetite to underwrite
specific contingent risks, where insurers
have historically been reluctant to
explore, insuring against the successful
application of regulatory approvals that
may be required in the context of an
M&A transaction outside of the U.S. In
contrast, we have seen a shift away from
that approach in 2017, where insurers are
now more willing to consider insuring
against the failure to obtain regulatory
approvals in jurisdictions outside of the
U.S. (albeit in limited circumstances)
and we expect the trend to continue
towards 2018.
Attractive Cautious
Industry
Energy Power
Fast Moving
Manufacturing
Consumer Goods
Pharmaceutical Food & Beverage
Chemicals Electronics
Financial Institutions Soft Commodities
With regards to claims, while W&I
insurance policies issued from Asia
have historically the lowest rates of
claims, 2017 saw a slight increase in
the rate of claims on W&I insurance
policies involving Asian targets. This
has led some insurers to relook at
their underwriting appetite for certain
jurisdictions, while providing an avenue
for others to enter the market and offer
more attractive premium rates. That
said, notwithstanding the slight increase
in claims activity in 2017, claims for
transaction liability insurance remain low
for Asian transactions.
Outlook
Adverse We expect the trend of softening
rates to continue in 2018,
particularly on the less challenging
jurisdictions/industries. However,
given the bespoke nature of W&I
policies which are negotiated to
cater to each M&A transaction, it is
important to consider other factors
such as the coverage offered,
coverage enhancements, the
experience of the underwriters,
and execution risk when deciding
on the choice of insurer.
As buyers become more
sophisticated in ‘de-risking’ M&A
transactions through the usage
of W&I insurance, coupled with
such Asian-based buyers who are
ramping up their M&A activities
to expand globally through
acquisition of companies in the
U.K., Europe, and the U.S., we
expect to see an increase in our
transaction volume assisting such
companies in the placement of
W&I insurance policies.
Asia Market Review 2018 38
Headline

02
Market Review
Technology,
Innovation, and
Associated Risks

Asia Market Review 2018 39

Innovation and Technology

In recent years, a number of countries in the region have emerged as global

hubs of innovation and technological progress. Last year, we spoke about
the emergence of smart cities in the region, autonomous vehicles, and
leaps forward in the way we are accessing healthcare; all of which continue
to transform the day to day experience and futures of people in the region.
This year, we focus on a handful of key trends, which have emerged over
the past years, have been felt with increased prominence in 2017, and
which will continue to gather momentum in 2018 and beyond.

Technology has already changed the
way we communicate with each other,
consume entertainment, shop, and
how enterprises manage their
equipment and price their products.
Insurance has been clearly impacted,
a few clear examples being:
• Digital or mobile channels to sell
and manage policies
• Visual data to underwrite and
adjust claims
• Satellite imagery to help us model
natural catastrophes
• New decision support tools made
possible by Machine Learning to help
insurers and businesses better manage
core operations
In this piece, we touch on three key
trends which are creating a myriad
of opportunities for our clients and a
number of challenges for the insurance
industry to meet if it is to remain a key
catalyst of economic and social growth
and benefit.
Data is the Key
In 2017, The Economist proclaimed
“data is the new oil”, a reference to the
phenomenon of businesses affecting
our everyday lives, where the primary
source of revenue is not the service
which is consumed, but the data
which is generated in the process
of consumption.
In China and several other countries in
the region, a number of start-ups have
deployed bikes in cities across that
country, with “dock free” or “station
free” bicycles becoming a common sight
in Beijing, Shanghai, and Singapore.
Consumers use a smartphone to “open
one up” and pay about 15 cents for a 30
minute ride. The two biggest operators
in China are O-F-O and MOBIKE. Each
valued in excess of USD1 billion. O-F-O
has over 3 million bikes in operation and
MOBIKE has 5 million. Every day, both
companies have over 20 million rides
each. At 15 cents a ride (and sometimes
entrepreneurs are setting prices at free),
there is little chance that fees will be the
source of profit for these businesses.
Most suspect that a primary source of
value will be data collection on consumer
behaviours and risk assessment.
One of the most interesting
developments in coming years will
be what happens when hundreds of
millions of people take multiple trips
per day on these “sensors attached to
a bike.” Can the routes consumers take
to work tell us about risk preferences?
Does the timing of the daily commute
tell us something about their likelihood
to repay a commercial loan? Does your
payment mechanism tell us something
about your consumption, or even claims
reporting data? The key challenge
for the insurance industry will be
understanding, qualitatively, different
types of small tailored data which can be
used to assess and understand risk.
The Rise and Risk of
Digital Communities
June 2017 marked what was perhaps the
most significant status update ever from
Mark Zuckerberg, Facebook’s founder,
who told us that two billion people,
more than a quarter of the world’s
population, are active on Facebook at
least once a month. If Facebook were a
country, it would be the most populous
one by far. Yet Facebook is not alone.
WhatsApp, Instagram, and Alibaba
are all building online communities
that trade information and exchange
goods and services. The scale of these
platforms is staggering, and even
more transformative is that thousands
of complementary businesses, which
are completely dependent on these
platforms are formed. The platform is an
entire eco-system of commerce.
We have all witnessed the rise of digital
communities and their role in replacing
the functions of some traditional
physical communities. Across the
region, it is easy to observe in various
social settings people sitting together
all preoccupied by their smartphones.
We are witnessing the slow but sure
shift from traditional social communities
to virtual communities. The appeal of
what is online in the digital world is
proving to be very attractive and virtual
communities will impact economic
activity beyond just e-commerce.

Asia Market Review 2018 40

All businesses will have to respond to
this shift, including the insurance sector,
which has three clear opportunities
currently emerging:
• The first and most obvious one is a new
way of thinking about affinity business
or programme business, where the
insurance industry has been provided
a new channel through which to make
its products more relevant and easily
accessible to consumers.
• The second is to think about ways
of leveraging these communities
to pool risks. Friendsurance creates
communities of “friends” and sells
personal lines products to groups
of friends that they claim reduce
acquisition costs, underwriting
costs, and fraud leakage; they are in
the market in Germany and soon to
be in Australia. Bandboo, another
community example that’s based in
Singapore, is an insurance technology
platform that pools together the
premium of its members. Bandboo
is yet to go to market, but they claim
their technology will dramatically
reduce frictions in the system.
• Third are risks in these communities
that we have to deal with in a different
way including fraud, cyber bullying,
and reputation assurance. New
products will be needed.
Consumer Expectations and The other example of this “bending
time” time phenomenon is the sharing
the Use of Time
economy. Companies like AirBnB allow
There is no doubt that consumer
us to divide up access to an apartment
expectations are changing; people want
or a house into individual slices of time.
products delivered “on demand.”
Companies like GetAround, which is a
Think about how Amazon and other
car sharing network in the U.S., allows
retailers are competing to get you
individuals to do the same thing with
something almost before you order it.
their personal autos. Sharing economy
People expect information and news “as
networks allow a split between
it happens,” not updated once a day or
ownership and access, which can be
once a month. Think about when you are
perceived as manipulating time. An
waiting for your pizza to be delivered
owner gets to “sell” small slices of access
and you want to know where the motor
rather than a large chunk of access with
bike is on the road, or waiting for a
an asset sale. Grab in South East Asia,
delayed flight and everyone wants up-
Didi in China, or Uber globally, are all
to-the minute information on schedules.
examples of time bending organisations.
There is more to this trend than
For insurance companies to increase
impatience or multi-tasking, and
in relevance to local economies and
the phenomenon called “binge-
the global economy overall, it must
watching” is instructive. Binge-watching
anticipate and support these new
or consuming a large number of
business models, and not scramble in
television shows in one sitting is not
response to them. Examples would be
about impatience or multi-tasking. It
moving away from the annual renewal or
is about how people today expect to
rating models where the primary source
control time.
of value of an asset is its accessibility at
a point in time rather than its market or
We are not content with consuming a
replacement value.
product on the schedule dictated by
the corporate network. We can watch
a show at the prescribed time once a
week on Thursday evenings, or not. If we
want, we can “bend time” by watching
all the shows at once.

“Technologies and innovations are changing the framework of
insurance; it is not only changing the way we assess and understand
risk, but it is also fundamentally changing the nature of risk. Take
autonomous vehicles for example, which will arrive faster than some
may think.
Autonomous vehicles from fork lifts to trucks and cars, will enable
greater efficiency and improved safety across many industries;
they will enhance mobility and generate economic growth, with a
significant impact on the global economy and society in general.
However, these benefits will only be realised if the technology
behind it can be widely commercialised and if it can be insured. But
how do you insure a product that does not have a history of failure
or claims? And what if a product has the capability to learn and
improve by capturing data and analysing its environment to optimise
performance? This is a new risk landscape.
To stay relevant to our clients, it is crucial for us as insurers to navigate
the change in the risk landscape and evolve in tandem with the
accelerating pace of change. We need to be more forward thinking.
Partnering with tech companies to drive the advancement of coverage
will help us innovate and deliver new insurance solutions to address
the new risks faster.”
David Guest
Country Manager, Singapore – Insurance
Regional Product Leader, Crisis Management, Asia Pacific
XL Catlin

Asia Market Review 2018 41

Cyber

2017 Rate Movements Flat

2018 Rate Movements Flat*

Loss Experience
benign** moderate severe

* versus limited take up

** much greater economic loss activity

Having dominated headlines and ranked in the top 10 risks for companies
for the last few years (ranked #9 in the Aon Global Risk Management
Survey 2015, and rose to #5 in the 2017 Survey), cyber can no longer be
considered an emerging or novel threat. Cyber risk awareness is becoming
as deeply entrenched as the reliance on technology, connectivity, and
automation which gives rise to it.

Risk Awareness
Aon and Ponemon’s 2017 Asia Pacific
Cyber Risk Transfer Comparison Report
demonstrated a rapid shift in the value
placed by organisations on information
assets and the size of a probable
maximum loss affecting those assets. In
the equivalent report in 2015, intangible
assets (for example, data) were valued,
on average, at USD589 million with
tangible assets (for example, physical
property) valued at USD706 million.
In 2017, the value of intangible assets
increased dramatically to USD903
million, eclipsing tangible assets
Only
14%
of potential cyber loss
in APAC is insured
Average impact
of a cyber attack
USD3.3m
(USD824 million). A similar shift occurred of 2016 have also been characterised
for probable maximum loss calculations. by significant cyber-related business
While loss calculations for tangible interruption losses.
assets increased from USD595 million
in 2015 to USD739 million in 2017, the Those losses have primarily been
estimation of balance sheet impact driven by 2017’s global cyber events:
arising from loss to intangible assets WannaCry and NotPetya. Although
more than tripled from USD297 million these were ransomware attacks, the
in 2015 to USD939 million in 2017. amount paid in extortion payments was
negligible relative to the scale of the
Major Losses attack. Losses suffered by companies
Recent years have seen a steady stream affected was much greater, with wide
of headline-grabbing, major data ranging estimates starting in the
breaches. While this trend shows no hundreds of millions of dollars up to
signs of abating, 2017 and the later part USD4 billion globally, primarily due to
business interruption loss, as well as
forensic expenses. A.P. Moller-Maersk
was particularly affected, suffering non-
damage business interruption losses of
up to USD300 million, a large portion of
57% 41% which is likely to be insurable.
of tangible asset losses of organisations
are insured, in line experienced a The aviation sector has been hit
with global averages cyber attack in particularly hard by a series of unrelated,
the last 24 months
non-malicious system failure events,
which are capable of triggering broadly
worded cyber policies. Relatively short
39% power outages (between 15 minutes
of organisations are and five hours) have caused far longer
planning to purchase
cyber cover in the
disruptions to service and tens of
millions of dollars in losses for
next 24 months
Southwest Airlines, Delta and, most
recently, British Airways.

