Asia’s Evolving Solvency Regimes ‘an Opportunity for Insurers’

A report from global reinsurance intermediary Aon Benfield outlines the latest solvency requirements applying to the non-life insurance industry across 20 Asia Pacific countries and regions.

The group’s
‘Asia Pacific Solvency Regulation report’
for 2015 covers Australia, Brunei, China, Hong Kong, India, Indonesia, Japan, Republic of Korea, Macau, Malaysia, Myanmar, New Zealand, Pakistan, Papua New guinea, Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam.

Aimed at multi-national insurers and reinsurers, including firms looking to expand overseas, the report provides an understanding and benchmarking of the existing methodologies adopted by regulators. “Asia Pacific has been identified as an area of growth and, as new capital flows in, companies will continue to take advantage of opportunities so a clear understanding of the status quo and future regulatory changes is very important,” comments Aon Benfield.

Key findings from the 2015 report include:

The most significant change since last year:
While regulatory evolution occurs throughout Asia, the introduction of China’s second-generation solvency regime – China Risk Oriented Solvency System (C-ROSS) – will impact both the fast-growing insurance market itself and beyond. Previously, solvency capital was only decided by an insurer’s size but now it takes into consideration insurance/catastrophe, asset and credit risk, plus hard-to-quantify risks such as operational, reputational and liquidity risk

Upcoming trends:
Asia Pacific is strengthening its solvency regulations. Markets such as China, Hong Kong, and Sri Lanka are moving towards risk-based capital (RBC) while developed markets are bringing their existing RBC to a new level – for example Singapore’s introduction of RBC 2 and Japan moving towards an economic value-based solvency regime. Insurance companies need to meet the regulatory challenges, which would effectively motivate them to improve enterprise risk management.

Benchmarking comparisons that the industry can learn from:
The Solvency II journey in Europe has greatly influenced markets that are developing new solvency regimes. The three pillar structure is being mimicked in China and Hong Kong, with Pillar 1 for quantitative requirement, Pillar 2 for qualitative requirement, and Pillar 3 for disclosures and information transparency.

“The report is geared towards helping insurers drill down to the information that is most important for them,” said Sifang Zhang, head of Aon Benfield Analytics’ rating agency advisory team for APAC.

“Many insurers and reinsurers are keen on identifying key strategic opportunities and at the forefront of this are the Association of Southeast Asian Nations (ASEAN) countries. This region presents many opportunities due to currently low insurance penetration rates, fast-growing economies, an active infrastructure building and the forthcoming ASEAN Economic Community.

“Regulatory regimes are evolving quickly and risk-based capital regimes are already implemented in half of the countries. The report’s standard structure will enable easy comparisons to be made when insurers are making strategic decisions.”

The report may be accessed at:


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