Clyde & Co Clasis sees favourable conditions for re/insurers to grow in South East Asia

Justin Tan, corporate partner at law firm Clyde & Co Clasis, part of the global firm’s Asia-Pacific network, sees growth for re/insurers coming from the consistent economic growth of South East Asian countries, as they have been actively targeted by several global life and health companies as new and/or growth markets.

Tan also pointed to Chinese insurers, describing them as “enthusiastic newcomers” to the market, while Japanese insurers have been longer term players in South East Asia.

He said economic growth has been “accelerated” with rapid urbanisation and industrialisation of the region, while the growing middle classes have resulted in rising demand for life insurance products.

Tan highlighted the gradual strengthening of insurance regulations in Association of Southeast Asian Nations (ASEAN) countries as something to watch, and added: “The challenge for insurers, especially life insurers, is how to adapt current products and strategies to match local culture and needs, as each market has its nuances where understanding and sensitivity are vital for success.”

With the future of the re/insurance market in South East Asia in mind, he said, the region has several key factors in its favour.

These include relative political stability throughout the region, along with favourable demographics for years to come and consistent economic growth in all the major markets.
He added: “The region has an ideal lower-cost alternative production base to China’s, which helps circumvent US-China trade war restrictions, while also being substantial markets in themselves.”

Further investment in the region is being driven by changes in rules for marine fuel sulphur emissions (IMO 2020) as well as a push for liquid natural gas and renewable energy.
In contrast, non-Asian multinational companies seem to be behind the curve, Tan said.

“Investment levels from North America and Europe in the region have been fairly stagnant compared with investment from North Asia, while the Australian economy remains largely domestic-focused,” he said.

“This lack of investment will result in ‘Western’ companies standing still while North Asian companies (along with their South East Asian partners) maintain growth, further exacerbating the shift in the economic centre of gravity from West to East,” he concluded.