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Mar 2018 Issue 129
Mar 2018
Issue 129
NEWS AT J. B. BODA 3
PRIME STORY 4-5
Counting the cost of Iranian tanker spill 4-5
NATIONAL 6-8
Penetration improving in India but still lower than neighbours 6
India market to reach US$280bn by 2020 6
Life firms embracing digitalisation to battle stagnation 7
India, China priority markets for UK insurers after Brexit 7
Indian life companies push for separate limit on tax exemption 8
India unveils three-way merger of state-owned insurers 8
INTERNATIONAL 9-11
Philippines to review capital rules for insurers 9
Korea to increase number of online insurers 9
Cat bond market hit record US$11bn issuance in 2017 10
Thai Life eyes Cambodian market 10-11
Korean insurers post higher profits in 2017 11
Chinese regulator puts cap on insurers’ overseas financing 11
J. B. BODA GROUP SERVICES 12
CONTENTS PAGE NOS.
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NEWS AT J. B. BODA
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INDIA RENDEZVOUS – 2018
While we walked into the year of celebration of our long and successful journey of winning hearts for
75 years, we scored yet another pride, being a lead sponsor for the India Rendezvous 2018 event.
Our Group Chairman Mr. Atul Boda lit the holy light together with the senior most dignitaries from
the industry seen in the picture.
We express our gratitude to the industry and we are thankful for the whole hearted participation by
the delegates to reach it to a majestic success.
We wish the industry and each of its participant a grand success into the business this year. And that
the industry continues the trend… while we continue our journey to the next milestone is what…
WE BELIEVE!!!
… glimpses of the event
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PRIME STORY
Counting the cost of Iranian tanker spill
Insurers are preparing to pay claims on the Iranian oil tanker Sanchi, which sank after
burning for eight days, once again highlighting the poor marine safety record in Asian
waters.
The Sanchi was carrying close to 1 million barrels of condensate on the way to Korea when
it collided with another ship in the East China Sea, roughly 300 kilometres east of Shanghai,
on January 6. All 32 crew aboard the vessel were killed.
“Sanchi exploded again around 12 pm on January 14, which caused the whole vessel to burn,
with flames as high as 800 to 1,000 metres,” China’s Ministry of Transport said in a
statement.
The tanker, which was operated by the National Iranian Tanker Company (NITC), had
protection-and-indemnity (P&I) insurance from Bermuda-based Steamship Mutual, which
will cover marine liability exposures, including pollution.
This will clearly form the biggest part of the loss. The magnitude of the spill is similar to the
official estimate of the Exxon Valdez disaster off the coast of Alaska in 1989, though
condensate is a very different type of oil. Formed from the cooling of natural gas, it is light,
volatile and highly flammable.
The nature of condensate tends to mean that clean-up costs are far lower than for heavy
crude oil. Most of it will have burned off already or will evaporate into the air before
reaching land, while some will dissolve into the sea. However, this is not to say that
condensate spills are harmless. Its volatile nature means that it is extremely toxic and it is
impossible to contain with booms.
“Surveillance and assessment by authorities is critical to understand the extent of the
potential environmental impact and for deciding on the appropriate next steps in terms of
salvage and recovery of the potential condensate spill,” said Paul Johnston of Greenpeace
International’s Science Unit at the University of Exeter in a news release.
Now that the vessel has sunk, the remaining colourless condensate will be extremely difficult
to track and its effect on local fisheries could be long-lasting. Greenpeace said that the area is
an important spawning ground for commercial species such as the bluefin leatherjacket and
the swordtip squid, and is used as wintering ground by edible species such hairtail, yellow
croaker, chub mackerel and blue crab.
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Norway’s Skuld is the lead hull insurer for the tanker and the P&I insurer for the CF Crystal,
the Hong Kong-registered freighter that was also involved in the collision. The Sanchi was
reportedly insured at a hull value of US$32 million.
The Norwegian insurer said in a statement that 30% of the hull value of the Sanchi is placed
through Iran’s insurance market, while the remaining 70% of the hull value is covered via the
international insurance market through 11 different insurers, with Skuld’s share being 15%.
The condensate cargo, which had a reported value of about US$60 million, had been sold to
Hanwha Total, which intends to claim for the loss under its own insurance programme.
International reinsurance coverage for Iranian tankers only recently resumed, with the
International Group of Protection & Indemnity Clubs restoring near full-coverage of US$7.8
billion per tanker since the partial lifting of US and EU sanctions against Iran in January
2016.
However, US insurers are still reportedly banned from paying claims on Iranian risks under
the current terms of the sanctions. The International Group has therefore removed US
insurers from the programme for NITC.
The incident is another black mark for marine safety in Asia. More than a quarter of shipping
losses during 2016 occurred in the Asian maritime region, which has been the biggest loss
hotspot for a decade, according to Allianz Global Corporate & Specialty’s Safety and
Shipping Review 2017. Losses in Asia are almost double that of the next highest loss region,
the East Mediterranean and Black Sea.
