CURRENTLY SPEAKING Bridging Borders Webinar Series 1 ASEAN ECONOMIC COMMUNITY: OPPORTUNITIES AND CHALLENGES FOR INSURERS
CURRENTLY SPEAKING
Bridging Borders Webinar Series 1
ASEAN ECONOMIC COMMUNITY:
OPPORTUNITIES AND CHALLENGES FOR
INSURERS
CURRENTLY SPEAKING
2
Welcome
You are on mute
A link to a recording of the webinar will be available
We can take questions by using the chat function, we will
respond to your questions by email after the webinar
Heng Loong Cheong Partner
Bridging Borders Webinar Series
Welcome
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Bridging Borders Webinar Series 3
Heng Loong Cheong
Partner
Introduction
Heng Loong Cheong Partner, Hong Kong
Ann Leung Senior Associate, Hong Kong
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4
Welcome
Heng Loong Cheong Partner
Bridging Borders Webinar Series
AEC: Background and Policy Context (1)
ASEAN 5 ASEAN 6 CLMV
Indonesia ASEAN 5+Brunei Cambodia
Malaysia Lao PDR
Philippines Myanmar
Singapore Vietnam
Thailand
ASEAN Community (2020)
ASEAN
Economic
Community
(2015)
ASEAN
Political –
Security
Community
(2015)
ASEAN
Socio-
Cultural
Community
"Three Pillars"
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5
Welcome
Heng Loong Cheong Partner
Bridging Borders Webinar Series
AEC: Background and Policy Context
(2)
"Key Characteristics"
ASEAN Economic Community
Single Market
and Production
Base
Highly
Competitive
Economic
Region
Region of
Equitable
Economic
Development
Region Fully
Integrated into
the Global
Economy
• Free flow of
goods
• Free flow of
services
• Free flow of
investment
• Freer flow of
capital
• Free flow of
skilled labour
• Competition
policy
• Consumer
protection
• Intellectual
Property Rights
• Infrastructure
Development
• Taxation
• E-Commerce
• SME
Development
• Initiative for
ASEAN
Integration (IAI)
• Coherent
Approach
towards
External
Economic
Relations
• Enhanced
participation in
global supply
networks.
CURRENTLY SPEAKING
6
Welcome
In recognition of diversity in economic and social backgrounds
AND the transitional economies of the "CLMV" states:
Common objectives and single end goal for ALL ASEAN
member states
Different timelines and milestones for each member country
depending on individual circumstances / readiness for reform
(i.e., "pre agreed flexibilities")
Liberalization through "ASEAN minus X" formula where:
member countries that are ready can liberalize first; and
be joined by others later
Respect for:
national policy objectives; and
differences in the level of economic and financial sector
development among individual member countries
Flexibility of member countries in setting their own preconditions
for liberalization and establishing own timelines
Heng Loong Cheong Partner
Bridging Borders Webinar Series
AEC: Implementation by 2015 – dream
or reality? (1)
CURRENTLY SPEAKING
7
Welcome
Bridging Borders Webinar Series
AEC: Implementation by 2015 – dream
or reality? (2)
Heng Loong Cheong Partner
CURRENTLY SPEAKING
8
Welcome
Liberalization covers 4 "modes" of supply for the delivery of
services in cross-border trade (as defined by the WTO)
Mode 1: Cross-border supply
Mode 2: Consumption abroad
Mode 3: Commercial presence
Mode 4: Presence of natural persons
AEC is a "work in progress"
Overall score of 68.2 out of 100 in latest (March 2012) AEC
Score card
Majority of ASEAN member states already complying with
benchmark for foreign equity participation (e.g., 80% in
Indonesia, 70% in Malaysia)
BUT cross-border trade in insurance services (Mode 1) still
widely restricted
Heng Loong Cheong Partner
Bridging Borders Webinar Series
AEC: Implementation by 2015 – dream
or reality? (3)
CURRENTLY SPEAKING
2 "track" development of ASEAN insurance sector?