Asia Market Review 2018 42

Global Trends
The trend towards business interruption
losses is consistent with the trend
towards automation and connectivity
for most businesses. Realising efficiencies
through the use of technology inevitably
increases risk where that technology
is compromised.
Recent developments in artificial
intelligence, particularly in machine
learning, suggest that automation will
no longer discriminate by the colour
of your collar. Business processes
will become increasingly reliant on
automated processes and digital
infrastructure, which will improve
efficiency but will heighten susceptibility
to system disruption, be it malicious
or inadvertent. When this occurs,
businesses are expected to find manual
workarounds more difficult to execute.
Companies must also be aware that
their cyber risk profile does not exist
in a vacuum. 2016 and 2017 have
demonstrated that cyberspace is the
new battleground for the world’s major
powers. While attacks may be “state-
sponsored”, targets are not limited to
government assets. Hackers will look to
bring down both physical infrastructure
(for example, power assets) and critical
information infrastructure (for example,
financial institutions, web and cloud
service providers, as in the Dyn attack)
and access sensitive data held by private
organisations in order to embarrass,
undermine, and steal from rival nations.
As this threat will fluctuate subject to the
geopolitical climate, businesses should
be aware of those times of heightened
risk and regularly test the resilience of
systems and processes in the face of
sophisticated attacks.
Regulatory Landscape
While keeping one eye on external
state threats, companies must maintain
compliance with data privacy and
network security laws in the jurisdictions
in which they conduct business, as well
as those countries from where their
customers come are domiciled.
Recent data privacy regulatory changes
in Asia have narrowed the legislative
gap with the western world. The Cyber
Security Law of the People’s Republic of
China became effective on 1 June 2017.
Companies are now grappling with the
implications of the first data protection
law affecting companies inside and
outside of China, irrespective of size
or industry. In particular, businesses
need to know whether they qualify
as “Network Operators” or “Critical
Information Infrastructure Operators”,
and how this affects their obligations.
Companies in the Philippines are now
required to be fully compliant with
the Data Privacy Act. Companies in
Singapore await the 2018 amendments
expected to introduce mandatory
data breach notifications to the Data
Protection Act 2012, following a public
consultation process.
Outside of Asia, Australia introduced
its own mandatory notification regime
in February 2017, which comes into
full effect in February 2018. The eyes
of the world will, however, be on the
commencement of the European Union
General Data Protection Regulation
(EU GDPR) on 25 May 2018. Under the
EU GDPR, companies may be fined up
to four percent of their annual global
turnover for serious breaches.
Market Conditions
Asia has continued to see the steady
introduction of new primary cyber
capacity. Beazley and XL Catlin, both
major cyber players internationally, have
cautiously entered the Asian market. As
underwriting comfort and confidence
grows, we expect to see healthy
competition on pricing and coverage.
Accumulation risk remains a concern
for insurers, and losses in 2017
demonstrated how this can be a threat
across industry lines (for example, the
breach of Sabre, the hotel booking
system) as well as across the software
and operating systems used by
companies, which can be susceptible
to the same exploit irrespective of
industry or location. The continued
influx of insurance capacity is needed to
respond more comprehensively to this
risk. Current estimates place syndicated
insurance capacity at approximately
USD650 million.
Emerging Risk
Directors and Officers insurance
policies have been unmoved by the
rapid emergence of cyber risk, while
other Property and Casualty insurance
lines have introduced specific cyber
exclusions. Thus far, claims against
Directors and Officers arising from
major breaches (for example, Target,
Wyndham, Home Depot, and Heartland)
have not been successful. That will not
have dissuaded class action law firms
from continuing to bring these claims,
and the recent Equifax breach may prove
to be the prototype.
Equifax is a leading American credit
reporting and monitoring agency,
regularly called upon to provide credit
monitoring and fraud prevention
services to victims of data breaches.
Between May and July 2017, Equifax
experienced a significant data breach
of its own when hackers gained access
to almost 150 million customer records
containing personally identifiable
information and, in some cases, payment
card information. Compounding the
breach, it was alleged that three Equifax
executives sold company shares after the
breach was discovered but over a month
before it was announced.
Equifax shares suffered an initial 13
percent drop after the breach became
public. Given the nature of the business,
the alleged actions taken by directors
and other errors made in responding to
the breach, there is a strong possibility
that this will be the first breach to trigger
a major loss (beyond defence costs)
under a Directors and Officers policy.
Asia Market Review 2018 43
Market Disruptors
Today, market disruption generally refers
to the overhaul of a traditional market
due to the introduction of technology.
In that context, market disruption is only
likely to drive interest in cyber insurance.
However, the current cyber insurance
market, despite its forecast growth,
is not immune to disruption. On one
hand, technological developments, for
example, the continued development
and practical application of technology,
may drastically reduce the impact of
data breach events and improve
system security.
On the other hand, a series of widespread
attacks on the scale of WannaCry, but
with a greater severity in insured losses,
for example, an attack which takes
advantage of a hitherto undetected
vulnerability in operating systems across
a multitude of companies, may test
underwriter appetite and diminish the
cyber capacity available. Current loss
ratios are, however, sustainable and the
market is expected to be sufficiently
robust to correct, rather than collapse.
Outlook
It was expected that legal
decisions in 2017 would provide
useful guidance for understanding
how both cyber insurance and
traditional insurance products
respond to cyber events, but a
wave of authorities has not yet
been forthcoming. Given the
regulatory shifts highlighted
above, we expect this situation to
improve, particularly when non-
specific cyber insurance remains
silent on cyber risk.
These regulatory developments,
along with headline cyber
events, will continue to drive
interest in cyber insurance, but
for many companies, the decision
to purchase will be driven by
contractual obligations from
corporate partners, shareholders,
or other stakeholder pressures.
As the concept of cyber insurance
is rapidly normalised, larger
corporates will insist on vendors
and other supply chain members
protecting themselves in this way.

Regionally, we expect there

to be continuing volatility in
underwriter rating models,
with the market in Asia more
closely aligning with global
trends. This will be countered
by increasing competitive
tension within the region in an
expanding marketplace.

“The market has seen several cyber loss events with each event
amounting to over USD100 million from several industries globally,
including the aviation, telecommunications, and marine industries.
These events have raised awareness about the value of cyber
insurance because of the interconnectedness of our global economy
and our increased vulnerability to cyber-attacks due to it.
We are starting to see a more consistent market response to “silent
cyber” with exclusionary language being imposed on traditional
industrial age policies. In addition, new privacy legislation is being
passed globally, and increasing corporate exposures to cyber
incidents continue to take a costly toll on the financial results of
companies. Against this backdrop, we should see price correction as
these new exposures are realised.
The cyber insurance market will continue to mature in 2018 as more
Boards appreciate that cyber resilience within their organisations is
not just a technology issue. The risk transfer and the value-added
services of more comprehensive cyber insurance policies will continue
to gain traction in helping organisations manage the exposures of the
digital age.”
Andrew Taylor
Cyber Underwriting Manager, Chubb Asia Pacific

Asia Market Review 2018 44

Headline

03
Market Review
Countries

Asia Market Review 2018 45

Macroeconomics

Asia benefited from favourable global macroeconomic conditions in 2017,

with the strengthening of the advanced economies and global trade,
as well as a partial recovery in commodity prices. Commodity exporters
such as Indonesia and Malaysia saw crude oil prices rise since 2016
(+87 percent), pushing external balances in their favour. Countries in the
region also experienced robust internal demand, with an exponentially
increasing middle-class in neighbouring countries. Today, with around 1.1
billion people and significant intra-regional trade, with 20 percent of exports
now stay within the region, versus 10 percent in 2000 and 15 percent in 2010.

China
Despite a GDP slowdown since 2010,
China’s economy performed above
expectations in 2017 and remains
confident of meeting its target of
doubling real GDP between 2010 and
2020. Chinese GDP growth is now
forecasted to rebound for the first time
since 2010, reaching 6.8 percent year-
over-year, before slipping closer to 6
percent towards 2020.
This unexpected uptick in performance
was driven by an expansionary fiscal
policy and unanticipated external
demand. Nevertheless, some
fundamental concerns over the Chinese
economy still remain. The national
savings level, at 46 percent of GDP, is
26 percentage points higher than the
global average, dampening internal
consumption. The second point
threatening China’s growth household
is corporate and government debt,
which currently accounts for 242
percent of GDP, but is expected to rise
to 300 percent of GDP by 2022. The
government has started to take measures
to deleverage its private sector, but
additional efforts should be taken to
curb this expansion of credit.
Japan
The second largest economy in Asia,
Japan is also starting to generate
positive momentum, with its economy
expanding for six straight quarters,
representing the longest consecutive
period of growth for more than a
decade, catalysed by strong external
demand and public investment.
However, this promising streak is highly
dependent on dynamic exports and the
Japanese Yen remaining at a competitive
level. Business confidence is high as large
Japanese corporates have accumulated
large cash reserves, and are becoming
more active in cross-border merger and
acquisitions to counter a stagnating
domestic market. Conversely, household
consumption is historically moderate,
and another consumption tax rise in
2019 from eight to 10 percent could
dampen it further and replicate the brief
recession experienced in 2014.
Despite the bullish sentiment in Japan, the
country is still struggling to lift inflation
to the Bank of Japan’s two percent target,
despite years of quantitative easing. This
is less significant while Japan’s GDP is
growing, however, in the event of an
economic downturn, low inflation rates
would limit policymakers capacity as their
leverage on monetary and fiscal policy
would be restricted.
South East Asia
The revival in world trade also
directly impacted South East Asia as
all countries, with the exception of
the Philippines, experienced stronger
growth in 2017. Malaysia benefited
from higher investment levels and an
increase in global trade, while Thailand
experienced stronger exports and
inflow of tourism, as expected. The
Philippines is currently experiencing a
slowdown due to a delay in a planned
government infrastructure programme.
GDP Composition
Over the past five years China’s GDP
composition has shifted, giving the
country a profile closer to that of
advanced economies, relying more
on service industries rather than
manufacturing. The GDP profile of
the emerging countries in the region
remained fairly constant and relies
from 10 to 20 percent on agriculture,
even though the share of this industry
decreased in Malaysia, Thailand,
and Philippines.
This new strategy has seen the share
of Manufacturing in the country’s GDP
fall by six percentage points to reach 34
percent in 2015, while in the meantime
Finance and Services have grown by two
and three percentage points respectively.
This trend is set to continue in coming
years and we can expect manufacturing
to only account for about 25 percent of
the country’s GDP in the mid-term.
In contrast, the GDP composition
of China’s North Asian counterparts
has been relatively stable since 2010,
with Japan’s economy focussed on the
services and finance sectors (28 percent
and 16 percent of GDP), while South
Korea and Taiwan derive a large share
of GDP from manufacturing hardware
and semiconductors, representing a
GDP share in manufacturing of 30 and
44 percent.
The land mass of Singapore and Hong
Kong means that both countries have
a very different economic profile, as
almost half of Singapore’s economy is
organised around services (increase in
six percent in five years), while Hong
Kong generates 25 percent of its GDP
from financial services.

