Emerging risks | Growth Opportunities | APAC Insurance
Emerging risks | Growth opportunities | APAC insurance
Emerging opportunities
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Southeast Asia is a rich hunting ground for M&A opportunities. Data collated by Statista shows that there are 150 insurers in Indonesia, 137 in the Philippines, 74 in Thailand and more than 80 in Vietnam.
Such intense competition makes it very difficult for smaller insurers to compete for market share, meaning that there is a strong incentive within these markets to consolidate.
“We’re looking at this and thinking, ‘this is a really big opportunity’. Insurers just need the patience, the time and the wherewithal to make things work,” says Ted Hodgkinson, a partner with Huntington Partners.
In August, two of the largest insurers in the Philippines, FPG Insurance and The Mercantile Insurance, announced their plans to merge. FPG’s President Gigi Pio de Roda said at the time that the combined resources of the two firms “will create a more resilient organisation”.
Several firms that lack the necessary scale have taken advantage of growing appetite for M&A to bow out of the markets. For instance, Liberty Mutual recently sold its P&C operations in Thailand to Chubb, saying that this divestiture would allow the company to concentrate on its interests elsewhere in APAC.
New regulations appearing in the region – such as risk-based capital (RBC) reforms and international reporting standard IFRS 17 – are also encouraging insurers to consolidate.
The capital burden from RBC rules can be particularly punitive for smaller firms, while IFRS 17 can affect the solvency ratios that are reported to the regulator.
Such changes are particularly impactful for life insurers, given the longer nature of liabilities that such firms have. However, they can also have an indirect impact on the P&C market as composite insurers decide to shore up their overall capital positions.
New opportunities are emerging in Japan, too, as the regulator forces insurers to divest cross-shareholdings (investments in firms with which they also have a business relationship). Not only does this free up insurers’ capital, which they can then use to make acquisitions elsewhere, but improved governance also makes Japanese insurance assets more appealing to overseas investors.
