ASEAN insurers 'must join forces or fail'

ASEAN insurers 'must join forces or fail'

KUALA LUMPUR (Reuter): Southeast Asian insurers should form regional alliances or risk dying under the onslaught of foreign players sweeping in as the pace of liberalization grows, Malaysian Deputy Finance Minister Wong Se Wah said yesterday.

"Liberalization is not only intensification of competition and erosion of profit margins for the ASEAN insurers, but also a threat to their very survival over the longer term if they are not equipped to face this coming onslaught," Wong said.

In the keynote address at the opening session of the second Association of Southeast Asian Nations (ASEAN) Insurance Congress, Wong told insurance chiefs the best way to compete internationally was to co-operate.

"Co-operation is crucial in view of the increase in global competitiveness in the insurance sector," he said. "Insurers in this region should implement strategic alliances for the sharing of business opportunities in the region," Wong said.

Insurance premiums are growing faster in Asia than anywhere else in the world, analysts say.

Real premium growth of 10 percent per annum up to 2000, against a global average of four percent, is predicted for Asia by Sigma, the research arm of Swiss Reinsurance.

Premium volume in Asia, including Japan, is estimated to be about four percent of global total.

Wong told the 260-delegate conference that regional collaboration was the best way for local small and medium-sized insurers to compete with highly capitalized international firms aggressively building market share as global trading barriers are increasingly dismantled.

He said the booming outlook was no guarantee of success for indigenous regional players.

"Notwithstanding this optimistic scenario, the insurance industry in ASEAN must face the challenges arising from increasing global competition," he said.

Industry sources say rates in many sectors of the insurance business are already at record lows, forced to rock bottom by over-capacity and under-cutting by new entrants anxious to build a presence in one of the world's most dynamic insurance markets.

Establishing alliances would enable smaller regional insurers to benefit from economies of scale and cross-participation in business they might otherwise have been competing for with one another.

"Greater regional co-operation will enable ASEAN insurers to realize their full potential and accelerate their progress collectively," Wong said.

The co-operation should be on human resource, information technology and reinsurance issues and should involve both the industry players and insurance regulators, he said.

Wong added that ASEAN-based insurers had to begin to play a stronger role in protecting assets accumulated in the region during its rapid economic growth and to retain more premium dollars locally to enable continued investment in economic development.

ASEAN groups Brunei, Myanmar, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.