Welcome to the 2019 Global Insurance Forum

I would like to extend a warm welcome to the 55th Global Insurance Forum, on behalf of the International Insurance Society and The Institutes. We are delighted to return to Singapore, a world leader in education, economic freedom and innovation. This Smart Nation has become an international hub for insurance and reinsurance, and its thought leadership in many aspects of our business, including managing catastrophes, cyber risk, insurance-linked securities and progressive regulation makes it the perfect place for us to gather and discuss our industry’s most pressing issues.

Our theme this year is ‘Insurance Reimagined: Global Issues – Asian Insights’. We believe that we are experiencing ‘Insurance 4.0’, an epochal change in our industry analogous to, and contemporaneous with, the 4th Industrial revolution. We are not merely introducing more new products or adding distribution channels. We are re-examining the basic concepts of risk: Defining risk in the new world of interconnected devices and social change, and finding better ways to manage it while providing the policyholder with a new and better customer experience.

To that end, we will present the results of an IIS/Institutes survey on what keeps CEOs awake at night, and sessions on the strategies of regional insurers versus multinationals in Asia, driving the customer experience, the insurance workforce of the future, the role of insurance in global trade, pension reforms in Asia’s Big 3 markets, and an exciting panel on innovation and InsurTech.

We will also have an executive panel of three prominent global CEOs commenting on the industry’s key challenges and opportunities, and a very special and personal conversation with legendary insurance leader Mr Brian Duperreault.

We will also highlight the important work being done by our industry to achieve the Sustainable Development Goals of the United Nations. The insurance industry has taken a leadership role in understanding risk and providing more protection for families, communities, businesses and governments around the world, and has been lauded by international institutions for doing so. The Insurance Development Forum, of which the IIS is the Permanent Secretariat, leads these efforts and coordinates with other industry initiatives, and will present the latest on their activities on the third and final day of the forum. You will be inspired by what you hear.

Notwithstanding the remarks you will hear from the stage, the GIF is really about interacting and exchanging ideas. The forum is the world’s leading venue for all the stakeholders of the industry to gather and exchange ideas: Insurers, brokers, academics, regulators, consultants, accountants, lawyers, asset managers and more. So participate, do not just attend! Thanks for coming.

Mike Morrissey
President and CEO
International Insurance Society, Inc (IIS)

Reimagining business fundamentals

By Paul McNamara

The theme of this year’s Global Insurance Forum – ‘Insurance Reimagined: Global Issues - Asian Insights’ has both a contemporary and a timeless feel to it.

Any forum that hopes to take a crystal ball to look at the future of the insurance industry must surely do so in the context of Asia – since the continent is the undisputed growth engine of the sector as well as the focus for many global players.

But the remarkable growth story in Asia is about much more than simply the twin giants of China and India coming of age. It is also about the rapidly developing smaller economies dotted throughout this vast continent – ranging from tiny green shoots in Myanmar and Laos - to seedlings in Bangladesh and Sri Lanka - and saplings in Vietnam and Thailand.

Almost without exception, insurance is booming in every significant market in Asia – and this year’s Global Insurance Forum allows a light to be shone on all of them, not just the two massive juggernauts dominating the picture.

Emerging themes

Last year the major themes dominating the insurance sector were said to be three Cs – cyber, climate change and compliance. This year we have continued on down the alphabet to the three Ds – disruption, driverless vehicles and disaster-risk financing.

Naturally enough, the increasingly pervasive subject of trade wars features prominently in many discussions – while providing a cautionary backdrop to others.

But what is clear is that the central issues facing the insurance sector over the coming years affect everyone at every level – from families in Asia looking to protect the health of their ageing relatives - to corporates that have found that their customer data has been hacked - to governments facing a future where sea levels may have risen substantially and many of their cities are under water

Making money make money

The relatively easy bit of all of this is figuring out a strategy that protects society as a whole – while the tricky bit is figuring out how to maintain an industry that remains profitable and healthy in the face of so much change.

