Asia ex-Japan Insurers Step Up in Difficult Times
April 13, 2020 — Singapore
Fund managers, too, have a role to play
As insurance companies in Asia ex-Japan step up amid the challenges to provide covers against COVID-19, asset managers can do their part by helping insurers ensure that their risks are well managed.
Amid the coronavirus pandemic, regulators in some regional markets are introducing new risk-based capital (RBC) frameworks, or revising existing ones. Hong Kong, for example, is in the process of developing a new RBC regime, while China, Malaysia, Singapore, and Thailand are upgrading their existing RBC requirements via quantitative impact study exercises and consultative discussions with the industry.
Insurers are also preparing to adopt the International Financial Reporting Standard (IFRS) 17. Although the International Accounting Standards Board has deferred its implementation globally by a year to January 2022, many insurers still face hurdles in fulfilling the requirements within the deadline.
Insurers may prefer to write more investment-linked policies (ILPs) to better manage their risks and comply with RBC standards. Those having to adopt IFRS 17 may also pull back from savings-type products, which incur higher liabilities. However, the potential of ILPs varies across the region—waning in some markets, such as China and Singapore, but looking promising in countries like Indonesia and the Philippines. In Singapore, insurers are innovating and seeking bancassurance partnerships to strengthen their ILP businesses, while in Taiwan, the segment is receiving a needed boost from a growing interest in annuity products.
In such unsettling times, however, it is likely that the need for protection will come first. Some insurers are already stepping up by offering COVID-19 covers, but others are going a step further to help society cope with the risks. In Malaysia, AIA has established a MYR2 million (US$460,158) fund to provide financial support to medical workers. In Singapore, the Life Insurance Association has said that policyholders facing financial difficulties owing to the pandemic can defer their premium payments by up to six months. Some insurers in the city-state, including Great Eastern, Manulife, and NTUC Income, are also offering free coverage against COVID-19.
“In these difficult times, insurers are going back to their roots of providing safety and security,” said Ken Yap, managing director, Asia. “At the same time, there is no escaping compliance with regulations such as RBC. Asset managers will need to offer solutions to insurance companies to ensure that their risks are well managed to meet regulatory requirements and other challenges of the day.”