Asia Market Review 2018 46

Three emerging countries of South
East Asia, Malaysia, Indonesia, and
Vietnam, have a significant reliance
upon the Oil and Gas industry. As this
market has faced significant volatility
and downward trends since 2008, the
share of this industry in these three
countries has decreased. It reached nine
percent in Malaysia in 2015 versus 16
percent in 2008, 22 percent in Indonesia
down three percent from seven years
before, and stagnant at 12 percent of
GDP in Vietnam. Nevertheless the rest
of the GDP composition of these three
countries vary widely, as Malaysia’s
manufacturing share almost reaches
a quarter of the GDP, while the retail
sector consolidated its major role to
reach 19 percent of GDP. On the other
hand, Indonesia and Vietnam are the
countries with the largest share of
agriculture in their GDP, at 20 percent.
Performing on the world stage
South East Asian corporates do not yet
have a significant impact at a global
level, unlike their Chinese counterparts
which benefit from a large internal
market and aggressive external
investments, helping them to narrow
down the gap with the European and
U.S. regions.
Asia GDP growth of circa six percent
(circa five percent including Japan), while
emerging economies barely reached circa
two percent, can also been linked to the
emergence of large local companies who
grew at a fast pace due to the boost of
internal demand, and the resurgence of
exports after the financial crisis in 2008.
The Forbes Global 2000 ranking was
previously highly dominated by groups
from mature economies, 76 percent were
U.S., Europe, or Japan based in 2009. The
trend is now gradually evolving with an
increased number of Chinese and Indian
companies, facilitated by a massive local
market with more than a billion potential
customers, and some degree of barriers
to entry allowing them to face limited
foreign competition.

Real GDP Growth by Country 2016 2017 2018 2019

2016 to 2019 (in %)

6.7 6.9 6.8
6.2 6.2 6.4
5.4
4.9 5.0
4.2
3.2 3.5
2.8 2.8 2.6
2.3 2.0
1.5
1.1 0.9

China Japan S. Korea Taiwan Singapore Thailand Malaysia Indonesia Philippines Vietnam

GDP by Industry

Country with highest share per industry in its GDP SG

TW
44.1% 44.7%
Average Asian countries share in their GDP

Country with lowest share per industry in its GDP

HK HK
ID 25.3% 25.4% SG
ID HK
22.2% 21.3%
20.5% 22.4% 19.6%
18.7%
ID 14.6%
9.4% 13.1%
8.6% 9.8% 9.0%
7.2% 9.6%
5.5%
7.1% CN 6.6%
PH 3.9% HK 4.0%
2.7%
TW 0.1% 1.2% 1.3% PH CN
JP JP HK

Construction Energy Financial Agri-business Manufacturing Public Retail Services Transport/

Institution/ Utilities
Real Estate
Asia Market Review 2018 47
Top Asian Companies
140%
Growth ’09-17 – # of Firms
ID
TW
India
Asia
SG S. KR
Growth ’09-17 – Sales US
-30%
EU
Size = Assets
-60%
Forbes Global 2000
Region and Country Growth – 2009-‘17
India indeed placed 11 new firms in the
“Global sentiment has improved in
latest 2017 ranking, mainly from the 2017 on improving growth of key
banking industry. China registered the developed markets, including the
most significant growth, with 109 new U.S., EU, and Japan. Despite lingering
corporates included in Forbes ranking, uncertainty over U.S. President
Trump’s trade policy, international
35 percent from Financial Services and trade has picked up significantly,
15 percent from Construction. The U.S. creating a conducive environment for
still dominates the ranking with 622 firms, the export-dependent Asian region.
but their overall performance over the Export-driven economic recovery is
expected to gradually feed through
2009-2017 period has been stagnant into stronger domestic demand of
compared to their Chinese counterparts. Asian countries to varying degrees,
U.S. and Chinese firms record a similar depending on the openness of the
individual economies. Despite the
amount of sales, but U.S. firms sales grew
lack of progress of the Trans-Pacific
by 10 percent while Chinese firms’ sales Partnership negotiation, regional
multiplied by five. Over this same period, integration will continue, building
the assets of Chinese firms got multiplied on the framework of the ASEAN
Economic Community (AEC) and Asian
by 6.1 versus an increase of only 1.5 for
Infrastructure Investment Bank (AIIB).
U.S. corporates. The number of firms
coming from South East Asia remains On the other hand, geopolitical
limited, but banks in Malaysia and Vietnam, tensions in the Korean peninsula
have heated up, and the potential
and conglomerates in Thailand and
impact on regional economic growth
Philippines allowed the region to be better and asset markets are still hard to
represented in this ranking. gauge. In addition, many Asian
+450%
PH
China
+200%
TH
50%
countries are going to experience key
elections and changes of leadership
in the coming one to two years (for
example, Thailand, Malaysia, India, and
Indonesia). Although some populist
measures in government budget are
expected to give impetus to short-
term consumption, it is possible that
profound structural reforms and
long-term investment projects may be
delayed during such period.
Asia, especially emerging Asia,
has stepped up efforts to increase
infrastructure investment as a strategic
move to sustain long-term growth.
China has taken the leading role
through the “Belt and Road” Initiative,
with India and South Korea distant
peers, while South East Asian countries
are catching up rapidly. Commercial
insurance business is projected to
greatly benefit from the infrastructure
boom along the way.”
Clarence Wong
Chief Economist Asia,
Swiss Re Institute
Asia Market Review 2018 48
China

General Insurance 5–10%

2017 Rate Movements
Health & Benefits Flat

General Insurance 5–10%

2018 Rate Movements
Health & Benefits 0–10%

General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe

2017 was a significant
year for China, marking
the 19th Communist
Party Congress in
October and the halfway point in Xi
Jinping’s tenor as President. At the
congress, President Xi Jinping said it
had been a “remarkable five years” for
Health market grew by 23.4 percent. The
online segment grew the fastest with
online gross written premium increasing
well in excess of 100 percent. There
were also two significant regulatory
changes in 2017, with phase two of
China Solvency II kicking off, and the
foreign minister announcing on 10
international insurers. As Chinese firms
continue to invest and operate abroad,
demand for a number of insurance
products increases, including terrorism,
political risks, trade credit and warranty
and indemnity insurance.
Capacity remained abundant in the

China as it celebrated achievements November that the Chinese government domestic market in 2017, leading to

in a number of areas, including in the would let foreign investors increase their another year of soft market conditions,

fight against graft, reduction of poverty holdings in life insurance companies where clients with favourable loss

and pollution, national security, and to 51 percent by 2020 and eventually experience enjoyed rate reductions,

strengthening of the Communist Party. totally remove the limitation after five coverage enhancements and reduced

At the same time, President Xi was years. This signals a potential influx of deductible levels. In other significant

elevated by the communist party to the wholly owned foreign insurers into market news, Zhong An, China’s first

same status as Chairman Mao, as his the domestic market representing an online only Property and Casualty

name and political ideas were written interesting new market dynamic. insurer started trading on the Hong

into the party’s constitution.
2017 was also a significant year for
the insurance industry in China: total
premium in the domestic market grew
by 21 percent when compared to prior
year, with total premium now reaching
in excess of CNY3045 billion.
The Property and Casualty market grew
by 14.5 percent, whilst the Life and
China’s “Belt and Road” Initiative
continued to generate significant
international interest, as a number
of major construction projects got
underway in 2017. Thus far, “Belt and
Road” projects have typically used
Chinese contractors, and the projects’
insurance programmes have been
largely placed with Chinese rather than
Kong stock exchange. The insurer which
was funded by Ping An, Tencent, and
Alibaba raised USD1.5 billion, valuing
the company in the region of USD10
billion. Zhong An has written in excess
of 5.8 billion policies in only three years,
demonstrating the possibilities of a low
cost, online model in such a large but
dispersed market.

Asia Market Review 2018 49

In June, far-reaching cyber security
legislation came into effect, affecting a
large number of businesses in China. The
law applies to companies considered
“Network Operators” or “Critical
Information Infrastructure Operators”,
and imposes restrictions on where data
can be stored, as well as granting Chinese
authorities the power to conduct spot
checks on companies’ network operations.
The law will impact a number of sectors,
but particularly firms in the energy, power,
water, IT, communications, and financial
services sectors.
2017 was also a year where China began
to emerge as a leader in the renewable
energy space. The past 12 months
represented a third year of falling coal
consumption, a significant investment
in green energy production, and a
government announcement that it was
working on a timeline to completely
remove fossil fuel powered cars from
its roads. This, coupled with America’s
withdrawal from the Paris climate accord,
and China’s subsequent championing of
the agreement, has led to a significant
level of focus domestically and
internationally on China’s next move in
this space.
China itself has not experienced any
direct catastrophic losses; however a
clearer picture of the impact of global
losses will be seen as we enter 2018,
as China is still reliant on the global
reinsurance market.
Outlook
As China continues to move
from its historic position as a
manufacturing economy towards
a service and consumer led
economy, the demand for certain
products in the domestic market
is likely to shift. Due to its heavy
manufacturing base, typically
Chinese clients have sought
cover for property and products
related exposures: property
all risks, products liability, and
product recall, predominantly.
As we start to see a greater focus
on services, demand for financial
lines products such as Professional
Indemnity, and Directors and
Officers cover will become more
of a concern. Whilst a rebalancing
of the Chinese economy is
ongoing, manufacturing is not
going to disappear in the short
run. However, manufacturing
processes are becoming
increasingly automated and
key processes evermore reliant
upon technology. As this trend
continues, the take up of cyber
insurance and contingent Business
Interruption covers will increase
steadily as organisations come to
better understand the exposures
they face as a result of more
complex and tech-dependent
production processes and
supply chains.
As the middle-class in China
continues to grow rapidly, and
a greater number of families
find themselves with significant
disposable income, we anticipate
an increase in the demand for
savings and investment products.
This is expected to directly impact
the life insurance market where
we believe a significant increase
in gross written premium will be
witnessed in 2018.
Asia Market Review 2018 50
Hong Kong

General Insurance 0–10%

2017 Rate Movements
Health & Benefits 0–5%

General Insurance 5–10%

2018 Rate Movements
Health & Benefits 0–10%

General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe

2017 saw a change in
government and the
election of a new
Chief Executive
for Hong Kong in July, which in turn
generated a renewed sense of optimism
that the SAR would benefit from an
increase in strategic investment,
facilitated by a more harmonious
relationship between the executive and
legislative branches of government.
Evidence of this has already begun to
emerge, with the approval granted for
a HKD30 billion sports park, which is
to be developed on the site of the old
Kai Tak airport in Hong Kong. The new
government has also recognised that
Hong Kong lags behind other global
financial hubs, specifically Singapore
within the Asia region, with regards to
the pace of technological innovation.
The government has sought to
encourage investment into the Fintech
and InsureTech sectors as a result, as it
seeks to defend the country’s position
The Hong Kong, Macau, and mainland
Chinese governments are also closely
collaborating on the Greater Bay Area
plan–the Chinese government’s vision
for an interconnected Pearl River Delta
region in southern China linking Hong
Kong, Macau, and nine other cities in
Guangdong province into an integrated
economic and business hub, to form
the largest economic and industrial
city cluster anywhere in the world.
In the coming years, this will result in
significant infrastructure development of
the west side of the Pearl River Delta.
2017 was another year where we saw
continued softening across most parts
of the portfolio, with the exception of
Employees’ Compensation, where we
have seen insurers become increasingly
selective with what they will offer for
accounts with poor loss ratios. The level
of Employees’ Compensation claims
inflation in Hong Kong, particularly
in respect to common law claims, has
above in 2017 and the first ‘T10’ since
2012, making 2017 the worst typhoon
year since 1999. Typhoon Hato led
to significant losses in Macau, with
reserves set in excess of USD400 million,
approaching double the annual general
insurance premium in the Macau
market. A significant portion of the Hato
losses will be settled in the Hong Kong
market. These losses, coupled with the
significant natural catastrophe events
in North America, and the loss ratios on
Employees’ Compensation portfolios,
mean that some major international
insurers in Hong Kong will be
increasingly selective and adopt a more
cautious underwriting approach as we
head into 2018. That said, there is still
ample capacity in the market place and
we are seeing major Chinese insurers,
local insurers, as well as some specialty
international insurers seeking to capture
market share which will temper any
hardening rate environment.

as a global financial services leader. meant that some businesses will be

This has resulted in the creation of a facing significant rate increases in 2018.

raft of incentives, tax breaks, regulatory

Hong Kong saw five typhoons with a
sandboxes, and other forms of
warning system category of eight or
government assistance being offered.

