Asia-Pacific - fastest growing insurance market in the world - supervisory challenges

Asia-Pacific high-level meeting on insurance supervision, Hong Kong SAR, 6 June 2018

Key themes

  • Sound prudential requirements for sustainable insurance market development
  • Conduct and prudential regulation - intersection or overlap?
  • When tail events edge towards the center - supervisory implications of climate change and natural catastrophe risk
  • Re-thinking financial system structure and stability

Although the primary role of insurance supervisors is to protect the interests of policyholders, many supervisors in the Asia-Pacific region are also mandated to support the development of their local insurance industry. In the pursuit of market growth, there have been instances of poor conduct practices by insurers in both developing and developed markets, often leading to solvency difficulties. How can insurance supervisors manage the potential conflicting prudential and developmental objectives? Are objectives of conduct and prudential regulation conflicting or complementary?

These and other questions were tackled at the Financial Stability Institute's inaugural Asia-Pacific high-level meeting on insurance supervision in Hong Kong on 6 June. The meeting was jointly organised by the Asian Forum of Insurance Regulators, the Financial Stability Institute (FSI) of the Bank for International Settlements, the Insurance Authority of Hong Kong and the International Association of Insurance Supervisors (IAIS). 

The Asia-Pacific insurance market is the fastest growing segment in the world, with huge further potential given low penetration rates. It is important that the growth is sustainable and based on solid prudential foundations.

Fernando Restoy, Chair of the FSI

Insurance supervisors from the region acknowledged common regulatory and supervisory challenges in the region and paved the way for enhanced cross-border cooperation by exchanging views on how to tackle them.

I am delighted to be here today to discuss the key supervisory and regulatory challenges facing our Member supervisors in the Asia-Pacific. As the IAIS looks forward, insurance markets in the Asia-Pacific region will play an increasingly important role globally and we need dialogues like this to inform our work.

Victoria Saporta, Chair of the IAIS Executive Committee

In the discussion on balancing between prudential and conduct of business objectives, the FSI highlighted its findings from the FSI Insights that certain life insurers have taken measures such as incentivising policyholder surrenders and investing in higher-yielding assets to deal with problems arising from a low interest rate environment; both steps warrant close supervisory scrutiny. Certain supervisory actions such as requiring benefit cuts or deferrals may involve a trade-off between potentially conflicting prudential and consumer protection aims. Insurance supervisors need to exercise sound judgment by striving for the fairest possible outcomes for policyholders.