ASM AGM and Dinner 2010

The Actuarial Society of Malaysia held its Annual General Meeting and Dinner yesterday in Hotel Impiana KLCC.  The event was attended by close to 100 members, despite it being held on the eve of a long weekend.

The event started with 2 invited speakers delivering papers that were not technical, for a change. Sridharan Nair, a PwC auditor, presented the broad insurance outlook post Global Financial Crisis while Sophia Ch'ng shared her work experience in particular in areas related to her winning the YAMA award.

The AGM proper started more than 30 minutes after the scheduled time with various reports from Council members. An amendment to the ASM's Constitution to formally introduce the FASM (Fellow of Actuarial Society of Malaysia) designation was put to vote after lengthy discussions.  It was resolved that a new FASM must be recommended by 2 existing FASMs and must fulfill 1-year related actuarial work experience locally within the 3 years preceding the application to become an FASM.  The FASM must also be a Fellow of a recognised global actuarial body such as The Institute of Actuaries of Australia, The Institute of Actuaries in England, Society of Actuaries in the United States, Faculty of Actuaries in Scotland, the Canadian Institute of Actuaries and the Casualty Actuarial Society in the United States.

With the change in Constitution in 2008, yesterday also saw the election of ASM's first ever President Elect - Liew Pek Hin.  Liew's existing Vice President position was in turned filled by Yap Chee Keong.  Nicholas Yeo in turn was elected to fill the position vacated by Chee Keong.

The full list of ASM 2010-2011 Council:

President:	Patrick Cheah
President Elect:	Liew Pek Hin
Vice President:	Yap Chee Keong
Secretary:	Nor Aida Daud
Treasurer:	Azim Mithani
Committee Members:	Yoon Yew Khuen
	Chin Tze How
	Loh Sheng Chieh
	Nicholas Yeo

Buffet dinner was served immediately after AGM. 15 lucky members also walked away with shopping vouchers sponsored by MLRe during dinner.

Sophia Ch'ng presenting her Paper: Experience and Achievements relating to YAMA awards.

MC of the day.

Sridharan Nair presenting "Reshaping the Insurance Industry".

The AGM in full force.

President delivering his speech.

The ASM Council 2010/11.

Articles on insurance/takaful over the weekend

Some of the articles appearing in StarBizWeek Special on 8 August that may be worth reading:

Keeping abreast with changes: Various insurance chieftains touch on issues like financial planning, bancassurance, professionalism, sustainability of business and future challenges and growth drivers.

Innovation key to growth for takaful: Leaders of takaful industry talk on sustainability of takaful industry, liberalisation, bancatakaful, human capital and retakaful.

Linking markets with Islamic finance: Towards the end of the article, BNM governor mentions that the insurance industry has a long way to go and develop products for retirement, pension schemes, annuities and medical coverage. Professionalism and capitalisation need to be increased. There should be more mergers in the domestic sector and the need for setting up enabling infrastructure.

Source: The Star

Pre-Budget focus group meeting

During the focus group meeting with the industry in the preparation for the 2010 Budget, the Deputy Finance Minister made the following remarks:

• Vast scope existed to increase the life insurance and takaful markets, given the current low penetration level of 40.8% and 7.8%, respectively
• Developed economies have market penetration of over 80%

Issue on the lack of private pension funds was also discussed.

Source: Business Times 1 & 2

Insurance outlook

Summary of views of various industry players on insurance outlook in 2H 2009:

Great Eastern

• The worst is over, export industry picking up, companies started recruiting
• 2H to be better than 1H
• Expect double-digit growth for whole year
• Distribution channel and products are key growth drivers

LPI Capital

• Export and construction sectors will provide growth
• Marine and fire insurance will benefit
• Need to be prudent in underwriting and have strong claims management in view of rising motor insurance claims (bodily injury and motor theft)

Manulife

• Regardless of economic cycles, insurance performs well
• Stimulus plans are positive
• External factors may affect growth pace
• Equity markets have not stabilised

Source: The Star

Foreign ownership up to 70%

It is confirmed that the financial sector is to be further liberalised. Foreigners will be allowed to own up to 70% equity in insurance companies.

9 new bank and insurance licences will also be issued to world-class players from 2009-2011.

Source: The Star

Earlier post

Liberalisation in insurance/takaful industry?

