More than 55 per cent of the world’s population live in the countries of the Asian markets of Japan, China, Hong Kong, SAR, India, Indonesia, Korea, Malayasia,the Philippines, Singapore, Taiwan, Thailand and Vietnam, although their share of GDP is much lower, amounting to slightly less than a quarter. In terms of insurance, these markets account for 15 per cent of global non life business and 38 per cent of life insurance premiums. The lion’s share (74 per cent and 83 per cent respectively is generated by Japan).
Asians spend more than three times as much on life insurance than on non life coverage. The important role of life insurance reflects the rudimentary state of government-sponsored social security schemes. Markets in India, Vietnam and China are highly concentrated, whereas the Hong Kong , Malayasia, Singapore and Indonesian markets are highly fragmented, comprising a large number of small providers. Foreign companies account for 6.8 per cent of Asia’s non life business and 6.2 per cent of its life insurance premiums. They boast the highest marketshares in in Hong Kong, Singapore, Thailand, the Phillipines and Indonesia.
Between 1990 and 1997, the Asia 11 (excluding Japan) country group’s non life and life insurance markets both grew at an average real growth rate of around 13 per cent. Life insurance in China, Indonesia and Japan registered growth rates of 20 per cent. Following the massive depreciation of the Thai Baht in July 1997, however, most countries in that region were dragged into an unprecedented economic and financial crisis. This turmoil has taken its toll on insurers who were faced with sharply declining premium volumes, severe balance sheet deterioration due to the asset meltdown and increasing loss ratios.
After bottoming out, the Asia 11 country group’s non life markets are expected to grow at a real average rate of 7 per cent between 1999 and 2005, and life insurance at 8 per cent.
Japan’s growth prospects are more bleak, however, given the nation’s prolonged economic slump and Big Bang -related reforms. In addition, there will be other major changes that will shape the competitive landscape of the Asian insurance markets.First, more intense foreign competition will emerge in most countries driven not only by the WTO liberalisation process, but also by recapitalisation requirements.
Secondly, the moves towards consolidation will accelerate against the backdrop of fiercer foreign competition, the fragmented character of some Southeast Asian markets and the continuing weakness of many insurers’ balance sheets.
Thirdly,an increasing number of countries will adopt a more solvency-oriented approach towards de-regulation,gradually dismantling tariffs and product-related restrictions. And finally, insurers will put more emphasis on cost effective and innovative forms of distribution like bancassurance and direct sales to hold their own in an increasingly competitive and less-regulated environment.

Excerpt from Sigma, 1999, Swiss Re.