It remains to be seen how big the loss will be for the Sanchi, but it is expected to be yet
another significant claim in Asia’s troubled waters.
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NATIONAL
Penetration improving in India but still lower than neighbours
From 2.71% in 2001, the insurance penetration in India has surged to 3.49% in 2016-17,
according to the government’s Economic Survey 2018. Under the study, insurance penetration
is defined as the ratio of premium underwritten in a given year to GDP. Despite the
improvement, India’s rate remains behind its other Asian counterparts.
In Malaysia, for example, the penetration rate is at 4.77%; in Thailand, 5.42%; and in China,
4.77%.
By sector, India’s life insurance penetration was 2.72% while general insurance penetrated
0.77% of the economy. Globally, the rates for these sectors are 3.47% and 2.81%, respectively.
The survey said India’s insurance density has risen to US$59.7 from US$11.5 in 2001, with a
life insurance density of US$46.5 and a general insurance density of US$13.2. This compared
to a global average, insurance density is US$353 for life and US$285.3 for non-life.
India market to reach US$280bn by 2020
By 2020, India’s insurance industry is expected to reach a value of US$280 billion from its
current US$84.72 billion, Vice-president Venkaiah Naidu said, citing the rosy economic
prospects for the country.
The Vice-president was speaking at the valedictory session of the 4th South Asian Insurance
Regulatory Meet and International Insurance Conference in Hyderabad. According to Naidu,
investments made by the insurance firms in various sectors reached Rs 30.76 trillion (US$479
billion) by the end of 2016-17, of which over Rs 2.40 trillion was in the infrastructure sector.
The insurance market jumped from US$23 billion in 2005 to US$84.72 billion in FY2017, said
Naidu.
He added that the penetration of insurance into the economy remains strong, partly owing to
the increase in FDI and government schemes to provide insurance cover to more people,
including farmers.
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Life firms embracing digitalisation to battle stagnation
Life companies around the world are moving to integrate digital technology more thoroughly
into their operations. Such moves are primarily aimed at preventing stagnation and potential
leakage to insurtech players.
In its 2018 Insurance Outlook report, Deloitte said insurance companies are experimenting
with connectivity and advanced analytics in an effort to cut the life application-to-closing
process from weeks to minutes, lower onboarding costs and reduce the consumer dropout rate.
Insurance carriers, according to the report, are conducting underwriting activities digitally
through accelerated metrics.
These metrics are largely based on digitally available medical data, drug prescription
information, and potentially even facial analytics technology. Such steps gauge an applicant’s
life expectancy and do away with conventional medical tests. With the digitalisation of
underwriting, online distribution capabilities are also enhanced, said the Deloitte report.
India, China priority markets for UK insurers after Brexit
According to the Association of British Insurers (ABI), India and China are the two nations
that are the priority in non-EU markets for Britain when it leaves the European Union next
year.
Britain is expected to seek bilateral trade deals as soon as possible to ensure those two
countries will relax restrictions on foreign ownership in the insurance sector.
The finance ministry and Department for International Trade in Britain have been offered by
ABI a template for handling financial services that can be inserted into trade deals.
Such a template is part of efforts made by insurers that are facing growing concerns that they
may be overshadowed by the needs of the banking industry during and after Brexit.
Indian life companies push for separate limit on tax exemption
India’s insurance sector is looking at introducing various supportive measures in the
upcoming state budget such as imposing a separate limit for tax exemption for life insurance.
The life sector is one of the investment platforms that is covered under Section 80C limit of
Rs 150,000 (US$2,353).
Because life insurance savings and protection products are long-term in nature, there should
be a separate limit of Rs 50,000 similar to that for the net promoter score for life insurance.
Based on the Economic Survey 2017-18, the insurance penetration of India jumped from
2.71% in 2001 to 3.49% in 2016, but the life sector accounts for only 2.72% of the most
recent figure.
Crop, motor sales and health insurance have been largely responsible for this growth, the
survey claimed.
India unveils three-way merger of state-owned insurers
Three public sector general insurance firms (PSGICs) – the National Insurance Company, the
United India Insurance Company and the Oriental Insurance Company – are set to form a
single insurance entity in India.
The proposed giant merger will create an entity that will substantially exceed the size of the
New India Assurance Company, India’s largest general insurer at present. The three PSGICs
had already started the process of going public individually, but after the official
announcement of the merger the firms will now have to halt that listing process.
New India Assurance was listed in November 2017. According to data from the Insurance
Regulatory and Development Authority of India, New India Insurance Company had a gross
direct premium collection of Rs 215.98 billion (US$3.38 billion) in FY2017, accounting for
16.50% of all the GDP of general and health insurers in that period.
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INTERNATIONAL
Philippines to review capital rules for insurers
The Philippine government intends to review the capitalisation requirement implemented on
local insurance companies.