1 for "regional champions" competing with their global /
regional peers across national borders
1 for all other (re) insurers mainly serving local needs / the
interests of domestic policyholders
9
AEC: Implementation by 2015 – dream
or reality? (4)
Heng Loong Cheong Partner
Bridging Borders Webinar Series
CURRENTLY SPEAKING
10
Welcome
There should be no restrictions at all to Mode 1 (Cross-border
supply) and Mode 2 (Consumption abroad)
Only permitted exceptions if:
bona fide regulatory reasons (e.g., public safety)
AND this is agreed by ALL member countries on a case by
case basis
So, in theory insurers should be able to:
Use a branch located in another ASEAN country to write
policies for local policyholders (Mode 1)
Be approached by policyholders from another ASEAN
country, and write polices for such policyholders (Mode 2)
Ann Leung Senior Associate
Bridging Borders Webinar Series
AEC: Likely / possible opportunities
and challenges for insurers
CURRENTLY SPEAKING
11
Welcome
Indonesia has committed to liberalize its insurance sector by
2015
Foreign equity participation quite liberalized- up to 80%
permitted
Foreign ownership can exceed 80% if the following
requirements are satisfied:
there is a mandatory need to increase capital;
the Indonesian shareholder cannot contribute its pro rata
share of the additional capital;
such increase is not applied for during the initial
establishment stage; and
it is by way of share subscription and the number of shares
held by the Indonesian shareholders remain the same (while
such shareholding may be diluted)
Ann Leung Senior Associate
Bridging Borders Webinar Series
AEC: Likely / possible opportunities and
challenges for insurers- Indonesia (1)
CURRENTLY SPEAKING
12
Welcome
If a foreign insurer would like to issue insurance policies to local
residents in Indonesia, a local entity must be established
Any party (including foreign insurers) wishing to carry on
insurance business or provide insurance to Insured Objects in
Indonesia requires a license from the Financial Services
Authority (FSA)
"Insurance business" is very broadly defined. Includes
"marketing and distribution of insurance products"
"Insured Objects" is also very broadly defined. Covers almost
all kinds of insurance services
Ann Leung Senior Associate
Bridging Borders Webinar Series
AEC: Likely / possible opportunities and
challenges for insurers- Indonesia (2)
CURRENTLY SPEAKING
Cross border supply of insurance services to Insured Objects
in Indonesia through a foreign insurer is not allowed, except
where no local insurer is capable or willing to provide the
coverage in question
Whether consumption abroad by Indonesian policyholders is
permitted depends on the residence status of the individual:
outside Indonesia on a long term/ temporary basis
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Ann Leung Senior Associate
AEC: Likely / possible opportunities and
challenges for insurers- Indonesia (3)
Bridging Borders Webinar Series
CURRENTLY SPEAKING
Thailand has not specifically committed to liberalizing its
insurance sector by the end of 2015
Foreign investment threshold is very low - generally 24.9%
and may go up to 49% with permission from the Office of the
Insurance Commission (OIC)
The insurance sector has made little tangible progress to
realize the AEC goals so far
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AEC: Likely / possible opportunities and
challenges for insurers- Thailand (1)
Ann Leung Senior Associate
Bridging Borders Webinar Series
CURRENTLY SPEAKING
A foreign (non-admitted) insurer must be licensed in Thailand
to carry on insurance business in Thailand
Non- admitted insurers are not allowed to market their direct
insurance products (reinsurance excepted)
Non- admitted insurers cannot, directly or through any local
intermediaries, facilitate the entering of insurance contracts
No restrictions on Thai nationals on the purchase of non-
admitted insurance
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AEC: Likely / possible opportunities and
challenges for insurers- Thailand (2)
Ann Leung Senior Associate
Bridging Borders Webinar Series
CURRENTLY SPEAKING
The OIC published an AEC roadmap in March 2014
The AEC roadmap addresses 3 main areas