Asia Market Review 2018 51

The H&B market in Hong Kong
continues to be dominated by three
major international insurers: AXA, AIA,
and Bupa, and is fairly stable in terms of
capacity. Medical inflation, and therefore
medical premium rates, continue to
edge upwards. Clients are attempting to
manage the effect of premium costs by
both changing insurers and modifying
policy terms/plan arrangements to
restrict cover for their employees.
As medical inflation rates rise, the
importance of accurate data and analytics
to manage and identify utilisation rates,
where claims are coming from, and
whether claims can be managed to a
lower cost, will only increase.
In June, the new “Insurance Authority”
came into force, replacing the “Office
of the Commissioner of Insurance” to
regulate insurers. They have stated that
brokers and agents will come under their
regulatory regime within two years of
June 2017. As a result of the Insurance
Authority coming into force, a new
insurance levy came into play since
1 January 2018, which is an additional
charge to be paid by policy holders. This
is being introduced on a stepped basis,
and will increase over the coming years.
Outlook
In terms of rates and coverage in
2018, property markets will wait
for the outcome of treaty renewals,
and wait to see if there is any
further worsening of the major
natural catastrophe results to see
if they can drive pricing up in both
Property And Casualty markets
in 2018. Our view is that the
uncertainty around pricing may
last for the first two quarters of
2018, at which point the market is
likely to settle into a more historic
rating pattern. As covered earlier
in this piece, there is significant
excess capacity in the Hong Kong
market which is seeking to capture
market share, should incumbent
markets present an opportunity
by significantly altering their
underwriting pricing models.
In 2018, we expect to see some
areas where clients will purchase
higher liability limits, particularly
for Directors and Officers (D&O)
and Professional Indemnity (PI)
policies, as awareness grows of
the increasing cost of litigation,
and therefore the need to procure
greater limits. We have seen an
increase in enquiries in cyber
insurance this year following
WannaCry, Petya, and the recent
WWPKG attack. We expect more
companies will purchase cyber
insurance in 2018 to protect their
businesses.
There is an expectation that
there will be higher volumes
of construction business as the
Legislative Council approves
additional construction projects.
There is an ongoing concern for
employers around the cost of
Employers’ Compensation for
construction projects, which can
now be multiple times the size of
the Construction All Risks premium
spend, and we anticipate these
concerns to continue.
Asia Market Review 2018 52
Indonesia
General Insurance Flat
2017 Rate Movements
Health & Benefits 11%
General Insurance Flat
2018 Rate Movements
Health & Benefits 10.5%
General
Insurance benign moderate
Loss Experience
Health &
Benefits benign moderate
A positive and reinsurance premiums, representing
economic outlook growth of approximately 12.7 percent
with a forecast when compared to 2016.
growth in real GDP of 5.1 percent in
2017 bodes well for Indonesia, although Property and motor vehicle premiums,
this remains below the government constituting over 50 percent of the total
target. Buoyed by rising commodity insurance spend in Indonesia, remain
prices, notably in coal, and crude palm under tariff pricing conditions, resulting
oil, exports have surged by over 17 in a stable premium for insureds. Tariff
percent year-on-year. changes effective from 1 April 2017
were relatively limited with a handful
The insurance industry has benefited of industries impacted by changing
not only from the impact of a growing tariff rates.
economy, but the government’s
continued focus to strengthen Cyber insurance has become more of
the Indonesian insurance market. a talking point in Indonesia following
Gross written premiums are on track to major data breaches, including in
meet the OJK’s (the regulator’s) 2017 neighbouring Malaysia, with several
target of USD 19.1 billion in insurance insurers in the local market active in
offering solutions to clients. However,
severe
severe
take-up remains modest as insureds
continue to tightly control their
insurance spend.
Marine insurance has seen a worsening
loss ratio develop through 2017, perhaps
as a reflection of several years of financial
pressure on shipping lines which may
have impacted crew, training, and
maintenance budgets. While several
insurers are adopting a stricter approach
to their marine portfolio, capacity
remains plentiful and the market
remains soft.
• Indonesia jumped from 91st to 72nd
in the World Bank’s Ease of Doing
Business index in 2017
• S&P lifted Indonesia’s sovereign debt
rating to investment grade
Asia Market Review 2018 53
Across the region, the threat of terrorism increased in Outlook
2017 as Islamic State (IS) was rolled back in the Middle
Organisations face uncertainty
East, prompting Asian fighters to return to their home caused by both domestic and
countries, trained and radicalised. In May, we saw an overseas factors in the year
IS-linked bombing at a busy bus station in Jakarta. ahead. Domestically, 2018 will
see the last full year of President
Whilst this major event increased awareness of the
Joko Widodo’s first term in office.
terrorism exposure in the country, Indonesia remains a Widodo’s initial target of adding
two-speed market for terrorism insurance. Foreign firms 35gigawatt (GW) of power
capacity by 2019 will not be
with operations in Indonesia still exhibit a much higher
realised, and pressure will be
propensity to buy cover than domestic organisations, on to ensure revised targets are
which are much more comfortable leaving this not missed.
exposure uninsured.
Indonesia has planned 247
national priority projects for
development between 2015
2017 saw some notable fire losses in the domestic market. and 2019, requiring USD355
The two most notable losses occurred at a plastics billion of financing, of which
production plant and a cotton warehouse, with the first 40 percent will be government
loss caused by an electrical short circuit, and the cause funded. Only five of the 247
of the second loss yet to be determined at the time projects have been completed
of writing. Both losses represented total losses for the as of June 2017, with another 130
insured, resulting in combined claims in excess of projects under construction. The
USD45 million. The sizeable losses will impact both construction industry will look
local and international insurers who participated on the to 2018 to hopefully represent
insureds’ programmes. a breakthrough year with more
projects commencing. Any surge
in power and infrastructure
projects commencing
construction will have a positive
impact on the insurance industry.
External challenges to the
outlook for Indonesia’s economy
include geopolitical uncertainties
in advanced economies, and
slower than expected economic
slowdown in China, one of the
top foreign direct investors
in Indonesia.
Life insurance remains a key
growth area in Indonesia,
with premiums anticipated to
continue their growth in excess
of 12 percent, a reflection of
an increasing middle-class
population and the continuing
development of business-to-
consumer (B2C)
distribution channels.
The FinTech revolution is slowly
building up pace in Indonesia.
In 2017, the OJK set up an official
registration system for FinTech
start-ups, formally recognising
the sector, as well as creating
a FinTech advisory forum.
Bank Indonesia, the national
central bank, is also planning
to create a regulatory sandbox
for Indonesian FinTech startups,
following the footsteps of Hong
Kong and Singapore. The areas
of e-commerce, online payment,
and InsureTech are expected
to see significant investment
and development in 2018, as
Indonesia seeks to boost the
financial services sector of
its economy. Creating more
effective and ubiquitous lending
infrastructure, such as peer-to-
peer platforms will also be a key
focus in 2018. Access to finance
remains a challenge for small
to medium-sized enterprises in
Indonesia, therefore online and
alternative models provide an
encouraging opportunity to drive
new growth in the economy.
Asia Market Review 2018 54
Japan

General Insurance 0–7.5%

2017 Rate Movements
Health & Benefits Flat

General Insurance 0–5%

2018 Rate Movements
Health & Benefits 0–5%

General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe

There is a general
feeling that ‘a
change is in the air’
for Japan. This is in
many aspects of
life, be it politics,
business, and perhaps even culturally.
The insurance market and attention
to risk is not excluded. More Japanese
multi-national corporations are seeking
global control for their risk and insurance
management. The shrinking domestic
economy, caused by the continuation of
a rapidly shrinking population, means
that many Japanese corporations need
to seek assets and businesses outside
of Japan. Last year, we commented
on M&A activity, especially within the
insurance industry, which continues to
be a key talking point, in view of the
most recent purchase of Singaporean
First Capital Insurance Ltd by Mitsui
Sumitomo Insurance Company Ltd for
USD1.6 billion. As a result, Warranty &
Indemnity and Directors and Officers
insurance has become more actively
considered, mainly for Japanese
outbound and international inbound
business, as domestic deals are still not
on a par with other major international
market places. This too is likely to
change in view of Japan Inc’s brand and
reputational damage in recent times.
With the acquisitions of international
firms, there also comes an understanding
of well-established and sophisticated risk
management controls of the acquired
companies. Management level people,
who have experience of dealing with
global brokers in the U.S. and/or Europe,
are introducing the idea of using global
brokers upon return to headquarters
in Japan.
With regards to notable global events,
Japanese insurance groups Tokio Marine
Holdings, MS&AD Insurance Group
Holdings, and Sompo Holdings may end
up paying out more than JPY200 billion
(USD1.78 billion) in total for damages
caused by the recent hurricanes in the
U.S. and major earthquakes in Mexico.
Tokio Marine said that it expected to pay
about JPY65 billion (USD0.57 billion),
which would be the company’s biggest
payout for natural disasters overseas
since the JPY130 billion (USD1.15 billion)
in losses stemming from the 2011 floods
in Thailand. MS&AD has quoted that it
expects to pay out about JPY70 billion
(USD0.62 billion) to JPY110 billion
(USD0.97 billion) in connection with
the North American hurricanes and
earthquakes. Sompo has yet to announce
an estimate, but is seen coming up with
a similar figure. Clearly these payouts
place downward pressure on full-year
earnings; however, whilst this may
impact pricing for international risks, it is
unlikely this will have a negative impact
on the Japanese domestic market, which
will continue to be underwritten outside
of the global norm.
In 2017, the commercial Property
Damage and Business Interruption
insurance experienced no major rate
change. In the large enterprise market,
international brokers’ penetration has
driven stiff competition from the insurers
for this sector, resulting in clients
achieving substantial premium savings.
Significant flood damages were caused
by heavy rainfall, including the torrential
downpour that hit northern Kyushu in
July. Typhoon 18, the first typhoon ever
to make landfall on each of the four
major islands of Japan, caused a major
damage all across the country.

