The edge Daily
03-03-2008
by Chong Jin Hun
KUALA LUMPUR: Malaysian insurers are making their presence felt in the region, capitalising on untapped markets in emerging economies to offset effects of a crowded and competitive market at home.
Geographical diversification enables local players to widen their revenue base, and spread their risks amid a larger global clientele.
While these foreign initiatives involve the injection of more capital, immediate returns on investments should not be anticipated, according to industry experts.
According to the 18-member Life Insurance Association of Malaysia (LIAM), insurers are likely to experience “new business strain” in their initial years abroad due to the capital and solvency requirements of the respective foreign markets.
“Going abroad is part of the strategies for companies to grow, especially when the market abroad shows significant potential. Some of the local players have gone to countries like Cambodia, Vietnam, Indonesia and Thailand as the insurance markets there are still relatively untapped.
“The bottomline is usually negatively affected in the early years and assuming the business is written on a sound basis, profits will emerge in the later policy years,” LIAM president Ng Lian Lu told The Edge Financial Daily via email recently.
Notable overseas ventures by home players include general insurers LPI Capital Bhd which have set up base in Cambodia, its second foreign unit after Singapore, and Kurnia Asia Bhd’s operations in Indonesia and Thailand.
LPI, for example, adopted an early bird strategy when it established its 45%-owned CampuBank Lonpac Insurance Plc in Cambodia last August, leveraging on Malaysia’s third-largest lender Public Bank Bhd’s branch network, and existing clintele in the Indochina nation.
The Malaysian insurer joined the ranks of other early movers in Cambodia. These include Cambodian Reinsurance Company, Cambodian National Insurance Company, Forte Insurance Company (Cambodia) PLC, and Asia Insurance Company (Cambodia) Ltd.
“Unlike Vietnam, Cambodia is a better market because there are fewer insurers there,” LPI chief executive officer and executive director Tee Choon Yeow said after LPI’s recent AGM.
According to Vietnam’s Ministry of Finance, the nation whose economy is projected to expand by more than 8% this year, had 27 insurance companies in 2005.
Insurance premium grew by an annual average of some 30% between 1993 and 2004. Ratio of insurance premium to gross domestic product which rose from 0.37% in 1993 to 1.86% in 2004, is forecast to hit 4.2% in 2010.
Kurnia is, meanwhile, represented in Thailand and Indonesia by Kurnia Insurance (Thailand) Co Ltd, and PT Asuransi Aegis Indonesia, respectively.
At the same time, foreign rivals like Singapore’s Great Eastern Holdings Ltd are also scrambling for a slice of the emerging insurance pie in the region.
Great Eastern said in its fiscal 2007 financial filings that it was preparing to start operations in Vietnam to complement existing undertakings in Singapore, Malaysia, China and Indonesia.
“It is projected that it would take a few years before operations in China, Indonesia and Vietnam break even,” the company said.
Meanwhile, OSK Investment Bank analyst Chan Ken Yew said: “Emerging markets like Indochina countries have less competition but a larger population. The bigger the pool, the probability of claims should come down.”
Another analyst said the Malaysian general insurance landscape is very competitive, resulting in limited growth potential for players in the local market segment .
He added that although the penetration rate for life insurance here was still low, the segment was still a tough market due to the domination of foreign heavyweights like ING Insurance Bhd and Prudential Assurance Malaysia Bhd besides local bank-backed units like Mayban Life Assurance Bhd and Hong Leong Assurance Bhd.
Malaysia’s general insurance sector, dominated by motor policies, posted gross premium growth of 3.2% to RM11.03 billion in 2006. There were 39 licensed general insurers in the country as at April 1, 2007, according to the General Insurance Association of Malaysia’s annual report.
It is estimated that about half of the Malaysian population does not have a life coverage. The nation’s life insurance sector saw its new business premium rising 9.1% to RM7.2 billion in 2006 from the year before, LIAM’s annual report shows.
