Economic development in ASEAN has led to an increase in premium growth, and the momentum likely is to continue, says AM Best in a report titled, ‘ASEAN – Favourable Demographics and Development Boost Economic Growth’.
Between 2008 and 2018, ASEAN total GDP, as a percentage of the world’s GDP, increased to 3.4% from 2.5%, and it is expected to grow to 3.8% by 2023. ASEAN has 10 member countries; however, the five largest economies among the 10 members - Indonesia, Malaysia, the Philippines, Singapore and Thailand - contribute 88% of ASEAN’s total GDP. The current trade uncertainty has been a headwind to growth, but accommodative monetary and fiscal policies have been able to mitigate the slowdown partially.
Cambodia, Laos, Myanmar and Vietnam – ASEAN’s frontier markets - have been among the fastest-growing economies in the world. (Brunei is the 10th ASEAN member.) Favourable demographic trends in the region have helped to fuel the expansion. The trade conflict between the US and China has the potential to be disruptive to the region, but may also provide an upside, as global manufacturers look to mitigate some uncertainty and diversify their production chains to countries other than China, says the international rating agency.
ASEAN’s total premiums were $92.1bn in 2017, according to industry reports, compared with $15.8bn in 1997. However, despite this growth, insurance penetration in the region remains low. In 2017, the average insurance penetration for the region was 3.6%, with the highest rate in Singapore (8.6%). While this represents a significant gap in insurance protection, it also highlights the significant opportunities for development in the future. Continuing economic and financial sector growth will help the insurance industry grow correspondingly.
AM Best’s country risk tiers for the 10 ASEAN countries range from CRT-1 (Singapore) to CRT-5 (Cambodia, Laos and Myanmar). Overall, insurers operating in the ASEAN region face differing levels of economic, political and financial system risks, all of which are key components of AM Best’s country risk analysis. A