Insurance commissioner Dennis Funa said the commission would re-examine the net worth
requirements of local insurance companies following the study it conducted on the
capitalisation system in the South-East Asian region.
In that study, the commission found that the Philippines has the highest net worth requirement
for insurance industries among the member-economies of the Association of South-East Asian
Nations.
Funa said the proposal to adjust the net worth requirement was first put forward by non-life
insurance firms.
New players in the industry are mandated to have P1 billion (US$19.5 million) in paid-up
capital when they set up their businesses in the country.
Korea to increase number of online insurers
Korea’s Financial Services Commission (FSC) plans to increase the number of online
insurance companies in the country this year. There is currently only one in operation.
The plan is among a host of measures that the FSC has designed to lower barriers to entry and
ramp up competition in the country’s financial sector.
To increase the number of online insurers, the FSC says it will ease capital requirements for
the formation of new financial investment firms.
This move, it said, will create an attractive environment for specialised financial firms to
materialise.
Additionally, the Korea Insurance Development Institute will conduct research to develop
statistical yardsticks for insurance products covering the self-driving car market.
This will pave the way for the introduction of a blockchain-integrated identification system
applicable to the banking and insurance sectors.
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Cat bond market hit record US$11bn issuance in 2017
Catastrophe bond issuance reached a record of US$10.7 billion during 2017 and is set to scale
new heights in 2018 despite last year’s catastrophe losses. In total, 35 catastrophe bonds were
issued by 31 different sponsors in the insurance-linked securities (ILS) sector.
The previous annual issuance record of US$8.38 billion, established in 2007, had already been
surpassed by the end of June, according to a report released. This first half total of US$8.6
billion was then augmented with a third-quarter issuance of US$800 million and a fourth-
quarter issuance of US$1.3 billion.
At year-end, the capacity of all catastrophe bonds active in the market totalled US$25.7 billion -
another new record - while alternative capital had reached a record US$89 billion. Despite
several catastrophe events in the second half of the year that affected the pricing on certain
catastrophe bonds, the market overcame this challenge in the approach to year-end with new
capital entering the sector.
“The ILS market had a very strong 2017, with several new records being set and alternative
capital rising to new heights in the reinsurance marketplace,” said Paul Schultz, chief executive
officer. “We expect to see a gradual broadening of the scope of ILS products, making them an
even more common risk transfer tool for re/insurers, with continued support from investors for
this diversifying asset class.”
The ILS market will maintain much of the momentum it generated last year during 2018, with
existing sponsors expected to renew maturing capacity and new sponsors and investors entering
the sector. It forecasts catastrophe bond issuance for 2018 will be approximately US$8 billion
to US$9 billion.
Thai Life eyes Cambodian market
Thailand’s third-largest life insurer, Thai Life is looking at the possibility of expanding into the
Cambodian market. At present, the firm is conducting market research for Cambodia, Laos and
Myanmar, which is expected to be finished within the year, according to a report.
Under Thai Life’s 10-year strategic plan, the company hopes to flex its muscle overseas and
make the big leap to digital space. Part of the goal is also to become one of the top five life
insurers for first-year and total premiums in the region. Thai Life president Chai Chaiyawan
said digital technology has changed customer behaviour immensely.
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Therefore, he added, the company must set time-sensitive business plans to achieve sustainable
growth. Despite the low penetration level in the insurance sector in Thailand, many local
insurers there are making inroads into other markets within South-East Asia.
Korean insurers post higher profits in 2017
Insurers in Korea posted a combined net profit in 2017 that was higher than the previous year,
driven by hefty gains on investment amid stock rallies coupled with a rise in market interest
rates.
Government data showed that the aggregate net profit of insurance firms operating in Korea
reached W7.83 trillion (US$7.21 billion) in 2017. This represents a 33% increase from a year
ago, according to the preliminary data from the Financial Supervisory Service (FSS).
By sector, life insurers witnessed their combined net profit surge 63.4% last year to W3.95
trillion. As for non-life insurers, the hike was 11.8% on year to W3.87 trillion.
In a statement, the agency attributed the increase in net profit of life insurers to stock rallies and
higher interest rates which led to a surge in insurance income.
Chinese regulator puts cap on insurers’ overseas financing
The insurance regulator in China said that insurance companies must put a ceiling on their
outstanding offshore financing that is backed by domestic guarantees. The cap, according to the
China Insurance Regulatory Commission (CIRC), will be 20% of net assets, based on reported
data from the end of the previous quarter. CIRC made the announcement in a post on its
website.
Furthermore, insurance firms are also prohibited from using such services to transfer domestic
assets abroad. Those engaged in single investment projects under insurers’ special purpose
arms must report their activity to the regulator in cases where the value of the deal is above
US$50 million.
As China has been seeing a surge in overseas investment as of late, the Chinese government has
also been taking a closer look at illegal practices in transferring assets abroad.
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J. B. BODA GROUP
J. B. BODA - First on Protection – 7 Decades of Transformation.
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