InsurTechs, who were once outliers on the core insurance spectrum, are now taking centre stage and promising to be the future of insurance as we know it. AI, machine learning, big data and blockchain have moved from being buzz phrases to tangible realities making a significant difference to everyday lives.

Meanwhile the industry’s reinsurance behemoths are now finding that their thunder (and their capital) is being challenged by conventional funding sources in the form of insurance-linked securities. Reinsurers, in turn, are finding that their future is more about relationships and understanding markets and less about the depth of their pockets.

The new reality

Add in an extra layer of complication in the form of new regulatory and compliance landscapes – take your pick from risk-based capital, IFRS17 and GDPR – and it looks as if the future of insurance in Asia will be more highly regulated, increasingly competitive and increasingly automated.

Is this the sort of industry that is going to attract millennials – either as customers or as head office staff? Let’s hope so.

And so there really couldn’t be a better time for a Global Insurance Forum that reimagines what insurance needs to be in the future in order to remain relevant, affordable and – above all – useful.

Has Tesla laid the groundwork for autonomous vehicle insurance?

By Amir Sadiq

In its 1Q2019 earnings call, Tesla CEO Elon Musk confirmed that the automotive and energy company is working to provide an insurance product for its autonomous vehicles (AV), which may be based around Tesla’s Autopilot self-driving system.

While details on Tesla’s new insurance product has yet to be released, there is a good chance it will look to offer lower premiums. Given that Tesla has more information about its cars and their owners, theoretically it will be able to price its risk better.

“We do give some more detailed information to insurance companies to help with rates,” said Mr Musk during the earnings call. “And obviously as we launch our own insurance product next month, we will certainly incorporate that information into the insurance rates.

The reliability of AVs

Getting AVs to work as intended has been a problem the automotive industry has been working on for the last few years. Tesla’s quarterly report in April seemed to show that AVs are indeed safer than vehicles driven only by humans.

“In the first quarter, we registered one accident for every 2.87m miles (4.62m km) driven in which drivers had Autopilot engaged,” said the report. “For those driving without Autopilot, we registered one accident for every 1.76m miles driven. By comparison, NHTSA’s (National Highway Traffic Safety Administration) most recent data shows that in the United States there is an automobile crash every 436,000 miles.”

The sentiment is backed up by a report by KPMG in February which referenced studies that said human error causes at least nine in 10 accidents.

And yet the reliability of AVs and whether or not they will be able to make the same decisions as humans is still hotly debated. Its case has also not been helped by the two Boeing 737 Max crashes earlier this year, a faulty sensor and the inability to disengage an automated anti-stall system were the main factors that doomed the two ill-fated flights.

Whose fault is it?

Then there is the question of who should assume liability in the event of an AV accident.

Does it fall on the driver, who is in command of the vehicle and arguably should be paying attention even when automated systems take over the vehicle? Or does it fall on the manufacturer who designed and built the machine in the first place?

Regulation surrounding this matter is still mostly up in the air, and existing liability laws have yet to evolve to take into account AVs. This is understandable, considering this issue represents unchartered territory for everyone involved.

Taking the questions of reliability and liability into consideration, insurers will have to navigate a veritable minefield of challenges as they seek to manage and underwrite risks for AVs, especially as they become more commonplace in the future.

There is little to no historical data to base risk models on, nor are there any case studies or examples to follow. Until now.

The dichotomy of AV accident liability

So far, only Tesla and South Korea appear to have stepped up to answer the question of liability

Back in April, Pulse News quoted a government source saying that the responsibility for driveway accidents involving self-driving cars will be placed on the driver in South Korea even though autonomous cars shift the responsibility of driving from humans to autonomous car technology.

On the flipside, Tesla’s partnership with State National will probably see the manufacturer assume liability, with the insurer only helping to develop the product and the Tesla shouldering the risk alongside its partners.

It is impossible to say how either of these cases will work out, especially considering the lack of concrete details about Tesla’s insurance product. But they do provide two dichotomous (with regard to who assumes liability) case studies which can be studied, analysed and learned from.

A roadmap for AV insurance?

