SINGAPORE: Trade and Industry Minister Lim Hng Kiang has said that ASEAN's pressing need for insurance protection creates tremendous business opportunities for insurers.

Mr Lim, who is also deputy chairman of the Monetary Authority of Singapore, was speaking at the inaugural ASEAN Insurance Summit on Wednesday (Oct 1).

Asia has been hit with three major catastrophes in as many years recently, with the earthquake and tsunami in Japan, floods in Thailand and Typhoon Haiyan in the Philippines. The 2011 double disasters in Japan are estimated to have caused a total damage of some US$210 billion (S$267 billion) or 3.6 per cent of Japan's gross domestic product (GDP), while in Thailand, losses from the floods amounted to US$30 billion or about 9 per cent of its GDP.

UNDER-INSURED ASEAN ECONOMIES

But despite the vulnerability to such natural disasters, ASEAN economies are still under-insured. Citing industry data, Mr Lim said ASEAN had an insurance penetration rate of 3.4 per cent in 2013, about half of the global average of 6.3 per cent. The figures are even lower for non-life insurance.

Mr Lim noted: "The penetration rate for non-life insurance is under 1 per cent or one-third the global average of 2.8 per cent, and there is a dearth of reinsurance and specialty insurance cover for large complex risks such as catastrophe risks.

"Meanwhile, growing urbanisation concentrates more economic assets in expanding cities, dramatically raising the lives and economic assets at risk in a catastrophe."

Catastrophe insurance is one of three areas which Mr Lim said can be a priority for insurance development and liberalisation. It can help strength ASEAN's financial resilience against the growing frequency and severity of natural disasters, and helps to secure emergency liquidity in the immediate aftermath of a natural disaster.

The other two are Reinsurance and Maritime, and Aviation and Transport insurance. Mr Lim said Aviation and Transport insurance helps to protect against transportation-related risks, thereby safeguarding regional and international trade flows. He added that the development and liberalisation of the insurance markets will benefit greatly from regulatory harmonisation.

According to Mr Lim, greater consistency in regulatory frameworks within ASEAN will give market participants greater clarity and assurance on the provision of cross-border insurance services and give consumers more confidence in taking up insurance protection.

He added that it will require the industry to raise awareness for the need for insurance, and spur more public-private sector cooperation and greater market opening.

BUILDING UP RISK ASSESSMENT EXPERTISE

Mr Lim noted that the insurance industry needs to build up its risk assessment expertise and underwriting capability. It also faces a shortage of professionals with a good understanding of Asian risks.

"Effective risk assessment, management and transfer are necessary to insure our economic achievements, and the best way forward is to pool our strengths and expertise together in an integrated ASEAN insurance market," said Mr Lim.

ASEAN nations are also aiming to integrate their economies by the end of 2015.

"The financial sector in general is a bit challenging because ASEAN consists of, at one end, countries that are quite advanced in terms of capital market and banking sector, whereas the younger member of ASEAN is still lagging behind, but we try to continue to narrow the gap," said Dr Bambang Irawan, assistant director of the Finance Integration Division at the ASEAN Secretariat.

Giving an update on the ASEAN Economic Community 2015 blueprint, Mr Lim said over 82 per cent of the key deliverables set for completion by 2013 have been implemented.

By channelnewsasia.com

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