DAILY NEWS Jan 27, 2014
Ernst & Young recently published a report suggesting there could be "significant opportunities" for insurance companies in certain foreign markets, including Malaysia, Indonesia, Mexico and Turkey.
The report, titled "Waves of change: The Shifting Insurance Landscape in Rapid-Growth Markets," is based on rankings of 21 rapid-growth markets on the basis of several factors. Those factors include a forecast growth in insurance premiums, regulatory change, corruption risk, liquidity risk and macroeconomic volatility.
"According to the matrix, China, Mexico and Thailand will offer the best risk versus opportunity potential for insurers between now and 2020," EY stated in a press release Jan. 23. "China, despite a recent modest slowdown, continues to boast extraordinary income growth that spurs auto and home ownership.
In the report, EY noted that "a cluster of emerging markets, such as Malaysia, Indonesia, Mexico and Turkey, are making regulatory changes that could produce significant opportunities."
Indonesia, for example, ranked third of the 21 markets in projected growth of car ownership while Mexico has “undergone a program of extensive liberalization, opening its market to foreign insurers."
Turkey ranked highest of the 21 markets in opportunity but also sixth-highest in terms of risk.
Ranking second through fourth in opportunity were Indonesia China, Colombia and Russia. In the risk rankings, the top 5 (with the least risky ranking first) were Hong Kong, the United Arab Emirates, Chile, China and Saudi Arabia.
Malaysia ranked sixth on both risk and opportunity.
"Malaysia and the UAE are both Islamic nations where rising incomes, a sustained construction boom and the increased adoption of sharia-compliant insurance products are creating new opportunities, but both markets are fairly small and so insurers are going to need to look elsewhere for rapid growth," EY stated.
India was rated the 7th riskiest of the 21 and ranked 11th in opportunity. In India, EY noted, "the regulatory environment has proved extremely challenging for investors." India also has "a large current-account deficit and reliance on portfolio capital inflows elevate liquidity risks," according to the report.
"The Indian Parliament continues to promise that it will unlock the insurance market to foreign players."
Meanwhile, China "allowed foreign ownership of insurance ventures to rise to 51% and, in 2012,' EY noted, adding China "opened the market for compulsory motor liability insurance to foreign insurers."
Other markets included in the report were Brazil, the Czech Republic, Poland, Morocco, Kenya, Nigeria, South Africa and Vietnam.
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