A recent insurance landscape report for the APAC region found that half of Asian insurers surveyed have not yet started on net-zero integration. Additionally, three in 10 insurers said that they have not yet integrated environmental, social and governance strategies at all.
Despite these ESG figures, the study found that 62% of APAC insurers believe that local ESG regulations will become stricter in the next three years, with the expectations from Australia, Malaysia, and Hong Kong listed as the highest.
The report, titled APAC Insurance Investment Landscape, comes from global asset manager abrdn and strategy consultancy Quinlan & Associates. It explores how insurers are facing various developments from the industry, from changing regulations through the adoption of IFRS 17, ESG efforts (or lack thereof), and the rise of investment-linked policies (ILPs).
The report surveyed 56 senior executives across 43 insurance companies in eight APAC markets, including Hong Kong, Singapore, Mainland China, Thailand, Taiwan, Malaysia, Australia, and South Korea.
The findings of the report indicate that nine out of 10 surveyed consider the adoption of IFRS 17 to be amongst their highest priorities. Risk-based capital (RBC) regulation adoption is also considered by seven out of 10 to be a high priority.
More than half of APAC insurers also said that they plan to adopt or have already adopted both security-level and SAA-level optimisation to manage their capital risks.
As a response to the increased capital requirements levied by RBC regulations, and with investment-linked policies capital-light in comparison, more than six in 10 Asian insurers say that they are likely to expand their ILP business. Insurers from Thailand, Korea, and Malaysia, in particular, are quite keen on the rise of ILPs, with seven out of 10 in all three markets likely to expand their respective ILP businesses.
Despite the attractive propositions these new policies bear, nearly half of all surveyed insurers consider creating an appropriate ILP fund advisory model to be a major challenge that they are looking to address.
abrdn senior insurance solutions director Xiong Jian said that the asset manager sees regulatory adoption and ESG integration as high priority focus areas for insurers in the region amid the current conditions of the market.
“The key to gaining a competitive advantage for regional insurers would be to move away from a reactive, compliance-driven mindset to a proactive one, leveraging RBC, IFRS 9 / 17, and ESG as strategic differentiation points,” he said. “The rising digital savviness of customers and the limitations of the agent network in effectively pitching ILP products to target customers also suggests that insurers should further digitalise their ILP businesses.”
What are your thoughts on this story? Please feel free to share your comments below.