The 2nd ASEAN Insurance Conference to be held in Yogyakarta, Indonesia on November 23

Around 250 insurance companies and regulators are expected to attend.

ASEAN will soon realize its vision to establish a single economic zone with a combined GDP of US$2.64 trillion (latest figure as of 2014), thus making it the 3rd largest economy in Asia after China and India, and 7th largest in the world. Liberalization of trade and services and people’s movement have been set as the main agendas in the formation of ASEAN Economic Community (AEC) by 2020. This offers opportunities as well as challenges for the insurance industry to play a greater role in the development of regional economy.

The insurance industry, with more than 500 industries, has experienced double premium growth up to US$85 billion for the period of 2009-2014. This growth notably occurs amidst the dwindling penetration level in the region at 3.5% population or less than half of total insurance penetration level in Europe and the United States that hovers around 8%. The ASEAN insurance industry can therefore grow rapidly if the integration of region insurance markets can be realized through AEC implementation.

“The insurance industry can significantly contribute to the region’s economy considering it ability in providing long-term financing, in addition to insuring various economic activities,” said Evelina Pietruschka, Secretary-General of ASEAN Insurance Council (AIC), in Jakarta, Tuesday, November 8, 2016. “For the insurance industry to grow and generate a greater contribution, a single insurance market must be realized and ASEAN economic integration optimized.”

The realization of a single insurance market in ASEAN will promote the reduction of premium price across member countries and thus revitalize insurance market in the Marine, Aviation & Transport (MAT) sector. Due to its long-term nature and stability as an investment, insurance can be used to finance infrastructure and further support national development. This is crucial considering that infrastructure is especially seen as a bottleneck to economic growth.

ASEAN life insurance premiums, recorded at US$65 in 2015, are potential as long-term funds to finance infrastructure projects across countries in the region. “Long-term investments, such as insurance and pension fund, play a significant role in the development of capital market and infrastructure financing projects,” Hendrisman Rahim, Chairman of the Indonesian Life Insurance Association (AAJI), stated.

Yasril Y. Rasyid, Chairman of the General Insurance Association of Indonesia (AAUI), further added that regional infrastructure projects will offer great opportunity to insurance industry in general as many activities in infrastructure development require insurance protection. ASEAN market integration will also increase the amount of infrastructure projects involving multinational vendors that need insurance protection across countries.

Market liberalization will also make insurance premiums more affordable, thus allowing those with lower middle income to receive insurance protection (micro-insurance) that are especially useful amidst the threat of natural disasters (disaster risk financing). One of the main challenges is then related to human resources, particularly on raising societal knowledge and awareness of the significance of insurance.

Integrating insurance industry in ASEAN is certainly not an easy process despite seven member countries already agreeing on opening their respective insurance market. ASEAN insurance industry thus needs to push for market integration while also gaining support from regulators. “Indonesia shall play a key role in the integration process of ASEAN economy, including a single insurance market, considering its major contribution of up to 40% of ASEAN insurance industry,” Evalina stressed.

The 2nd ASEAN Insurance Conference, to be held in Yogyakarta on November 23, 2016, can play a crucial role in promoting the integration of insurance market as well as the reformation of insurance in all region. The previous conference, held in 2014 in Singapore, has underlined support towards liberalization of services sector, starting from those become the main focuses of industry in the region, such as Marine, Aviation & Transport and Microinsurance

This year’s Conference is also expected to become a strategic discussion platform for 250 insurance companies and insurance regulators in ASEAN, a forum to jointly seek solutions to the problems that have been experienced by the insurance industry and provide feedback and recommendations from the industry that can be a reference to regulators in formulating MEA policies.

In the meeting in Yogyakarta, representatives of the insurance industry will follow the annual meeting of members of AIC which will be held one day earlier, while the regulators will meet in the ASEAN Insurance Regulators Meeting (AIRM) which will be held in conjunction with the AIC 2nd Conference. At the height of the conference on the following day, regulators and industry will hold a joint-plenary session, further harmonizing all aspirations in a collective vision of promoting a greater role of insurance industry in the ASEAN Economic Community.