Furthermore, if Tesla’s insurance offering works out well, it could signal to insurers that this collaborative strategy is a good way to approach AV insurance, at least in its early years.

World Economic Forum autonomous and urban mobility project head Michelle Avary wrote an article earlier this year in which she detailed three automotive vehicle trends to follow in 2019, one of which is the expectation of more collaborations.

“Designing, testing and manufacturing a new vehicle is expensive. CEOs don’t get to make many $3bn bets in their tenure,” she said in the article.

“Some companies will seek to minimise risks by partnering with others, which is one reason why I expect to see more mergers, collaborations, partnerships and consolidations in the autonomous vehicle industry.”

In similar fashion, insurers can collaborate with AV manufacturers to develop insurance products, while minimising risks to themselves. The AV manufacturers, who should know their own vehicles better than anyone else, will likely be able to manage their risks better than the insurers can.

These are exciting times and Tesla’s insurance offering could possibly represent a major step forward in AV insurance. Only time will tell.

First CAT bond in Singapore:
A sign of greater things to come

Singapore’s insurance and financial sector marked a watershed moment last February when the first CAT bond was issued in the republic. The A$75m bond, sponsored by Insurance Australia Group, was also the first A$-denominated CAT bond in the global market.

This inaugural CAT bond will go a long way to help broaden Singapore’s capital markets by adding a new asset class and generating a new set of service providers locally.

An enabling ecosystem is necessary to support future insurance-linked securities (ILS) issuances and possible listings on the Singapore exchange for such bonds. In that regard, the country’s central bank – the Monetary Authority of Singapore (MAS) – has been actively positioning Singapore as an ideal location for ILS issuances in a bid to capitalise on the growing interest from Asia-Pacific issuers looking to develop an APAC market for CAT bonds due to the proximity of the underlying risks.

The fact that Singapore managed to get the IAG deal to market relatively quickly, which is a consideration for all CAT bond sponsors when they look at a new domicile for issuance, was a significant plus point, said law firm Rajah & Tann head of insurance and reinsurance practice Simon Goh.

“The fact that we completed this inaugural ILS transaction within a few weeks demonstrates the efficiency and business-friendly regulatory environment in Singapore. Following this successful transaction, we are optimistic that more issuers will consider coming to Singapore.”

Strong government support

The MAS has introduced several measures to encourage issuers to consider Singapore as an ILS domicile.

In a recent interview with Asia Insurance Review, MAS executive director, insurance depar tment Daniel Wang highlighted the central bank’s ILS grant scheme launched in 2018 that funds 100% of upfront costs associated with issuing an ILS instrument here.

Further, the MAS has also sought to address one of the main barrier for ILS in Asia – the lack of quality data which makes it difficult for ILS to be structured and modelled. To address the issue, the MAS implemented the Natural Catastrophe Data Analytics Exchange (NatCatDAX) in 2016, which is envisaged to be the leading natural catastrophe data facility in the region that fuses top-down economic and exposure data obtained through satellite imagery and remote sensing technologies, and bottom-up industry loss data.

“The outcome would be a high-resolution, objective and widely-accepted data and analytics platform which will facilitate the underwriting of catastrophe risks. This will increase the confidence of insurers to participate in previously untested markets and develop more innovative products such as catastrophe bonds and government pools.

“The NatCatDAX will also enable countries to identify coverage gaps through the development of hazard maps and new models for currently hard to model or unmodelled regions, and to design effective risk-transfer solutions for their economies,” said Mr Wang.

Secondly, Singapore has also sought to create a conducive business environment, which includes regulatory, tax and corporate frameworks.

“Currently, catastrophe bonds can already be issued and regulated in Singapore via the Special Purpose Reinsurance Vehicle framework. We have also further enhanced our Approved Special Purpose Vehicle (ASPV) and Qualifying Debt Securities (QDS) tax scheme, to provide tax exemption for the vehicle, as well as withholding tax exemption to investors,” said Mr Wang.