Asia Market Review 2018 55

From a Liability viewpoint, with the
exception of some specific industries such
as pharmaceutical manufacturing, Japan
is still a favourable buyer’s (soft) market.
Insurance premium reductions continue,
particularly in large corporate markets.
This is primarily due to promotion of
competition among insurance companies
via the appointment of international
brokers and the optimisation of
insurance arrangements.
Unfortunately, from a branding
perspective, Japan Inc continues its run of
scandals. Top Japanese automakers said
that they were scrambling to assess the
safety of vehicles containing products
from a major Japanese steel manufacturer,
which has admitted falsifying quality data
in a growing scandal. Toyota, Nissan,
Honda, Mitsubishi Motors, Subaru, and
Mazda joined aviation firms and defense
contractors Mitsubishi Heavy Industries,
Kawasaki Heavy Industries, and IHI that
have used the steelmaker’s products. The
brewing crisis is the latest in a string of
quality control and governance scandals
to hit major Japanese businesses in
recent years, undermining the country’s
reputation for quality, trust, and integrity.
It remains to be seen what impact, if any,
these events will have on Directors and
Officers insurance premiums, especially in
view of a recent high profile case where
three retired directors of a well-known
power company were brought before the
Japanese courts following the 2011 Great
Easter earthquake.
A major topic of discussion in Japan is
Cyber risk and insurance. Approximately
half of Japanese financial institutions
have been on the receiving end of a
cyberattack since 2015. Of the 411 banks,
credit associations and other financial
institutions recently surveyed, 1.2 percent
said they suffered significant fallout
from a cyberattack while 9.7 percent
noted a minor impact. Japanese financial
institutions are now spending an average
of JPY178 million (USD1.59 million) on
cybersecurity each year. The costs,
which include system development and
personnel expenses, totalled just JPY113
million two years ago. Japan’s megabanks
continue to boost their defenses, but
attackers are increasingly turning their
attention to small and midsize regional
financial institutions, whose cybersecurity
responses vary drastically depending
on the institution’s strength and other
factors. Serendipitously, as the demand
for cover increases, due to an increase
in insurance companies providing cyber
insurance, the market continues to soften.
However, some insurers have tightened
their underwriting on specific industries
which have suffered large losses overseas.
Outlook
Despite the significant damages
caused by the flood and large
typhoons, the loss ratio of major
local companies continue to be
favourable, and so the softening
market trend of 2017 is expected
to continue through 2018. The
high level of broker penetration
in the large corporate market
will also continue to generate
downward rate pressure on local
insurers. There is an increasing
tendency in the large corporate
space for organisations to seek to
optimise their global insurance
arrangements in an attempt to
drive consistency and premium
savings, which is expected
to continue in 2018 as large
businesses consolidate their
insurance operations and leverage
their group buying power.
Major Japanese non-life
insurers have started reviewing
their earthquake insurance
underwriting models, reassessing
earthquake ratings by region and
in some cases, postcode. Tokio
Marine & Nichido Fire Insurance
Co, as well as Sompo Japan
Nipponkoa Insurance Inc., will
amend their pricing models for a
number of earthquake and tsunami
exposed regions, although the
major areas of Osaka Prefecture
and Tokyo will remain unchanged.
This is not cause for alarm, as it is
more a correction than a general
sign of the market. The insurers
will keep premiums unchanged
for the major areas of Osaka
Prefecture and Tokyo.
Asia Market Review 2018 56
Malaysia

General Insurance 5–10%

2017 Rate Movements
Health & Benefits 0–5%

General Insurance 5–10%

2018 Rate Movements
Health & Benefits 0–5%

General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe

The most
significant
single impact
on the Malaysian insurance market in
2017 was the continued loosening of
tariff pricing in the domestic market.
This deregulation of insurance which
began in the motor market is now
being applied to the property market,
with fire insurers now permitted to
deviate from the tariff price by up
to managing the risks they face are
able to achieve significantly better
renewal outcomes than their peers.
Another significant trend in 2017
has been the continuing interest of
international markets to write Malaysian
risk on a tier two basis, by establishing
an offshore presence in Labuan. We have
recently seen a number of insurers enter
the market in this way, including Allied
are seeing clients increasingly take
targeted interventions in their employee
populations to attempt to reduce future
loss experience. One way of doing
this, which is becoming increasingly
popular, is the use of employee wellness
programmes which make an upfront
investment in the health and well-being
of a company’s employee base, in order
to prevent future negative outcomes.

to 30 percent. This freeing up of the World, Berkley, and Berkshire Hathaway. Cyber is a risk which has been spoken

market has led to a wave of product about for a number of years, but in
The H&B market in Malaysia remains 2017 we saw a significant increase in
innovation as insurers now have to
dominated by a handful of large the number of Aon clients seeking to
aggressively compete to gain or
international players, including AIA, close their existing coverage gap in
maintain market share. From a client
Allianz, Prudential, Great Eastern this area. There were a number of high
perspective, this regulatory change
Life, Tokio Marine, and AXA Life. As profile cyber losses report in Malaysia
shines a spotlight on the importance
medical inflation rates continue to sit and further afield in 2017, and these
of effective risk management. In
well above the overall level of inflation, losses seem to have crystallised the
contrast to the previous, tariffed
clients continue to look for new ways risk of a cyber breach in the mind of
market, clients with a superior loss
of containing the cost of their medical many insurance buyers in Malaysia.
experience and a clear commitment
plans. As utilisation rates increase, we

Asia Market Review 2018 57

As cyber stops being thought about
as an emerging risk and is accepted
as a core exposure which must be
appropriately managed and transferred,
we expect to see a significant rise in
the demand for cyber insurance and
with it a renewed wave of product
innovation from the insurance market.
Another area where we saw elevated
activity in 2017 was in the terrorism
market. The terror threat level across
the entire region rose in 2017, with
returning fighters from the Middle East
seeking to execute attacks on home soil,
the Philippines perhaps being the most
high profile example of this. Malaysia
is not immune to this phenomenon,
and over the past 12 months, we have
seen increased take up of standalone
terrorism solutions form our retail, hotel,
and leisure portfolios in particular.
The Malaysian economy performed well
in 2017, with growth rates between
5.2 percent and 5.7 percent achieved.
The Malaysian Ringgit strengthened
compared to other key benchmark
currencies, in contrast to the prior
year where significant weakening
took place. This, coupled with
somewhat of a recovery in commodity
prices, boosted a number of sectors
including Oil and Gas, Construction,
Agriculture, Palm Oil, and Rubber.
Malaysia’s Ministry of Health amended
the Medical (Amendment) Act 2012
and Medical Regulations in 2017, which
came into force on 1 July 2017. Under the
new rules, doctors must have medical
malpractice cover in place, and attend
continuing professional development
courses to upgrade their skills, before
they can renew their Annual Practising
Certificates (APCs), which are required
to practice medicine in Malaysia. The
new requirement, which is set to come
into effect on 1 January 2019, makes it
mandatory for doctors to accumulate 20
Continuing Professional Development
(CPD) points, which can be obtained
through attending courses, seminars,
and workshops. The amendments were
made to address the current needs of
medical practice, and ensuring safe and
quality medical care for the public.
Outlook
The Malaysian economy is
expected to perform well again
in 2018 with real GDP expected
to expand between five to 5.5
percent led predominantly by
strong domestic demand. Private
sector expenditure is expected
to expand by 7.3 percent, in line
with the anticipation that private
consumption and investment
activities will keep pace. All sub
sectors will continue to expand
in 2018 with manufacturing
sector forecast to increase by 5.3
percent, and agriculture expected
to grow by 2.4 percent in 2018.
The construction industry is
forecast to grow significantly, with
a rate of 7.5 percent expected,
supported by an increase in large
infrastructure projects. Gross
exports are projected to expand
by 3.4 percent, led by continued
demand for electrical products
and commodities.
In 2018, we expect market
capacity to continue to grow
for Property and Casualty and
financial lines risks. The increasing
market capacity, and the relaxation
of tariff conditions means that
well-managed risks can expect
to achieve further premium
reductions in 2018. The strong
interest in cyber cover exhibited
in 2017 is forecast to grow
exponentially again in 2018 and
beyond, and similarly, we expect
to see an increased level of interest
in financial lines products as risk
managers move to deal with
existing coverage gaps.
Asia Market Review 2018 58
Pakistan

General Insurance 10–15%

2017 Rate Movements
Health & Benefits 5%

General Insurance 0–5%

2018 Rate Movements
Health & Benefits 0–10%

General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe

The Pakistani insurance
market, dominated
by aggressive local
players, was incredibly
competitive in 2017.
The cut throat environment in the
local market resulted in some accounts
receiving significant rate reductions as
insurers wrote for market share. The
more established, larger markets in the
Pakistani Property and Casualty market
attempted to stabilise a market which
has been softening at an incredible
rate for a number of years, but found
themselves undercut by smaller outfits
who continued to drive rates lower.
As with other markets, terms differed by
risk, but competition was particularly
fierce in the Construction, Power, and
Energy sectors where Aon witnessed
significant appetite to support risks at
incredibly low deductible levels, with
particularly thin rates.
The Health & Benefits (H&B) market
also remained extremely competitive in
2017, with organisations achieving rate
reductions, despite continuing medical
inflation. Year on year, the demand from
large corporations for H&B products and
services continues to rise, as employee
headcounts increase, and benefits are
increasingly used as a talent retention
and attraction tool. 2017 was a year
where the H&B market in Pakistan
started to exhibit a major change
in market dynamics. Having been
dominated for years by agents offering
off-the-shelf products with restrictive
cover, discerning organisations began to
search for more tailored, sophisticated
offerings as demand for targeted
interventions and the popularity of
wellness programmes increased. We
also saw an increase in the demand for
data-backed insights, as organisations
sought to make targeted interventions
in their workforce to increase health and
well-being, and to control their medical
insurance expenditure. At the same
time, a number of large organisations
which had previously self-insured their
H&B exposure through in-house funds,
now looked for external solutions, in an
attempt to reduce their administrative
burden, and insulate themselves
against rising healthcare costs. From
an end user perspective, Pakistanis,
particularly from younger generations,
are becoming increasingly interested in
smart healthcare delivery, on-demand
services, and online/mobile app delivery.
As this area of care delivery expands
and develops, consumers will enjoy
greater choice and access to healthcare
services, particularly in hard-to-reach or
underserved areas.

Asia Market Review 2018 59

Healthcare was not the only sector which saw
interesting developments from a consumer perspective
in 2017. As the middle-class in Pakistan continue to
grow at an exponential rate, the demand for personal
lines insurance coverage grows with it. In recent
years, the Pakistani insurance market has seen a
significant uptake in insurance on personal devices
such as phones and tablets, as well as a flourishing
bancassurance sector for products such as Personal
Accident, Travel, and Income Protection. As Pakistanis
become richer and the middle-class grows, the amount
of insurable property will continue to increase, as will
the corresponding demand for insurance products.
Linked to this is the increased purchasing power of
the millennial generation, which is tech savvy, and
prefers to purchase online. As these trends grow in
coming years, we will begin to see more and more
insurance business done online, and greater success for
convenient channels such as bancassurance.
Terrorism remains a key challenge for the country,
and 2017 was a year where we saw increasing take-up
of terrorism coverage. However, there still remains a
significant coverage gap in Pakistan, with the majority
of affected premises uninsured. This means that despite
the significant exposure in the country, most insurers
boasted positive loss ratios for the year, resulting in
another year of significant reductions for clients.
Outlook
One of the most significant
influences on the domestic
economy in 2017 was the
establishment of the China-
Pakistan Economic Corridor
(CPEC), with a number of
significant projects starting
to kick off. Looking forward to
2018 and beyond, this initiative
is set to have an enormous
impact on the country as China
invests billions of dollars in
creating new motor, rail, power,
and energy infrastructure in
Pakistan. The country, currently
suffering from a 5,000 megawatt
shortage of power generation
capacity, will see an additional
10,000 megawatts added over
the next 10 years as part of the
project, including a significant
investment in wind, solar, and
hydro, as well as coal and nuclear
power. The project, which was
originally estimated to be worth
circa USD46 billion has already
expanded to an estimated USD60
billion over the course of its 10-
year lifespan. The project, linking
the Port of Gwadar in the south
of Pakistan to Kashgar in western
China via a series of infrastructure
projects, is expected to generate
up to USD600 million in
additional insurance premiums
in the coming years. Unlike
other “Belt and Road” initiatives,
Chinese capital invested into
Pakistan appears to be trickling
down into the local economy
benefiting all insurers, insurance
brokers, loss adjusters, and risk
engineers. Our estimate is that 40
percent of CPEC related premium
is placed with international
markets, with this proportion set
to gradually increase over the
course of the project, whilst the
balance is placed in the Chinese
market. CPEC has also given
great confidence to other large
local groups who are now also
investing in major projects
in Pakistan.
Overall, in 2018 we expect to
see the H&B market remain
incredibly competitive and so,
despite its status as a loss leader
for many insurers, further rate
reductions are anticipated,
although how sustainable this
is can be questioned. In the
Property and Casualty market,
we believe that after a number
of years of softening market
conditions, and against the
backdrop of catastrophic global
reinsurance market losses
following the North American
hurricanes, earthquakes and
wildfires, we believe that the
insurance market will be largely
flat in Pakistan in 2018.
Asia Market Review 2018 60
Philippines

