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| 1. |
India: Air crash could lead to claims of more than US$90 mln |
Saturday's Air India Express plane crash in Mangalore, which lies on India's west coast, may result in one of the highest claim payouts in a plane accident in India. Private-sector insurers led by Reliance General are expected to take a hit of around INR4.5 billion (US$96 million) for the Boeing 737 aircraft which flew in from Dubai and crashed on landing. The flight had 166 people on board, of whom 158 were killed.
Estimates are that insurers and reinsurers are likely to see a claim of US$90-100 million. The crash would lead to a hull loss of US$50 million. Passenger liability claims could be of the order of US$40 million.
The Air India fleet is currently insured by a consortium of four private sector insurance companies - Reliance General Insurance, HDFC Ergo, Bajaj Allianz and Iffco-Tokio. They reportedly cover Air India's fleet of 136 aircraft for US$8.59 billion at a premium of US$24.3 million. However, the insurers are not expected to be hard hit because they have in turn acquired reinsurance.
The leading reinsurer for Air India is Japan's Mitsui Sumitomo. Other companies with reinsurance exposure include the General Insurance Corp of India (GIC), which had reinsured 14% of the US$8.59 billion and ICICI Lombard, 3%. "The maximum hit our balance sheet will take will be around US$6 million. Claims paid over that sum will be recovered from our reinsurers," said Mr M Ramprasad, GIC General Manager.
This is the first time that private insurance companies are providing comprehensive cover to the country's national carrier. The consortium won the bid last September. In previous years, public sector players led by New India Assurance provided the cover.
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| 2. |
Thailand: Unrest damage toll up to US$1.23 bln |
Bangkok stands to lose an estimated 30-40 billion baht (US$926 million-1.23 billion) in property damage after more than 30 buildings, including huge shopping malls, were set on fire by anti-government protesters last week, reports the Bangkok Post.
"Insurance losses are estimated at about 10 billion baht for Bangkok's tragic night," said Mr Surachai Sirivallop, Chief Executive of Thai Reinsurance, the country's leading reinsurer. He was referring to the start of the military crackdown on protesters that began before dawn last Wednesday.
"We have to examine again whether the policies bought by those property owners cover riots, civil commotion and terrorism," Mr Surachai said. The loss figure he mentioned excludes property damage caused by arson at state and private properties in the provinces when the violence spread outside Bangkok.
"The key point is how the General Insurance Association defines the arsons - whether they are acts of terrorism, riots or civil commotion," said Mr Surachai. "For me, I treat the arson attacks as riots." However, the government has declared the acts committed by the Red Shirt protestors to be terrorism.
Among the owners of burnt properties, Thai department store operator Central Pattana PCL says that it has taken out Industrial All Risks insurance of 13 billion baht and another cover of US$100 million for riot and terrorism. The company owns the Central World mall, the second biggest retail complex in Southeast Asia, that suffered severe damage following arson attacks last week.
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| 3. |
China: Investors' equity ceiling in insurers to be raised |
China may lift its existing ceiling of 20% for a single holder to have a stake in a local insurer, according to a statement by the nation's insurance regulator, the China Insurance Regulatory Commission (CIRC). The rule also for the first time bans two or more insurance companies which are controlled by a single investor from operating similar insurance business.
The new rule, which takes effect on 10 June, maintains a general requirement that any single investor holds no more than one-fifth stake. However, CIRC can approve exemptions for the sake of corporate governance and to ensure strategic investment.
"Strict simple percentage restrictions are not conducive to attracting good-quality capital into the insurance industry," the regulator said. Such curbs also resulted in fights for control among investors at a limited number of companies, it says.
The government will restrict foreign investors to financial institutions that own a minimum US$2 billion of assets, have been profitable for the three preceding years, and have at least a long-term A credit rating by international rating agencies, according to the rule that covers insurance companies where foreign ownership is less than 25%.