03-03-2008
by Chong Jin Hun
KUALA LUMPUR: Malaysian insurers are making their presence felt in the region, capitalising on untapped markets in emerging economies to offset effects of a crowded and competitive market at home.
Geographical diversification enables local players to widen their revenue base, and spread their risks amid a larger global clientele.
While these foreign initiatives involve the injection of more capital, immediate returns on investments should not be anticipated, according to industry experts.
According to the 18-member Life Insurance Association of Malaysia (LIAM), insurers are likely to experience “new business strain” in their initial years abroad due to the capital and solvency requirements of the respective foreign markets.
“Going abroad is part of the strategies for companies to grow, especially when the market abroad shows significant potential. Some of the local players have gone to countries like Cambodia, Vietnam, Indonesia and Thailand as the insurance markets there are still relatively untapped.
“The bottomline is usually negatively affected in the early years and assuming the business is written on a sound basis, profits will emerge in the later policy years,” LIAM president Ng Lian Lu told The Edge Financial Daily via email recently.
Notable overseas ventures by home players include general insurers LPI Capital Bhd which have set up base in Cambodia, its second foreign unit after Singapore, and Kurnia Asia Bhd’s operations in Indonesia and Thailand.
LPI, for example, adopted an early bird strategy when it established its 45%-owned CampuBank Lonpac Insurance Plc in Cambodia last August, leveraging on Malaysia’s third-largest lender Public Bank Bhd’s branch network, and existing clintele in the Indochina nation.
The Malaysian insurer joined the ranks of other early movers in Cambodia. These include Cambodian Reinsurance Company, Cambodian National Insurance Company, Forte Insurance Company (Cambodia) PLC, and Asia Insurance Company (Cambodia) Ltd.
“Unlike Vietnam, Cambodia is a better market because there are fewer insurers there,” LPI chief executive officer and executive director Tee Choon Yeow said after LPI’s recent AGM.
According to Vietnam’s Ministry of Finance, the nation whose economy is projected to expand by more than 8% this year, had 27 insurance companies in 2005.
Insurance premium grew by an annual average of some 30% between 1993 and 2004. Ratio of insurance premium to gross domestic product which rose from 0.37% in 1993 to 1.86% in 2004, is forecast to hit 4.2% in 2010.
Kurnia is, meanwhile, represented in Thailand and Indonesia by Kurnia Insurance (Thailand) Co Ltd, and PT Asuransi Aegis Indonesia, respectively.
At the same time, foreign rivals like Singapore’s Great Eastern Holdings Ltd are also scrambling for a slice of the emerging insurance pie in the region.
Great Eastern said in its fiscal 2007 financial filings that it was preparing to start operations in Vietnam to complement existing undertakings in Singapore, Malaysia, China and Indonesia.
“It is projected that it would take a few years before operations in China, Indonesia and Vietnam break even,” the company said.
Meanwhile, OSK Investment Bank analyst Chan Ken Yew said: “Emerging markets like Indochina countries have less competition but a larger population. The bigger the pool, the probability of claims should come down.”
Another analyst said the Malaysian general insurance landscape is very competitive, resulting in limited growth potential for players in the local market segment .
He added that although the penetration rate for life insurance here was still low, the segment was still a tough market due to the domination of foreign heavyweights like ING Insurance Bhd and Prudential Assurance Malaysia Bhd besides local bank-backed units like Mayban Life Assurance Bhd and Hong Leong Assurance Bhd.
Malaysia’s general insurance sector, dominated by motor policies, posted gross premium growth of 3.2% to RM11.03 billion in 2006. There were 39 licensed general insurers in the country as at April 1, 2007, according to the General Insurance Association of Malaysia’s annual report.
It is estimated that about half of the Malaysian population does not have a life coverage. The nation’s life insurance sector saw its new business premium rising 9.1% to RM7.2 billion in 2006 from the year before, LIAM’s annual report shows.
No comments:
Post a Comment