Green shoots in a vibrant marketplace

The island state is showing signs of reaping the fruits of its labour in the ILS space, and rising awareness in the region on this asset class means that a vibrant ILS marketplace centred in Singapore may not be too far off.

In a recent report, Fitch expects potential Asian issuers from countries where reinsurers have lower profitability, such as Japan, Hong Kong and China.

“These insurers are likely to have more need of low-cost capital. Insurers from Indonesia and South Korea, where reinsurance margins are wider, are likely to enter the market later,” said the ratings agency.

Grab ready to deliver insurance to the masses

Asia Insurance Review spoke to Grab’s insurance head Tom Duncan on the company’s vision to provide simpler access to protection across Southeast Asia.

By Ridwan Abbas

With over 9m drivers, merchants and agents in a network that spreads across eight Southeast Asian markets, Grab has an impressive captive audience to promote its nascent insurance service to. And considering that large parts of the region are unbanked and uninsured, Grab and its insurance partners see a big opportunity to bridge the protection gap in Southeast Asia.

Grab Financial, the FinTech unit within Southeast Asia’s leading ride-hailing and mobile payments platform, does not underwrite policies but rather acts as a partnership platform to deliver digital insurance products to its drivers and partners through Grab’s driver app.

Grab announced its first insurance partnership with Chubb in Singapore last year, offering its drivers in the island state protection against loss of income from illness or accidents. When asked what it looks for in a potential partner, head of insurance Tom Duncan said, “The motivation and willingness to create new and more innovative insurance products, and what that comes down to is simplification... so we’re really keen to work with partners who are interested in simplifying insurance products.”

Rather than have a product that comes with complicated features, Grab wants to deliver “basic coverage at a very affordable price point that addresses a very specific need,” he said. The term ‘micro’ was a recurrent theme in conversation with Mr Duncan and it is clear that Grab sees ‘bite-sized’ and affordable coverage that is integrated into a user’s lifestyle as the future of insurance.

As a first step, it is offering insurance services only to its driver ecosystem who can access the product through the Grab drivers’ app. In some ways, Grab can use this as a sort of test-bed before it ultimately rolls out insurance products through its main consumer app.

Unique customer insights

Well on its way to becoming an ‘everyday super-app’ in the mould of China’s WeChat, Grab has a tremendous deal of insight into its users. With regards to offering the right proposition for its drivers, Mr Duncan said, “We are able to design products that suit their income and cash flow, and in time they will be able to pay extreme micro premiums on a per trip or per day basis.”

Grab is currently working with insurers NTUC Income and MSIG in Singapore to deliver a customised motor cover, where Grab’s drivers can choose to turn the cover on and off depending on when they are on the road. It aims to roll out its motor cover later this year.

Again, Grab’s depth of user insight means it has the ability to offer coverage based on scenarios generated by everyday use of its app.

“We are in a unique position because obviously we can see when the driver turns the app on when they drive... and in time on the consumer side of the platform we’ll also very much be looking into scenario-based insurance, offering products that are very linked to a consumer’s existing use case on the ground.” said Mr Duncan.

Payments system an enabler

Grab’s payment system – GrabPay – is an enabler for the company in delivering insurance services at a low cost, he added.

With 144m downloads of GrabPay, there lies a big opportunity for Grab to enable insurance transactions for under-served segments of the population within Southeast Asia.

“For example our drivers will be able to pay out of their earnings on the Grab platform rather than enter in credit card details or any other kind of payment methods. It will be very easy for them to opt in if they wish to and have micro premiums taken out from their earnings as they drive.”

One other advantage is that premium and claim payments can be integrated through GrabPay, and Grab is intent on making its claims process as simple and efficient as possible.

“Ideally we are able to pay that claim in real time but when it’s not possible with some insurance products, then they can track the status of their claims with the insurer through our app,” he said.

Getting as many people insured

Grab’s aim for its insurance business in this first phase is to get as many of its driver partners insured across the region, and is “very ambitious” about the number of signups it can reach.

It also recently received a general insurance agency license in Malaysia, which will represent the second market after Singapore for Grab’s insurance business

With the ability to interface with more than 140m users of its app across Southeast Asia, Grab’s insurance foray may yet be one of the most successful microinsurance ventures this region has seen.