Business Times quoting industry source reported that the caps on foreign equity participation in the insurance/takaful sector would be lifted.

Current caps are:

• 49% for existing foreign shareholders
• 30% for new foreign shareholders

New takaful licences may also be issued.

Source: Business Times

Bond Insurance

Edward I. Altman, finance professor of New York University has called for MALAYSIA to establish a bond insurance market to lift investor confidence and spur the bond industry.

Altman said the market requires solvent insurance or government insurance so that in the event it fails, investors would be repaid.

He pointed out that the proposal to establish a government guarantee fund or insurance in the country, would bring a positive effect to the market, only if the premium to be paid by the company is reasonable.

Source: Business Times

BNM Met with Insurance and Takaful Leaders

BNM held a dialogue with leaders of the insurance and takaful industries today to discuss the developments in the economy and wide ranging issues facing the industries.

Among others, the insurers are ready for the implementation of RBC come 1 Jan 2009. The insurers and takaful operators will be more vigilant against fraudulent claims and potential fraud. BNM has also make available liquidity facility to insurance companies and takaful operators.

Source: BNM

Asia's Insurance Industry is Strong

Asia's insurance industry is strong enough to withstand the current financial market turmoil, according to S&P. "Rated insurers that have strengthened their balance sheets over the past 5 years are expected to ride out the storm without major rating changes".

Other points mentioned in the S&P's report:

• Negative outlooks on Singapore and Taiwan's life insurance sectors.
• Operating performance is likely to deteriorate in 2008 due to plummeting investment profits.

Source: The Star

Impact on Malaysia Insurance Industry

How is the local insurance industry affected if the financial crisis that has hit the US and Europe worsens? The Star reported the following views from the industry players:

Unnamed insurer: “If the credit crunch persists, it may affect the performance of insurance companies as it will have an impact on the local economy, hence affecting spending.”

Allianz Malaysia Bhd: Minimal impact on the company as has minimal exposure in foreign investments, difficult to predict the outcome should the credit crisis persist.

Manulife: Growth might be slow but sales would continue to grow.

Hong Leong Assurance: Business expected to grow as economic downturns create a need for insurance protection. Investments are maily in the local markets, no exposure to CDOs and exotic instruments. Exposure to stock market kept to a minimum and in sound dividend-yielding stocks.

Weak Investment Returns for Insurers

The Star is predicting weak investment returns for insurance companies due to the poor performance of the financial markets following the crisis in the US.

However, investment returns will remain positive over the longer period.

The solvency ratio was 120.6% at end of 2007, well above the regulatory minimum.

Manulife meanwhile believes that insurance is counter-cyclical and people tend to save more and cut back discretionary spending during current market conditions.

Source: The Star

Inflation will Affect Motor Insurance Business

The recent fuel price hike and the high inflationary environment is expected to have negative impact on the motor insurance business. The demand for vehicles, especially the large capacity vehicles, will likely to be depressed. The motor insurance premium growth is expected to be affected as a result.

The gross written motor insurance premiums reached RM4.67 bil in 2007, a growth of 1.4% over 2006.

Kurnia expects that inflation will also put pressure on management expense. The slowdown in vehicle sales however may be temporary as cars are still a neccessity for Malaysians.

Source: Business Times

2007 Annual Statistics for Insurance & Takaful

BNM recently released annual statistics for insurance and takaful industries for 2007. This is the 2nd year BNM publishes only the statistics as opposed to full annual reports as per year 2005 and earlier.

We make the following initial observations on the insurance industry (more may be posted in future as we have time to digest the statistics):

• Number of Financial Adviser licensees is still low at 7, an increase of 5 over the year. Number of financial advisers is 43 (6 in 2006), meanwhile the number of life agents increased by 3,247 to 78,587.
• There was a decrease in 1 direct general insurer and an increase of 1 general reinsurer.
• Premium as a % of Gross National Income dropped from 4.5% to 4.3%, total insurance fund assets (life & general) also dropped from 5.0% to 4.9% of total assets of the financial system.
• In absolute terms, the per capita insurance premium expenditure on life and general insurance increased from RM644 to RM695 and from RM362 to RM369 respectively
• The claims ratio for general insurance industry worsened from 60.6% to 65.7%. The main deterioration occured in Contractors' all risk & engineering and Motor Act.

Source: BNM