The new regulation is an important move to curb risks and enhance supervision after the diversification of equity investments in Chinese insurers becomes "increasingly obvious" and stake transfers get more frequent, the regulator says.
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| 4. |
Singapore: Study disputes Pru's claims over AIA sales |
UK-headquartered Prudential's claims that its US$35.5 billion takeover of AIA will boost the amount of business sold by the pan-Asian company's agents have been disputed by independent research, reports the Financial Times. The Pru, which last week launched its US$21 billion rights issue to fund the acquisition, said that it could deliver US$800 million more in revenue partly through making improvements to the productivity of AIA's agents.
However, analysis by Pi Financial Services Intelligence, a Singapore-based consultancy to the insurance sector, said the agency forces of the Pru and AIA showed very similar productivity levels in three key markets before the global financial crisis. Mr Simon Drimer, Pi FSI Managing Director, said that his analysis showed there was "no material difference between the two companies' agent productivity levels" before the financial crisis. The Pi FSI report covers four markets, namely, Hong Kong, Indonesia, Singapore and Thailand.
AIA sales were hit much harder in 2009, following the bailout of its parent AIG in 2008 by the US government, compared to those of rivals including the Pru, AXA and Manulife. But in its presentation to investors, the Pru used 2009 figures to highlight the significantly better productivity of its agents across most Asian markets. Mr Barry Stowe, head of the Pru's Asian operations, told the Financial Times his group stood by its claim that its agents were more productive than AIA's. He said the Pru would "restore AIA to its former greatness" by enabling its agents to offer more products.
The Pru said that based on 2009 figures, its agents were more productive compared with AIA in nine of 10 regional markets, with AIA holding the upper hand in Thailand alone. In Hong Kong, Singapore and Indonesia, the Pru said its agents out-sold those of AIA by 1.2-, 1.3- and 2.3-times respectively in 2009.
Pi FSI says AIA agents are just as productive and, in some instances, even better than Prudential's. Mr Drimer said: "They (Pru and AIA) were pretty much the same. There is no material difference at all, if we took out the noise of the financial crisis." He adds that AIA agents who have achieved million-dollar round table (MDRT) sales outranked those of the Pru. In the combined three markets of Hong Kong, Singapore and Malaysia, the percentage rates of AIA agents in MDRT were 5.9, 3.5 and 3.2 for 2007, 2008 and 2009. For the Pru, the percentage rates were 3.5, 2 and 2, he said.
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| 5. |
Hong Kong: Insurers start marketing yuan-denominated policies |
Insurers are lining up launches of yuan-denominated policies in Hong Kong to tap investor expectations of a rising yuan, reports Reuters. However, such policies bring to the fore severe asset-liability mismatch problems and pose the question whether insurance should be used as a vehicle for speculation.
This month, HSBC's insurance arm launched its first product denominated in yuan in Hong Kong. Mr Bruno Lee, HSBC's head of wealth management in Asia, said: "Many clients are buying in anticipation of an appreciation of the renminbi, and we do expect similar products to appear in the market over time." Previously, insurance products sold in the territory would typically be denominated in the local currency or in the greenback.
For many buyers of yuan-denominated policies, the prospect of currency appreciation appears to be foremost on their minds. There is strong belief that China will allow its currency to start appreciating again by the end of the year, following a two-year hiatus in which it has remained steady against the US dollar. In yuan-denominated policies, any payout will be in yuan, which allows the buyer to bet on an appreciation in the Chinese currency.
Industry observers say that the biggest hurdle for the development of yuan-denominated products is the lack of investment options for holders of the Chinese currency, a situation that could leave insurers with piles of yuan collected as premiums and nowhere to invest the money.
"We're currently marketing the yuan insurance product only to those living in Hong Kong," said Mr Lee, explaining why the product is currently not sold to those outside the territory. "There're limits on how much we can invest in China, and once we hit that, we can't take any more money in."
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