Cooperation between China and EU crucial in anchoring global stability

By Alexis Garatti, Euler Hermes’ head of macroeconomic research

After WWII, and more extensively after the fall of Berlin’s wall in 1989, the US became the main supplier of world public goods (a public good is free of charge, and available to anyone without exclusion) by maintaining a global order based on military presence and NATO’s actions, promoting trade with the WTO, coordinating economic policies with international organizations (IMF, World Bank, G20) and accepting to participate in the Paris agreement on climate change.

President Trump’s presidency has represented a turning point as the America First Policy led to a retrenchment of USbased multilateralism.

From this point of time on, the US has refused to provide world public goods without counterparties for the benefits of US companies. In this context, EU and China have to revive multilateralism on the basis of a multi-sided cooperation ranging from investment, trade, finance, infrastructure projects and environment protection.

China and the EU have reacted swiftly

On 9 April 2019, the EU and China announced that they could sign a treaty on investment at the horizon of 2020 fostering reciprocity in access to domestic market, and control of strategic assets.

On 16 July 2018, China and EU leaders committed to: (i) promote multilateralism and reinforce the current rules-based trading system; (ii) work together on climate change and clean energy; (iii) collaborate in order to tackle steel overcapacity; (iv) strengthen cooperation on foreign and security policy; and (v) increase cooperation to improve connectivity between Europe and Asia by continuing to build synergies between China’s Belt and Road initiative (BRI) and the EU’s initiatives.

China and EU could cooperate more in foreign exchange, trade and investment policies

As regards the internationalisation of their currencies, Europe and China have effectuated some progress albeit remaining far from USD’s influence, which still represents 60% of foreign exchange reserves or international debt. Europe and China could have a joint approach in internationalising their currency.

This includes the development of renminbi clearing arrangements in Europe and more powerful bilateral currency liquidity facilities between the ECB and the PBoC. As regards foreign direct investment, the Chinese government plans to release a new ‘negative list’ to reduce the number of sectors restricting FDI. Financial integration between China and the EU should be at the forefront of that kind of initiatives in order to reduce an often destabilising dollar dependency. As regards trade, the two regions should promote the usage of the renminbi and euros as the main currencies for billing and transactions.

China and the EU could increase synergies on the back of Belt and Road Initiative

China and the EU already have a common financing vehicle: The China-EU Coinvestment Fund (CECIF). It has a total commitment of EUR500m of which Silk Road Fund and European Investment Fund have each participated on equal share. While the amount is relatively low for now, one could imagine an increase of the fund capacity going forward. Another idea would be to increase the synergies between Belt and Road financial capabilities and EU investment initiatives (e.g. Juncker plan worth EUR315bn).

China and the EU could coordinate their industrial policy better

Both markets could adopt a collaborative strategy on industries that requires large economies of scale and a large pool of financing. These include environment-related industries such as renewable, green energy but also transport equipment. For example, in an attempt to align ‘Industry 4.0’ and ‘Made In China 2025’ strategy, the German and Chinese government have developed high industrial parks (e.g., Sino-German Intelligent Equipment Manufacturing Park in Shenyang, Kunshan German Industrial Park). Similar approaches should be encouraged at the EU level as a real European Industrial Policy Strategy does exist. It is made up of 10 initiatives ranging from improving cyber security to modernising the EU intellectual property framework and bolstering the circular economy.

Singapore – Asia’s melting pot

Instead of hitting the more popularly-known tourist attractions after the conference, choose to immerse yourself in Singapore’s rich cultural heritage and savour the melting pot of cultures in this tiny red dot by visiting historical sites and eating authentic cuisines. This island state encapsulates the beauty of its major ethnic groups – Chinese, Malay and Indian – in a pristine and jubilant manner.

By Ranamita Chakraborty

Must-see cultural sites

As one of the most religiously diverse countries in the world, Singapore offers beautifully preserved places of worship.

Must-eat foods