INSURERS, SOCIETY AND REGULATION

Asia House Signature Conference, 19 September 2012

Paul Traynor, Head of Insurance EMEA, BNY Mellon

Brunei Darussalam

Cambodia

Indonesia

Laos

Malaysia

Philippines

Singapore

Thailand

Vietnam

Myanmar

The Insurance Industry doesn’t have a Basel III…IAIS

Member?Reg Capital

Regime?IAIS

Member?Reg Capital

Regime?

?

?

?

Risk Based

?

Fixed Ratio

Risk Based

Risk Based

Risk Based

Fixed Ratio

2

Indonesia

Malaysia

Philippines

Singapore

Thailand

Vietnam

…but one size doesn’t fit all Life

3

Non-life Sum

ASEAN

World

World Advanced

World Emerging

D($) P(%)Life Non-life Sum

D($) P(%) D($) P(%) D($) P(%) D($) P(%) D($) P(%)

4,666 40 1.1 20 0.6 60 1.7

16,186 328 3.3 175 1.8 502 5.1

4,214 20 0.8 10 0.4 30 1.3

59,711 2,296 4.3 810 1.5 3,106 5.9

9,396 134 2.7 88 1.7 222 4.4

3,549 9 0.7 12 0.9 21 1.5

80 2.0 41 1.0 122 3.0

378 3.8 283 2.8 661 6.6

2,168 5.0 1,543 3.6 3,712 8.6

61 1.4 56 1.3 118 2.7

Density – Premiums per capitaPenetration – Premiums as a % of GDPSource: Swiss Re, World insurance in 2011

GDP (pc)PPP$

…especially in fast moving Asia…

The LIMRA Market Maturity (Distribution) Model

Phase I II III IV

Emerging Developed

Tied Agents

Multi-channel

Multi-product

Vietnam China Malaysia Singapore UK, US, Australia

300 years 125 years150 years

15 years

New to all channels – Supermarkets, phones

4

…where the on-going search for talent is being experienced most acutely…

…in Asia 70% of respondents to the Lloyd’s of London Risk Index survey rated this risk as a high or very-high priority for their businesses.

5

The insurance industry has a lot to offer…

• In 2011• The US suffered economic losses of

$25 billion as a result of Natural Catastrophes. $17 billion of the loss was insured against

• $12.5 billion of the estimated $17 billion of economic losses caused by the Christchurch earthquake was absorbed by the global reinsurance industry

• $3.5 billion of Australia's estimated $8 billion of losses were taken by the global re-insurers

• The economic losses blamed on the Thai floods has been estimated by the World Bank to be $45 billion (7% of GDP), $4 billion of this was insured

Sources: Lloyd’s of London, the World Bank

6

“The welfare state is flowering in Asia. Will it free the continent from squalor? Or sink it in debt?”

7

8

Other

Personal lines insurance

Commercial insurance

Catastrophe insurance

Annuities

Life insurance

0.0%

20.0

%40

.0%

60.0

%80

.0%

Other

Personal lines insurance

Commercial insurance

Catastrophe insurance

Annuities

Life insurance

Which products do you think will be most negatively affected by Solvency II? Select up to two.

Insurers will have a reduced / increased appetite for which of the following assets?

Insurers expected to further de-risk their asset allocations

Long term guarantees under pressure

Policyholder protection must be balanced against socioeconomic goals…

Distribution & Consumer Protection

Product & Infrastructure Development

Governance & Fund Operations

Resilience & Stability in Markets

Efficiency, Integrity, Liquidity & Transparency,

Financial & Business Mgmt

New regulatory bodies , ESFS, ESMA, EBA, EIOPA,

GlobalDistribution

Basel III / CRD IV

European Retail

Distribution

UK Retail Distribution

Solvency II

MiFIDReview

AIFMD Depositaries

IFRS & GAAP Convergence

TaxationDerivatives

Market Infrastructure

Human Resources

Crisis Management

Margin Erosion

UCITS IV & V

T2S & Market Infrastructure

Money Funds

Outcome Oriented Products

Convergence of

Alternatives

PensionRestructuring

Investor Compensation

Securities Law

Directive

Credit Rating Agencies

Market Abuse

Short Selling & CDSs

Commodity Markets

Corporate Governance

9

…as must the amount versus the effectiveness of new regulation

10

“Simplicity is not a simple thing”, Charlie Chaplin