Archived insights remain available on the site. Please consider the publish date while reading these older insights.
publish

Preparing for a sea change in Asia’s insurance landscape

ALM & Regulatory Capital Strategist Francisco Sebastian and Insurance Strategist Max Davies discuss the shifting regulatory environment for Asia’s insurance industry and propose solutions that may help Asian insurers adapt accordingly.

The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.

THE 21ST CENTURY HAS BEEN BILLED BY MANY AS THE “ASIAN CENTURY”, GIVEN THE REGION’S TREMENDOUS GROWTH POTENTIAL. Much like other industries, the insurance sector in Asia is subject to significant change, fuelled by an expanding middle class, rapid digitalisation and persistent downward pressure on global interest rates. We believe these structural macro changes, when combined with a shifting regulatory backdrop, mean that Asian insurance companies will need to adapt their business models and investment portfolios to capture the exciting opportunities the region has to offer.

The emerging Risk Based Capital (RBC) frameworks bear a strong resemblance to the prudential regulations that have been applied in Europe, notably Solvency II. As such, the experience to date in Europe can be instructive in helping Asian insurers to transition smoothly to their own new regulatory environment. In this paper, we discuss the drivers of balance-sheet management in European insurance and aim to provide tangible takeaways for Asian insurance companies. We also propose solutions that may help Asian insurers overcome the challenges that the new risk-based accounting and capital frameworks pose.

What’s been Europe’s experience with RBC frameworks?

Solvency II has shaken up the European insurance industry at all levels. The previous regulatory regime was largely static, accounting-based and bore low risk sensitivity. By contrast, Solvency II is dynamic, risk sensitive and grounded in actuarial and financial foundations. In short, it has made investments and asset-liability management crucial drivers of capital management and efficiency.

Prior to the official launch of Solvency II in 2016, European insurers had spent the better part of a decade testing the new regulatory framework through multiple “quantitative impact studies”. The results of these provided the opportunity for insurers to adjust their balance-sheet, governance and disclosure practises as needed.

The pace of regulatory change has slowed since the launch of Solvency II, but has by no means come to a halt. Indeed, the shifting economic environment in recent years and the dynamic nature of the regulatory framework have been pushing insurers to…

To read more, please click the download link below.

Recommended for you

<span>Insurance Multi-Asset Outlook — </span>Strong but slowing growth: a tale of two narratives
Markets appear to be caught between two hard-to-reconcile narratives: the pace of economic growth looks poised to slow, but the level of growth is likely to stay relatively strong. Multi-Asset Insurance Strategist Tim Antonelli and Investment Strategy Analyst Daniel Cook offer insights for global insurers at this point in the cycle.
Archived insights remain available on the site. Please consider the publish date while reading these older insights.
publish
October 2021
Insurance Multi-Asset Outlook — Strong but slowing growth: a tale of two narratives
,
publish
Tim Antonelli
 CFA, FRM, SCR
<span>Multi-Asset Outlook — </span>With growth and policy, which matters more: level or change?
While macro risks may be elevated somewhat, Nanette Abuhoff Jacobson and Daniel Cook still see opportunities, including in European equities and commodities. They also argue for being selective in credit while maintaining fixed income for diversification.
Archived insights remain available on the site. Please consider the publish date while reading these older insights.
publish
October 2021
Multi-Asset Outlook — With growth and policy, which matters more: level or change?
,
publish
<p style="font-size: 13px; margin:7px 0;">FUTURE THEMES | SOCIETY</p>The future of work: why societal shifts matter
While the pandemic has accelerated existing shifts in people's working lives, these changes may just be the start. We assess the future of work in 2030 and highlight some potential investment implications.
Archived insights remain available on the site. Please consider the publish date while reading these older insights.
publish
September 2021

FUTURE THEMES | SOCIETY

The future of work: why societal shifts matter
,
publish
<span>Top of Mind</span> Investing for the long term (in a short-term world)
With short-term behaviour evident across the financial landscape, Multi-Asset Strategist Adam Berger explores the intuitive and quantifiable advantages of being more long term, and he offers seven habits that can help asset owners cultivate a long-term mindset.
Archived insights remain available on the site. Please consider the publish date while reading these older insights.
publish
September 2021
Top of Mind Investing for the long term (in a short-term world)
,
publish
Monthly Market Snapshot: August 2021
A monthly update on equity, fixed income, currency and commodity markets.
Archived insights remain available on the site. Please consider the publish date while reading these older insights.
publish
September 2021
Monthly Market Snapshot: August 2021
,
publish
Mid-2021 Investment Outlook
As you look ahead to the second half of 2021, thought leaders from across our investment platform share their views on pressing questions.
Archived insights remain available on the site. Please consider the publish date while reading these older insights.
publish
August 2021
Mid-2021 Investment Outlook
,
publish
Update on key sustainability initiatives
We highlight progress on key sustainability initiatives: interim targets for our net-zero commitment, inclusion of location data in climate disclosures and expanding our compliance with SFDR.
Archived insights remain available on the site. Please consider the publish date while reading these older insights.
publish
August 2021
Update on key sustainability initiatives
,
publish
Using climate science to uncover investment opportunities
Investors are increasingly aware of the risks posed by climate change, but perhaps less so of the unexpected opportunities that climate science can help uncover.
Archived insights remain available on the site. Please consider the publish date while reading these older insights.
publish
July 2021
Using climate science to uncover investment opportunities
,
publish