Asia Pacific insurers unhurt by US subprime crisis

The Star, Tuesday October 9, 2007 PETALING JAYA: The recent investment market turmoil caused by the US subprime crisis will have limited impact on Asia Pacific insurers.

Standard & Poor’s Ratings in a special teleconference last Thursday said it had a “stable” ratings outlook on the insurance sector for most of the countries in the region.

Director and team leader, Insurance Ratings, Asia, Connie Wong said thanks largely to the constraints of regulations in the region, Asia Pacific-based insurers had limited exposure to US subprime-related instruments compared with their Western counterparts.

On the sector outlook in Asia, Wong said: “We expect the sector to self-navigate through the crisis (rather than require government intervention).

“There is sufficient liquidity in the sector with a high level of industry capital.”

As for Malaysia, S&P has a “stable” ratings outlook on its insurance sector.

However, Wong said the ratings agency covered only the higher capitalised insurers and the outlook did not extend to smaller players.

“We view Malaysia as one of the most sophisticated insurance markets in the Asia Pacific,” she said, adding that its financial outlook was relatively stable, and insurers were well capitalised with positive operating performance.

Associate director, senior insurance analyst, Asia, Paul Clarkson said while S&P maintained its “stable” outlook for most insurance markets in the region, the exception was China which had a “positive” outlook.

However, director and team leader, Insurance Ratings, Pacific, Michael Vine added that industry risks varied from “high” to “moderately low” among different Asian markets, reflecting different levels of development in terms of insurance risk, market infrastructure and regulatory regimes.

“Furthermore, based on our enterprise resource management assessments of insurers in the region, leading companies in Australia, Hong Kong and Singapore are more likely to achieve strong assessments, while insurers from Japan, Taiwan and other Asian countries are more likely to achieve adequate assessments,” he said.

Wong said while Chinese insurers were still underwriting at a lower sophistication level than regional peers, the growth potential was high.

She added that S&P also saw a growing performance gap between the top performers and weak players in the industry in region.

Consequently, consolidation in the Asia Pacific industry would eventually accelerate, she said.


Source from: The Star, URL: http://biz.thestar.com.my/news/story.asp?file=/2007/10/9/business/19096354&sec=business