General Insurance 10%

2017 Rate Movements
Health & Benefits 0–10%

General Insurance 0–10%

2018 Rate Movements
Health & Benefits 0–10%

General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe

2017 was a positive
year for the Philippines
on the whole, despite
growth slowing slightly in
comparison to prior years.
This was driven by a fall
in foreign direct investment (FDI) into
the country, which had been elevated
in 2015 and 2016. Notwithstanding
prior bumper years, reduced FDI figures
of USD4.5-5 billion still represent a
significant investment and driver of
wealth creation in the local economy.
Over the past 12 months, large
corporate buyers of General Insurance
have enjoyed rate reductions in the
region of 10 percent, whilst SME
businesses have experienced even
greater savings. Conversely, global
medical inflation rates and adverse
claims experience resulted in average
H&B rate increases of up to 10 percent
on average.
Towards the third quarter of 2017, we
saw significant natural catastrophe losses
in North America and the Caribbean.
Insurers in the Philippines, which is
also exposed to natural catastrophe
risk, watched closely as the losses
mounted on the other side of the world.
Interestingly, and largely unrelated to
hurricanes Harvey, Irma, and Maria,
Aon fielded a number of enquiries
around alternative natural catastrophe
products such as catastrophe bonds and
parametric solutions over the course of
the year. These products are increasingly
attractive to clients due to the lack of
ambiguity around insured losses, and
the speed of pay out in the event of a
qualifying event.
Whilst clients showed increased maturity
in 2017 around alternative risk transfer
solutions, there was also an increased
focus on enterprise risk management and
corporate governance. This represents
a positive development, particularly
now we may be witnessing a different
market dynamic from that seen over the
past decade, with well-managed risks
always performing favourably. For those
who are committed to understanding
their risk profile, Aon sees a significant
opportunity for Philippine clients to find
solutions to risks which may not include
traditional forms of insurance or off-the-
shelf products.
Whilst the Property and Casualty
market continued to be reliant upon
FDI and the government facilitating
private investment into the power
and construction sectors, the H&B
and Life insurance markets were the
real growth engines in the Philippine
insurance market in 2017. The Business
Process Outsourcing (BPO) sector
remains a key revenue driver for the
Philippine economy, and with the
trend of offshoring back office and
support functions for developed
market businesses showing no sign of
abating, the sector provides a significant
opportunity for the insurance market.
The long hours and shift work patterns
which are typical of the BPO sector have
resulted in heightened rates of lifestyle
related illnesses, such as hypertension
and diabetes. Organisations are now
starting to gain a more complete picture
of the impact upon their workforce of
these working conditions. By utilising
claims data from existing employee
populations, Aon is able to assist clients
in identifying developing health trends
within their own workforce and the
progression of different conditions,
through specialist medical staff and Aon
Pulse, an award-winning data analytics
platform. As organisations gain a more
complete view of the economic and
reputational cost of work and lifestyle
related conditions, Aon is seeing an
increased interest in well-managed clinic
programmes, as well as more effective
(and measurable) wellness programmes,
with clients making significant
investments in physical and mental
health interventions.

Asia Market Review 2018 61

Technological developments continue
to drive change and progress in the
Philippines, as in other countries around
the world. In 2017, we saw an increase
in the gamification of benefits and
employee engagement tools, particularly
targeted towards the millennial
generation. Smart phone penetration is
now at such a high level that all major
businesses have mobile accessible
platforms, with laggard businesses being
left behind. As businesses continue to
become increasingly reliant on online and
automated technology to drive business
critical processes and sales channels, they
become further exposed to cyber risk. In
this sense, adoption of technology has
outstripped take-up of appropriate risk
transfer solutions, with many Philippine
businesses now finding themselves with a
significant coverage gap.
Referencing technology, the risks
associated with all things tech and data
are also on the rise, and in the Philippines
there was a lot of activity around this
topic in 2017. That being said, the activity
was mostly seminar/conference chatter,
risk assessments, and attempts at risk
value quantification. The actual uptake of
risk transfer solutions/products remains
almost zero, with more money being
spent on understanding and minimising
the risk and the impact of a breach when
it happens – which did happen in 2017.
Finally, the Philippines was also
affected by acts of violence in 2017
(well publicised kidnappings, the lone
wolf attack on Resorts World, and the
occupation of the City of Marawi being
a few obvious examples) and this has
raised interest in the Special Contingency
and Political Violence/Terrorism lines of
insurance. Understanding the risk these
types of events pose and mitigating
against them remains a top priority, with
more firms engaging qualified advisors,
consultants, and brokers to perform such
work and also offer risk transfer solutions.
Outlook
As a country exposed to natural
catastrophe risk, the Philippines
market will possibly feel the
effects (coverage restrictions or
withdrawals of capacity) of the
events in North America and
the Caribbean more than other
markets in the region. Reinsurance
capacity driven accounts in
particular will be affected by the
global market’s (facultative and
treaty reinsurance) reaction to
the massive losses incurred in
2017. Rates may be flat or even
marginally increased, unless
strong risk management and loss
experience continues to attract
interest. For SME businesses,
conditions are likely to remain
extremely competitive, as the local
insurers who play in this space are
not as reliant upon international
reinsurance capacity. The impact
of global medical inflation
rates and the deteriorating loss
experience in the Philippines
means that H&B programmes are
likely to see rate increases in 2018.
The biggest medium- to long-term
client concern in the Philippines
is regarding the future of artificial
intelligence, automation, and how
this may affect the outsourcing/
BPO sector. As the amount of
low skilled work which can be
automated increases, more and
more BPO jobs may be lost.
Clients in the Philippines, who
have become increasingly exposed
to cyber risk as their businesses
automate and digitise, have
shown greater awareness of their
exposure in recent years. Whilst we
commented in the retrospective
portion of this piece that
awareness of exposure has not yet
translated into appropriate uptake
of cyber risk transfer solutions, we
believe 2018 may be the year this
begins to change. Cyber risk can
now be accurately quantified, and
the tangible impact that uninsured
losses could have on even the
largest businesses is expected
to prompt action in the coming
years.
Asia Market Review 2018 62
Singapore

General Insurance 7.5–12.5%

2017 Rate Movements
Health & Benefits 5–12%

General Insurance 5–10%

2018 Rate Movements
Health & Benefits 5–12%

General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe

2017 was another offering, designed to provide increases businesses’, individuals’, and
good year for reputational protection to the insured the country’s exposure to cyber hacking.
buyers of insurance when there is a major loss event. These
in Singapore. offerings not only reflect a maturation in 2017 was somewhat of a breakthrough

Though there was a higher than usual underwriting models in the Singapore year for the cyber market in Singapore.

level of attritional marine cargo losses market, but also an increase in client For a number of years, clients have

and a number of major fires in the west demand for value-added services and closely monitored their cyber exposures,

of the island, rate reductions remained products which go beyond the scope of although risk transfer practices for cyber

on offer throughout the year.
As the softening trend of previous
years continued to play out in 2017, a
number of Singapore-based markets
looked to guarantee premium income by
putting their capacity behind structured
portfolio solutions or facilities, which
are largely still profitable. In addition,
we also saw some insurers relax their
underwriting criteria and increase their
traditional insurer offerings.
2017 saw the Singapore government
ramp up its efforts to push Singapore
towards being a world-leading smart
city. A number of private and public
projects were launched to upgrade
critical infrastructure within the city
state, embedding smart technology
into everyday processes such as traffic
lights, transportation systems, and
have lagged behind that of developed
markets such as North America and
Europe. However, a number of high
profile events in 2017 and the resulting
significant financial losses have now
prompted a number of businesses to
take action, with Aviation and High Tech
two examples of industries leading
the way.
One major infrastructure initiative

appetite for risks that they had not retail outlets. These developments will which has yet to impact Singapore in

typically written in the past. continue to have a positive effect on the a meaningful way is China’s “Belt and

Over the past 12 months, there has
also been an increase in the number of
blended products offered by Singapore-
based insurers. New offerings emerged
that combine traditional insurance
coverage for physical damage and loss
of revenue with a crisis consultancy
lives of Singaporeans and residents, as
well as create an environment in which
businesses can flourish. Whilst there
are a myriad of benefits derived from
the utilisation of smart technology in
every day processes, the reliance on
connected devices and digital systems
Road” Initiative, which has seen major
Chinese-funded infrastructure projects
undertaken across the region. Thus far,
investment has been focussed on faster
growing economies in the region with
Chinese contractors and insurers almost
exclusively involved.

Asia Market Review 2018 63

Last year, we commented on the government’s SG Outlook
Secure campaign. Public information campaigns such as
Heading into 2018, we expect
SG Secure and news coverage of high profile terrorism Singapore-based clients to
incidents across the region and elsewhere in the world continue to seek the rate
have certainly raised the public level of awareness reductions which they have
enjoyed in recent years. Whilst
of the threat posed to Singapore. Singapore-based cost remains a key focus in
businesses already have a fairly high level of maturity the prevailing, challenging
regarding terrorism and most businesses already macroeconomic conditions,
as risk maturity continues to
have risk transfer strategies in place. However, as the
increase, so too will the demand
threat level increases across the region, businesses are for value-added services from
becoming more aware of the threat posed to their staff insurers and brokers. Looking
ahead to the next 12 months,
operating and travelling abroad. Terrorism is no longer
some underwriters from
just a risk to property and revenue, but is now also very international insurers will be
much a people and reputational issue. Businesses must under pressure from their head
therefore ensure that they have appropriate coverage office not to provide further rate
reductions in 2018, but overall,
and response plans in place in case of an incident either we expect to see reductions
at home or abroad affecting their business or people. available for well-managed risks,
Aon assisted a number of clients in 2017 with arranging albeit of a smaller order than in
2017. As clients continue to push
blended cover, including an element of consultancy.
for further premium reductions,
we expect to see an increase in
One of the largest pieces of market news in 2017 was the number of hybrid products
Mitsui Sumitomo Insurance Company Ltd’s purchase offered, with multiple liability
of First Capital Insurance Ltd from Canadian group covers offered within one policy,
giving insurers and clients the
Fairfax Financial Holdings, for USD1.6 billion. First benefits of efficiency which is
Capital is the largest non-life insurer in Singapore and generated when combining
its acquisition by Mitsui Sumitomo Insurance could multiple covers under one
umbrella.
be the first of many as Japanese insurers continue
to grow their international presence in the region. The H&B market is likely to once
First Capital currently writes a number of lines which again be affected by medical
inflation, with another year of
MSIG Insurance Singapore (who’s parent company
increasing costs for employers.
is Mitsui Sumitomo Insurance) does not, which has In Singapore and across the
led to speculation in the market that MSIG Insurance region, the rate of medical
inflation continues to out-strip
Singapore may slowly, over time, seek to expand its
the pace of general inflation.
own book by writing new lines of business. As the H&B insurance markets
harden, this increase in the cost
of medical services is likely to
start finding its way into the cost
of funding medical plans, a staple
employee benefit across the
region. However, in the short-
term, the extremely competitive
environment in Singapore is likely
to result in 2018 being another
year of H&B rate reductions.
In the medium-term, one key
challenge for the economy and
the country is the effect of the
vast increase in digitisation
and automation which is taking
hold currently. Singapore has
established itself as an innovation
hub, and two of the key
industries driving growth in 2017
were the semi-conductors and
high tech sectors, which are both
closely linked to global supply
chains and quick to automate
processes. As more and more
manual jobs are automated,
greater numbers of low-skilled
workers will find themselves
out of work. This will be a major
challenge for Singapore and
a number of countries across
the world as governments
seek ways to find meaningful
employment for large portions
of the workforce. From a risk
perspective, this also represents a
major challenge to the insurance
market, as it tries to update
and innovate products to meet
the needs of the world rapidly
evolving around it.