i. Enhancing financial stability of insurers;
ii. Developing a competition strategy to boost growth; and
iii. Developing fundamental infrastructure necessary for
business expansion
Specific details and precise commitments underlying the
broad concepts yet to be announced
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AEC: Likely / possible opportunities and
challenges for insurers- Thailand (3)
Ann Leung Senior Associate
Bridging Borders Webinar Series
CURRENTLY SPEAKING
17
Welcome
Malaysia has committed to liberalize its insurance sector by
2015
Insurance industry in Malaysia is relatively open to foreign
investors
Foreign equity ownership limit of 70% for Malaysian insurers
and reinsurers
No foreign equity ownership limit for Malaysian insurance
intermediaries
Ann Leung Senior Associate
Bridging Borders Webinar Series
AEC: Likely / possible opportunities and
challenges for insurers- Malaysia (1)
CURRENTLY SPEAKING
18
Welcome
Foreign insurers are not permitted to carry on insurance
business in Malaysia unless licensed
Meaning of "carry on an insurance business"
Soliciting and advertising of insurance policies in Malaysia by
unlicensed foreign insurers not allowed
Providing insurance service through local intermediaries:
Insurance agents: unless prior written approval from the
Bank Negara Malaysia (BNM) is obtained, foreign insurers
cannot provide or market their products in Malaysia through
an insurance agent
Insurance brokers: foreign insurers can be approached by
approved Malaysian insurance brokers to issue life policies
for clients in Malaysia
Ann Leung Senior Associate
Bridging Borders Webinar Series
AEC: Likely / possible opportunities and
challenges for insurers- Malaysia (2)
CURRENTLY SPEAKING
The FSA does not prohibit consumption of insurance services
abroad if the execution is done outside Malaysia
Approval is required from BNM for direct placement outside
Malaysia of insurance of property located in Malaysia
(including any ship / aircraft registered in Malaysia)
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Ann Leung Senior Associate
AEC: Likely / possible opportunities and
challenges for insurers- Malaysia (3)
Bridging Borders Webinar Series
CURRENTLY SPEAKING
20
Welcome
Singapore has committed to liberalizing its direct non-life
insurance, reinsurance and retrocession, insurance
intermediation and services auxiliary to insurance sub-sectors
by end of 2015
No limits on foreign ownership of Singaporean insurers and
insurance intermediaries
Ann Leung Senior Associate
Bridging Borders Webinar Series
AEC: Likely / possible opportunities and
challenges for insurers- Singapore (1)
CURRENTLY SPEAKING
Non- admitted insurers are not permitted to carry on
insurance business in Singapore, whether directly or through
insurance intermediaries
Non- admitted insurers are not permitted to advertise its
activities to promote their insurance products or solicit
insurance business within or outside Singapore
Consumption abroad of life insurance by Singapore residents
is allowed provided that such sales do not render the offshore
life insurer's business activity to be carrying on of insurance
business in Singapore
Bridging Borders Webinar Series 21
AEC: Likely / possible opportunities and
challenges for insurers- Singapore (2)
Ann Leung Senior Associate
CURRENTLY SPEAKING
Currently, no tangible measures to achieve the remaining
steps towards liberalizing the insurance industry
Further discussions with ASEAN insurance regulators in 2015
are likely to determine Singapore's next steps
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AEC: Likely / possible opportunities and
challenges for insurers- Singapore (3)
Ann Leung Senior Associate
Bridging Borders Webinar Series
CURRENTLY SPEAKING
In Summary
Varied progress across the ASEAN member states
Insurance sector still heavily regulated by domestic laws of
member states
A great degree of liberalization needed to meet the 2015
milestone date
Bridging Borders Webinar Series 23
Ann Leung Senior Associate
AEC: Likely / possible opportunities and
challenges for insurers
CURRENTLY SPEAKING
24
Welcome
Bridging Borders Webinar Series
Q&A
THANK YOU!
Heng Loong Cheong
Partner
Ann Leung
Senior Associate