Seventy percent of life insurance executives who responded to a survey on the forthcoming Asean Economic Community (AEC) believe that there are benefits to common regulation across all 10 member states of the regional grouping. The remaining 30 percent were not convinced that common regulation was advantageous at all.
Among them, the highest proportion of 37 percent said that the main attraction of a common regulatory framework is that it would allow greater consistency of approach and comparability across markets in Asean. Almost the same proportion (36 percent) said that it would raise overall standards of prudential oversight and governance. The rest see the forging of closer ties between regulators across ASEAN (19 percent), a trend that has been gathering pace in recent years; Asean as having stronger influence on the world stage (5 percent) and cost savings in working to common standards.
The online survey was conducted by Milliman, an international actuarial and consulting firm, among life insurance executives working in the ASEAN markets to gauge their views on certain aspects related to the introduction of the AEC. The survey drew a wide response, with 86 respondents from all of the ASEAN member states except Laos, plus responses from individuals based in other markets with ASEAN responsibilities.
When asked what they saw as the single most significant obstacle in moving to common insurance regulation, 60 percent of respondents cited the disparity in the maturity and sophistication of the different markets in Asean. 17 percent also envisaged political constraints coming into play, with one saying: “It will be political, involving reciprocity on what are perceived to be mutually beneficial terms.” Implementation cost and talent issues are felt to be far less significant obstacles.
The survey findings also suggest a strong consensus of opinion that the AEC would lead to slightly higher or similar levels of required solvency capital. However, only a small proportion (6 percent) felt that the increase would be significant.
Many respondents (37 percent) expressed concern that the AEC would disadvantage the less developed markets within ASEAN. 20 percent of respondents were worried about the increased competitive pressures, and a similar proportion about the practical logistics and cost of implementation. One respondent commented: “Countries will go through the pretense of opening up their markets but in practice will put in place significant hurdles.”
The survey findings reinforced the view held by many commentators that Singapore stands to gain the most from closer economic collaboration with its ASEAN neighbours by virtue of the relative sophistication of its market. A relatively high proportion (17percent) thought Indonesia, as the largest ASEAN economy and a growing force on the world stage, would be the most positively affected member state. Interestingly, a significant proportion (14 percent) felt that Myanmar would benefit the most, similar to Thailand, Vietnam, Cambodia and Laos combined.