Medical costs continued to escalate in Singapore, with

cardiovascular conditions, cancer, respiratory illness,
gastrointestinal conditions, and diabetes representing
the most significant utilisation drivers. Specifically in
Singapore, advancements in technology and drugs,
high rental costs, increasing private sector treatment,
and deteriorating public health profiles all contributed
to medical inflation in the range of seven to 13 percent.
Despite these trends, 2017 saw H&B clients achieving
premium savings as incredibly competitive market
dynamics forced prices down.

Asia Market Review 2018 64

South Korea

General Insurance 0–10%

2017 Rate Movements
Health & Benefits 0–10%

General Insurance 0–5%

2018 Rate Movements
Health & Benefits 0–10%

General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe

2017 was a largely
stagnant year in the
Korean insurance
market. SME business
continued to be a
tariffed market, meaning
that minimum rates remained fixed,
whilst large corporate business saw
flatter rates than in previous years, with
greater independence from the United
States, increased trade with regional
neighbours, and seeking to improve
relations with North Korea. If Moon was
conciliatory in his tone upon election, his
North Korean counterpart was anything
but. Over the course of 2017, Kim Jong
Un continued to ratchet up tensions on
the Korean Peninsula as public barbs
nuclear war is uninsurable, events
such as a North Korean test missile
accidentally landing in a populated area,
some form of military miscalculation, or
minor retaliation following a targeted
surgical strike against North Korea would
still be counted as an insurable loss.
Urged on by the public, who are

maximum reductions of up to 10 percent were traded with U.S. President Donald concerned about safety and air

achieved for well-managed risks. No Trump, and a series of nuclear tests pollution, President Moon has pledged

notable product innovations occurred in and missile launches were conducted. to significantly reduce South Korea’s

the 12-month period, but Allianz Global Whilst Koreans have lived with the reliance upon coal and nuclear energy,

Corporate and Specialty entered the threats of their Northern neighbour’s setting a target that 20 percent

local market continuing the ongoing regime for generations, relations have of all power generation will come

trend of international insurers seeking become unusually tense over the past 12 from renewable sources by 2030

to gain direct exposure to Korean risk. months due to a nuclear armed North – an ambitious target considering

If 2017 was a quiet year for the Korean
insurance market, the political scene
was anything but benign. Korea elected
its 19th president in May, Moon Jae In
of the democratic party, following
the dismissal and impeachment of
the incumbent president Park Geun-
hye. The new president outlined a
wide sweeping agenda covering an
increase in the minimum wage, creating
Korea, who is able to strike a number of
targets within the region, where even
mainland U.S.A. is a distinct possibility.
As a response to the escalating tensions,
Aon fielded a number of requests
from clients regarding their War and
Terrorism coverage. A number of clients,
particularly foreign organisations
operating within South Korea, sought
to broaden policy wordings to transfer
as much of their risk as possible. Whilst
that less than five percent currently
originates from renewable sources.
Given this lofty target, a significant
increase in the number of renewables
construction projects can be expected
in the coming years. A number of
these projects will also have a non-
traditional risk profile as new technology
is utilised and innovative construction
techniques are employed to build
a number of floating solar plants.

Asia Market Review 2018 65

South Korea Electricity Generation by Type, 2015

Hydroelectricity
1%
Oil
Other renewables
6% 4%

Nuclear
Coal 31%
39%

Natural gas
Souce: Kepco 2016 Annual Report
19%

2017 was another year where Korean
businesses continued on the journey
to bring their risk management and
transfer culture and strategies into
line with what is generally accepted
as global best practice. Whilst clients
remain price sensitive, we saw an
increased willingness to deal with risks
which previously had been topics of
discussion rather than targets of active
treatment. A number of clients took
up cyber policies, with some taking
up slightly reduced limits of liability, as
businesses get a feel for their true cyber
exposure. Following a series of high
profile product recall incidents in recent
years, both in the region and outside,
we also experienced an increase in the
number of domestic clients, particularly
from the electronics manufacturing
sector, taking up product recall policies.
Outlook
As Korean buyers of insurance
mature, so too will the domestic
insurance market. In 2017, we
began to see more and more
domestic capacity utilised on
large and complex Korean risks.
In 2018, we will see the market
continue to play an increasingly
important role on these large
corporate insurance programmes.
As the domestic market writes
more business, we also expect
to see Korean insurers increasing
their retention levels and utilising
local reinsurance capacity, rather
than ceding to the international
market. As buyers and the market
continues to mature, we will
see a move towards the model
of creating long-term, strategic
tripartite relationships between
the insured, insurers, and brokers.
Aon is taking the lead in this
space, creating opportunities for
direct client-insurer interaction at
renewal roadshows, Aon events
such as the Aon Risk Symposium
– Asia, and in the course of annual
strategic planning. In 2018,
we expect the value of these
strategic partnerships and the
evidence of client commitment
to risk management and the clear
articulation of this to the market to
become increasingly evident.

Asia Market Review 2018 66

Taiwan
General Insurance 0–5%
2017 Rate Movements
Health & Benefits Flat
General Insurance 0–5%
2018 Rate Movements
Health & Benefits Flat
General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe
2017 was an eventful, but suffering significant, uninsured losses,
successful year overall as well as a number of local insurers
for Taiwan. President Tsai experiencing capital erosion as a result
Ing-wen’s first year in of overstretching themselves. There
office was a testing one, was a response to this event in 2017,
marked by challenges domestically on as the market, which is dominated by
key policies and difficulties internationally local players, hardened somewhat and
with Chinese relations, as the anticipated as organisations started to take a more
support from U.S. President Donald mature approach to risk management
Trump did not materialise. Despite this and transfer.
challenging political backdrop, 2017
saw significant overseas investment The Electronics sector remained a key
driver of growth for the Taiwanese
into Taiwan, which fuelled strong
performance by both the national stock economy in 2017, meaning that a focus
market and currency. on supply chain and product risks was
at the centre of a significant proportion
Organisational behaviour regarding risk of our client conversations over the past
management and risk transfer remains year. Contingent BI, products liability,
a three tiered concern in Taiwan, with product recall, and trade credit covers
some organisations boasting dedicated were key concerns for electronics and
risk management and insurance manufacturing clients. Supply chains
functions, some where this function and global trade continues to increase in
is predominantly limited to insurance complexity and technology, and become
purchasing and falls under finance’s further embedded in core processes. As
remit, and still others where risk is limited this trend wears on, we have seen and
in its entirety to insurance purchasing will continue to see an ever larger group
and is viewed as a procurement matter. of organisations looking for end-to-end
This has a challenging knock-on effect for solutions, such as stock throughput cover
insurers, with a number of organisations and cyber insurance to protect against
purely focussed upon buying “cheap losses resulting from hacking of vital
cover”. The shortfalls of this approach operating systems.
were highlighted last year when a major
earthquake led to a number of businesses
Outlook
Green energy, particularly solar,
water, and wind will be a key area
for growth in Taiwan in 2018 and
beyond. Prime Minister Lin Chuan
has announced ambitions to
increase the share of power output
attributed to clean sources on
the island to 20 percent, from its
current level of circa five percent
by 2025. In order to deliver this,
the government is seeking up to
USD59 billion in private capital
investment. This project will not
only require the creation of new
generation capacity, but also an
upgrade to existing power storage
and transmission infrastructure.
Therefore, we expect to see
in the near- to medium-term,
a significant increase in the amount
of construction work undertaken,
the level of FDI into the energy
and power sectors, recruitment
of skilled overseas labour, and
sourcing of alternative financing
such as green bonds.
The major earthquake losses
incurred in 2016 meant that on
average most businesses were
hit with rate increases in 2017.
However, general insurance loss
experience in 2017 was relatively
benign, and the domestic
insurance market remains awash
with capital – a trend which is
set to continue again this year.
Therefore, small rate reductions
and coverage enhancements are
expected to be on offer for clients
in 2018.
Asia Market Review 2018 67
Thailand

General Insurance 0–10%

2017 Rate Movements
Health & Benefits 0–5%

General Insurance 0–15%

2018 Rate Movements
Health & Benefits 0–10%

General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe

2017 was a year of reflection
and contemplation for
Thailand. The passing of the
king in October 2016 was a
historic national event, and
marked a year of mourning
which impacted every aspect of the
country, including business and the
insurance market.
Amid this backdrop, the economy
moved more slowly than usual,
exhibiting growth in the region of
three-3.5 percent as investment slowed
and projects were put on hold. Despite
the sluggish growth, the Thai Baht
remained strong against other Asia
currencies, which was a challenge for
Thai exporters. Notwithstanding the
reduced overall economic activity,
compared to the status quo, 2017
did see development of a number of
significant infrastructure projects. Two
such projects were the expansion of
Bangkok’s public transport over and
underground rail infrastructure, and the
State Railway of Thailand double tracking
project, linking a number of key regional
hubs. In addition, Chinese investment
as part of the country’s “Belt and Road”
Initiative started to materialise in 2017,
although not yet at the scale anticipated.
The military-led government
delivered political stability to the
country in 2017 and continues to remove
what it considers to be the undesirable
influence of politicians associated with
the Red Shirt movement.
The insurance market has seen a
continuing decline in all insurance
ratings over the past 12 months,
particularly for less technical property
risks such as offices, hotels, and
condominiums. New construction
projects also enjoyed historically
low rates, as the significant appetite
and readily available capacity from
international insurers drove rates
down even further, with some projects
having rates applied as low as 0.01
percent. Conversely, QBE departed
the Thai market in 2017 after 40 years.
This decision is felt to be partly due to
wider issues which impacted QBE over
the course of the year, through losses
suffered on legacy business and partly
due to the unprofitability of its local
operation. Whilst some commentators
believe that this may signal a change
in the status quo in the market of
falling rates and abundant capacity,
we anticipate the opposite with strong
rumours locally that CV Starr and
Berkshire Hathaway are considering
entering Thailand.

