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Asia and Australia

Published on 21 January 2019

In this chapter of our Annual Insurance Review 2019, we look at the main developments in 2018 and expected issues in 2019 in Asia and Australia.

Key developments in 2018


Hong Kong auditors' current self-regulatory framework will soon be a thing of the past. Starting 1 August 2019, the Financial Reporting Council of Hong Kong will step in as an independent regulator, taking over the regulation and disciplinary actions of auditors of listed companies from the Hong Kong Institute of Certified Public Accountants. For more details, please see the Accountants section of this review.

Regulators also have their eyes set on the growing, but largely unregulated, cryptocurrency market. 2018 saw the Hong Kong Securities and Futures Commission take its first regulatory action against a local virtual coin issuer. It also published an announcement setting out its proposed approach for regulating the cryptocurrency industry, primarily aimed at portfolio managers, distributors and potential trading platforms. One measure currently under discussion is whether regulatory exchanges should be required to obtain insurance to cover their digital assets. These developments are set to prompt rapid growth in the crypto-insurance space.

Natural catastrophes

Cities in the region are still taking stock of the property damage caused by this year's numerous earthquakes (Indonesia, Japan and Papua New Guinea), major floods (Laos and Cambodia) and, most recently, Super Typhoon Mangkhut, which brought widespread damage to Guam, the Philippines and South China in September 2018. Insurers are expecting record-high claims for Typhoon Mangkhut, set to exceed the HK$1bn mark. This marks a significant hit after last year's Typhoon Hato, which saw insurers exposed to the tune of HK$900m.

Given the trend of increasingly frequent and severe natural catastrophes, it is expected that insurers will need to adapt quickly. While there have been discussions on raising premium rates for weather-related claims, competitive market conditions make this a challenging option.

Cyber security

2018 saw numerous large-scale data breaches across Asia. These included cyber attacks on a Chinese hotel chain (affecting 130 million customers), Singapore's SingHealth (affecting 1.5 million patients), and Hong Kong's Cathay Pacific (affecting 9.4 million passengers). Although Cathay first discovered suspicious activity on its network in March, no disclosures were made until almost six months later.

These incidents are likely to spark further reviews of the current regulations on corporate data breaches. Across Asia-Pacific at the moment, Australia, South Korea and the Philippines are the only countries imposing formal requirements for the notification of data breaches, under which data breaches must be notified to the relevant regulators within reasonable time. China, Indonesia and Taiwan impose some basic reporting requirements (with no stipulations on how and when notifications should be made), although China is reportedly working on draft standards that provide more detailed guidance. Singapore implemented the Cybersecurity Act 2018 on 30 August 2018, imposing mandatory cyber incident reporting obligations on certain types of organisation owning "critical information". In contrast, Hong Kong still carries no explicit notification requirements but in the wake of the Cathay incident, local authorities have indicated they are keen to remedy this soon.

Introduction of more stringent compliance requirements will greatly improve consumer protection, although insurers underwriting cyber risks need to be prepared for increased exposures as a result (where costs of compliance usually fall for cover). On a positive note, increased sharing of cyber security information will increase the availability of data that insurers can use to assess risk and make more informed underwriting decisions.


Emerging markets are expected to account for 52.8% of global construction output by 2021, and a large portion of these will be due to large-scale projects in Southeast Asia originating from the Belt and Road Initiative (BRI). The BRI is now in full swing, with infrastructure projects planned or ongoing in Malaysia, Pakistan, Sri Lanka and Vietnam (among others). In response, the Hong Kong Insurance Authority (IA) is actively promoting Hong Kong as a risk management centre for BRI projects and, in December 2018, unveiled the BRI Exchange Facilitation platform, aimed at helping Hong Kong and international insurers to tap into these projects.

Competitive market conditions across Asia over the last few years has led to an average 20% rate reduction in all construction-related insurance. However, complications with these projects – including lack of funding, corruption, delay and mismanagement – are starting to emerge. By way of illustration, a power plant project in Vietnam worth US$1.8bn has been delayed since June 2018 as a result of non­-compliance with local regulations and lack of capital. In an effort to counter some of these issues, Singapore has recently launched a new disputes protocol aimed at minimising time and cost overruns in these projects from the start. Nevertheless, project complications are set to give rise to significant claims and impact on insurers' profitability – especially in a soft market – so going forwards we can expect insurers to adopt a more cautious approach to underwriting risks in these projects.

Financial risks

Trade credit and political risk insurers are facing a time of uncertainty. The USChina trade war, combined with China's economic slowdown and political crises in certain Southeast Asian countries, have led to a sharp increase in trade credit disputes. The market has showed a strong appetite for credit risks cover in the past few years and demand for this is only set to intensify in the current climate, with an increased need for geographic and product diversification to meet the differing demands of companies and traders across the region. Meanwhile, as significant claims are starting to surface, insurers are expected to adopt a more prudent approach to underwriting in order to hedge their exposures.

The warranties and indemnities (W&I) insurance market is growing at a steady pace. While it is still a relatively new product in Asia, buyers and sellers are increasingly looking to use W&I insurance as a bargaining tool or to ensure a clean exit. Strong demand has led to more insurers entering this market, and more competitive premiums.


The International Monetary Fund warns of another global economic downturn, and expects a drop in the global property market and an increase in corporate insolvencies to hit soon. If this materialises, property owners, investors and liquidators will all look for ways to recover their losses, and experience (specifically the 1997, 2003 and 2008 financial crises) tells us that professionals will be a key target, with lawyers, auditors and surveyors among those expected to shoulder the blame. Cue increased claims exposure to professional indemnity insurers across the region. 

What to look out for in 2019

The industry is leaning heavily towards InsurTech, especially in emerging markets and developing countries, as its online consumer base becomes increasingly sophisticated and pressure to save costs is mounting. The Philippines and Malaysia are using InsurTech sandboxes launched in Hong Kong and Singapore to model and develop their own, and it is expected that more countries will soon follow suit.

Regulators are gradually tightening their regimes and taking more aggressive steps to enhance public protection. This is set to increase exposure to regulated entities, thereby triggering an increase in claims under financial institutions liability and professional indemnity policies. In particular, cyber protection is expected to be a priority. Singapore, for example, is already reviewing the recently implemented Cybersecurity Act 2018 to include further mandatory notification requirements, and is pushing for the launch of an Association of Southeast Asian Nations framework on personal data protection in 2019. These measures will help to clarify the recommended approach for dealing with cyber risks, but equally stand to impact on insurers' claims exposure under cyber insurance policies.

More broadly, insurers may wish to keep a keen eye on changes in global trade patterns as political uncertainty in the US and Europe stands to affect global economic performance and, potentially, shift focus towards emerging markets in Southeast Asia, where infrastructure projects are dominating.

In Hong Kong, 2019 will mark the formal implementation by the IA of new direct licensing regimes for insurance intermediaries, and an increase on the premium levy rate to be collected from policyholders from 0.04% to 0.06%. Insurers and intermediaries will have to prepare and implement internal measures to ensure compliance with the IA's increasing regulatory powers.

Authored by Adrian Chang.

Download our full Annual Insurance Review 2019 for more insights.