Asia Market Review 2018 68

The insurance market in Thailand is driven
by the motor business, with circa 60
percent of all premiums coming from the
Automotive space. 2017, therefore, was
a challenging year for the industry as the
slowing economy and year of mourning
resulted in reduced numbers of new car
purchases. This further exacerbated the
oversupply of capacity in the market,
forcing already thin rates down even
further. The country experienced some
moderate flooding in 2017, which could
be described as greater than typical
seasonal flooding, but not enough to
genuinely test the insurance market
or lead to a meaningful withdrawal
of capacity.
In contrast to the soft market conditions
exhibited by the majority of the market in
Thailand, there are certain specialty risk
areas where insurers have been seeking
rate increases. One such area is the
Power market, which has suffered severe
operational losses recently.
From a client perspective, the economic
pressures, which are being felt by
everyone globally, have driven clients to
focus on pricing rather than the financial
security of their insurance panel or the
quality of cover provided by them.
This has led to businesses turning to
second tier markets, because of their
aggressive pricing.
In line with the trend witnessed across
Asia, healthcare costs continued to rise
last year, with the average rate of medical
inflation hitting eight percent in Thailand
in 2017 and forecast to reach 8.5 percent
in 2018. The key cost contributors were
hospitalisation, physician services,
prescription drugs, and maternity costs.
With the cost of inpatient procedures,
rent, and medication set to increase,
these trends and their impact on
businesses’ employee medical plan costs
are beginning to be noticed. As the H&B
market continued to harden, driven by
another year of unprofitable underwriting
results, organisations showed an increased
focus on targeted interventions in their
employee population. As medical costs
continue to spiral, we expect to see more
and more wellness and health promotion
initiatives being undertaken by employers
to control their H&B expenditure.
Outlook
Whilst we commented that 2017
was a year of reflection, we
anticipate that in 2018, Thailand
will experience significant
growth and activity. With an
election scheduled for the fourth
quarter of 2018, we anticipate
significant effort from the
national government to stimulate
growth and push forward key
infrastructure projects. Foreign
direct investment will also play a
key role in the local economy in
the coming 12 months, as “Belt
and Road” initiatives start to ramp
up, and Korean and Japanese
businesses continue to seek
growth opportunities in Thailand.
The country’s economic growth
estimate for 2018 has been
increased from its 2017 level
to 3.8 percent, with the Thai
economy expected to show an
export-led expansion this year.
The Baht is anticipated to remain
strong against the U.S. Dollar
and regional currencies again in
2018. Furthermore, the Tourism
Authority of Thailand is also
launching “Amazing Thailand
Tourism Year 2018” with budgeted
revenue of THB3 trillion, providing
an additional boost to the
Thai economy.
Asia Market Review 2018 69
Vietnam

General Insurance 10%

2017 Rate Movements
Health & Benefits 0–5%

General Insurance Flat

2018 Rate Movements
Health & Benefits 0–10%

General
Insurance benign moderate severe
Loss Experience
Health &
Benefits benign moderate severe

A period of sustained
economic growth continued
throughout 2017, fueled by
foreign investment, a rising
middle class, continued
growth in factory work, and
the maturation of private and publicly
listed businesses in Vietnam. Over the
past five years, Vietnam has experienced
relatively consistent amongst insurers,
with the top five insurers accounting
for approximately 60 percent of
market share.
The market consists of a mix of local and
international insurers, with competitive
pricing, particularly for small and
mid-market risks, when compared
and efforts to purchase insurance locally
should be made in order to adhere
to local regulations. For larger, more
complex risks, it is common for insurance
to be purchased offshore, however, a
local insurer must be engaged to place
the cover and the law stipulates that 10
percent must be retained onshore.

25 percent GDP growth, with annualised to other regions in Asia and globally. Within the property market, a property

growth around seven percent. After a International insurers typically price insurance tariff applies to all locations

strong increase in 2015 of 6.7 percent, between 20 percent and 30 percent under USD30 million in value, and

GDP saw a slightly gentler growth rate higher than their local counterparts. has been in place since 2010. The

in 2016 of 6.3 percent, then rebound Broad terms and conditions can be tariff premium rates are reasonably

by the end of 2017, recorded at negotiated in the market, however, competitive; however, for large

6.81 percent growth year-on-year, buyers should review terms carefully to operators with a high number of low

thanks to numerous policies on ensure they understand the scope and single value locations (for example, a

public investment.
In 2017, the insurance market in Vietnam
grew 14 percent, driven by a 27 percent
increase in H&B premiums (excluding
Life) and a 12 percent increase in General
Insurance premiums. The distribution
of the total premium pool remained
limitations of coverage offered by each
insurer. Underwriting expertise, financial
security, and claims service should be
considered when reviewing quotes from
insurers to ensure coverage is aligned
to the needs of the business. Fronting
is common in Vietnam, however, local
insurance is mandatory in certain classes,
retailer network or grocer) premium
reductions cannot be achieved. For
locations above USD30 million, the
market remains competitive with
reductions of 10 plus percent achievable
throughout 2017.

Asia Market Review 2018 70

The liability insurance market is
particularly competitive, driven by a
non-litigious environment and preference
to settle matters in a more traditional
manner. Whilst premiums are extremely
competitive, the claim environment
is benign and typically businesses will
only purchase public liability (and not
products liability). With a growing
number of exporters providing products
to the U.S., North America, Europe, and
Australia, businesses should review their
contractual arrangements with buyers,
and consider exposures to product
liability claims from abroad. Purchasing
insurance is a cost-effective risk mitigation
for exporters, and costs can
be negotiated with buyers, who will likely
see this as a value-add, if it is not already
a contractual requirement. Whilst liability
losses are infrequent, the value of a claim
can be very high, and many businesses in
Vietnam are unnecessarily exposed.
In March 2017, a construction tariff was
introduced which applies to all projects
below VND70 billion (around USD32
million) which has resulted in increased
insurance costs between three to five
times, depending on project specifics.
The construction market has become
extremely competitive, and for projects
below this value, the market was
becoming uneconomic. The introduction
of the tariff is intended to level the
playing field and ensure market rates are
sustainable for these projects. Above
this project value, insurers continue
to compete aggressively for business,
offering low rates and broad coverage.
Within the Financial Lines market, there
has been an increase in the number
of notifications and claims, however,
overall market pricing continues to
be competitive. Clients are aware of
cyber threats, with frequent incidents
covered in the local and international
press. Despite an increase in awareness,
the uptake of cyber insurance in
Vietnam remains relatively limited. In
the healthcare sector, outside of larger
providers, medical malpractice insurance
uptake remains minimal, despite the need
to comply with local regulations that
stipulate insurance should be maintained.
The H&B (non-Life) market continues to
grow rapidly in Vietnam. With insurers
competing aggressively for health
insurance, and medical inflation at 20
percent over the past three years, insurers
are experiencing elevated loss ratios.
Short-term premium savings have been
achievable in 2017, with new entrants
competing aggressively on price to win
market share from more established
insurers. However, at renewal, for
accounts with loss ratios in excess of 80
percent, premium increases have been
the norm.
Loss Experience – 2017
In 2016, loss ratios were 24 percent
and 32 percent in General Insurance
and Health & Benefits, respectively. In
the first half of 2017, losses across the
market continued to fair favourably at
a total of 33.98 percent, as reported by
the Ministry of Finance (July 2017). In
the third quarter of 2017, major tropical
storms and floods across the northern
and central region were suffered, with
insured losses yet to be determined at
the time of writing. This could impact
insurers’ loss records for the 2017 period.
Outlook
With GDP growth of 6.5 percent
expected in 2018 and country goal
at 6.7 percent, the economy shows
positive economic prospects.
Vietnam’s underlying growth
momentum remains robust,
underpinned by strong
export-oriented manufacturing
activity, increased FDI, robust
domestic demand, and a rebound
in agricultural production.
However, the impact of U.S.
President Donald Trump’s
decision to pull out of the
Trans-Pacific Partnership is yet
to be fully understood and trade
protectionism could negatively
impact the region.
Starting in 2018, ASEAN Economic
Community (AEC) rules will
come into effect, with various
preferential tariffs applicable for
ASEAN made goods. These tariffs
include 0 percent import tax for
automobiles with 40 percent
country localisation rates. This
will threaten the local automobile
manufacturing industry that
mainly consists of parts assembly
with low average localisation rates.
In recent years, the Vietnamese
General Insurance market has
been a growth target for a number
of international insurers and
reinsurers, with underwriting
discipline somewhat relaxed
in order to drive growth. If this
attitude changes, pricing in
Vietnam could increase sharply.
However, this is considered to be
relatively unlikely in the short-term.
In the past five years, the H&B
market has been very competitive,
with new entrants continually
driving prices down. However, we
do not foresee any new entrants
to the market in 2018, and expect
incumbent insurers to push for
premium increases on existing
programmes with loss ratios in
excess of 65 percent.
Insurance buyers should develop
medium- and long-term strategies
to ensure costs can be adequately
budgeted for in the future. Whilst
downward spikes in pricing are
always welcome, upward increases
can be difficult to manage, and
proactive management of health
insurance programmes is essential
to driving long-term success.
Asia Market Review 2018 71
 Contributors

Specialty Broking, Asia Default Risk – Power

Trade Credit
Geoffrey Lambrou Nicki Tilney
+65 6512 0279 Helen Clark +65 6239 8735
geoffrey.lambrou@aon.com +65 6239 7604 nicki.tilney@aon.com
helen.m.clark@aon.com

Murray Wood
Aviation Property
+65 6645 0116
Gary Moran murray.wood@aon.com Jiunn Woei Lee
+65 6239 7645 +65 6231 6397
gary.moran@aon.com jiunnwoei.lee@aon.com
Energy
Paul O’Keefe
Reinsurance
Captives +65 6239 7654
paul.o’keefe@aon.com Jeremy Fox
George Ong
+65 6239 7600
+65 6239 7690
jeremy.fox@aon.com
george.ong@aon.com
Financial Lines
Murray Wood
Terrorism and War
Casualty +65 6645 0116
murray.wood@aon.com Julian Taylor
Niloy Majmudar +65 6231 6402
+65 6512 7362 julian.taylor@aon.com
niloy.majmudar@aon.com Health & Benefits
Dan Bould
Terry Stephens +65 6239 8844
+603 2773 7057 daniel.bould@aon.com
Construction
terry.stephens@aon.com
Nicki Tilney
+65 6239 8735 Transaction Liability
nicki.tilney@aon.com Marine
Sandra Lee
Nicholas Bain Venn Peter Hulyer +852 2862 4121
+65 6645 0113 +65 6239 7698 sandra.s.lee@aon.com
nic.bainvenn@aon.com peter.hulyer@aon.com

Nick Wolfe
Innovation and Technology
+ 65 6645 0191
Default Risk – Johnny Shaw
nick.wolfe@aon.com
Structured Credit +65 6239 7549
& Political Risk Jan Steven Kelder
johnny.shaw@aon.com
+65 6239 8789
Miles Johnstone
jan.steven.kelder@aon.com
+65 6512 0226
miles.johnstone@aon.com

Murray Wood Mining

+65 6645 0116
Boon Yan Lee
murray.wood@aon.com
+65 6231 6337
boonyan.lee@aon.com

Melissa Shepherdson
+65 6231 6309
melissa.shepherdson@aon.com

Asia Market Review 2018 72

Cyber South Korea Thailand
Andrew Mahony Paul Choi Paul Frankland
+65 6313 7080 +82 2226 02706 +662 305 4577
andrew.mahony@aon.com paul.choi@aon.com paul.frankland@aon.com

Murray Wood
+65 6645 0116
Malaysia Vietnam
murray.wood@aon.com
Jasminder Kaur Tim Dempsey
+603 2773 7057 +84 28 3822 4884
Macroeconomics jasminder.kaur@aon.com tim.dempsey@aon.com

Andrew Hare
+65 6512 0263
Pakistan
andrew.hare@aon.com
Khurram Alikhan
+92 213 561 5339
China khurram.alikhan@aon.com

Jia Dai
+86 21 3865 8358
Philippines
jia.dai@aon-cofco.com.cn
Andrew Minnitt
+63 2908 1201
Hong Kong andrew.minnitt@aon.com

Paul Young
+852 2862 4249
Singapore
paul.young@aon.com
Wee Teck Tea
+65 6239 8711
Indonesia wee.teck.tea@aon.com

Jon Pipe
+62 21 2985 8503
Taiwan
jon.pipe@aon.com
Ernest Leung
+886 2 6639 0375
Japan ernest.leung@aon.com

Cameron Sheild Brian Wang

+81 3 4589 4190 +886 2 6639 0318
cameron.sheild@aon.com brian.wang@aon.com

Asia Market Review 2018 73

About Aon
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