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Copyright © 2016 A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED. No part of this report or document may be distributed in any electronic form or by any means, or stored in a database or retrieval system, without the prior written permission of A.M. Best. For additional details, refer to our Terms of Use available at A.M. Best website: www.ambest.com/terms. A.M. Best Company October 11, 2016 • Issue 41 Insurance Newsletter Sompo to Merge International Inside Highlights: Businesses Following Endurance Deal 3 Consultants: Liberalization Leads to Paradigm Shift of Thai Sompo Holdings Inc. said it will merge its international businesses following its Nonlife Insurers acquisition of Endurance Specialty Holdings Ltd., according to Kengo Sakurada, the group’s chief executive officer. 5 Sun Life to Fully Acquire Life Subsidiary in Vietnam, Appoints In a conference call, Sakurada noted the group’s international businesses, including New CEO Sompo Canopius and Endurance, would be merged under one holding company. Within the holding company there will be three operating companies — one each for Lloyd’s 6 Chinese State-owned syndicates, reinsurance and the U.S.-based businesses. Investment Groups To Acquire Singapore Reinsurer ACR Sompo announced it is fully acquiring Endurance for US$6.3 7 Sompo Japan Nipponkoa billion. The Japanese insurer Changes Name to Sompo is paying US$93 per share for Holdings Endurance, a 40.3% premium to the average share price for the 8 Risk Modeler: Asia Needs past three months (Best’s News Greater Flood Risk Management Service, Oct. 5, 2016). 10 Nippon Life Completes 80% Sakurada said the group’s Acquisition of NAB’s Life Unit for acquisition of Endurance will A$2.4 Billion give them a stronger platform to geographically diversify its 10 AIR: Insured Losses from overseas businesses and get Typhoon Meranti Could Increase to the group closer to its aim US$1.15 Billion of becoming one of the top 10 companies globally, with 11 MS&AD Plans to Integrate adjusted consolidated profit of Lloyd’s Syndicate and Reinsurance ¥300 billion (US$2.89 billion) Business after the 2020 fiscal year. 12 Swiss Re Economist: The Tokyo-based insurer’s overseas business currently accounts for 12% of group income, Technology Helps Comeback of the company said, and that proportion would rise to 27% after the deal closes within Mutuals in Some Markets the first quarter next year. “I’m happy with the acquisition. It will give us an overseas exposure of close to 30% of Sompo’s total business. But 30% is not good enough — we estA.M. Best Companys ournal target 50%,” he said. B ’ JInsurance Issues and Analysis November 7, 2013 • Issue 6 www.bestweek.com

Europe Briefing Non-Life A.M. Best analysts on U.S. Captives, U.S. State Funds, U.S. Health For A.M. Best Global Reinsurance Market Review Middle East Market Review Sompo is targeting an adjusted consolidated profit of between ¥180 billion and ¥220 Analysis, visit Insurance Asset Management billion for its 2018 financial year compared with ¥164.4 billion in 2015. Including the Best’s Journal. Endurance acquisition, the 2018 full-year adjusted consolidated profit should reach more than ¥220 billion.

The Japanese insurer expects Endurance to contribute around ¥40 billion to Sompo’s total News Inquires? ¥63 billion overseas insurance business targeted for 2018. [email protected]

Endurance CEO John Charman, who is expected to lead what will become Sompo’s Follow us @AMBestCo

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maidenre.com © 2015 Maiden Re international division, said during the call the integration with Sompo will help Endurance sell its Upcoming range of specialty products as it targets to expand business with multinational conglomerates in the Insurance Events United States. “The international businesses of Endurance will be completely integrated with Sompo • Oct. 11-15: East Asia in a speedy integration as possible. Endurance was not for sale and Sompo was a trading partner. We Insurance Congress, Macau Insurers Association realized we have a very strong common vision and we are better suited as business partners than 28th Insurance Congress, remaining separated,” Charman said. Venetian Macau Resort Hotel, Macau, China. The program discusses who “Over the next three-five years, we can rapidly expand our business globally with the help of Sompo customers are, how to better licenses and infrastructure as we (Endurance) have the skills set to be globally competitive,” he added. serve them and the role technology plays. The deal is confirmation primary insurers in either the United States or Bermuda are attractive • Oct. 14: The Insurance Library Association of Boston targets, according to Ryan Byrnes, director of insurance at Janney Montgomery Scott LLC. In an Insurance Professional of analyst note, he said the two countries are appealing “especially for foreign buyers in a low interest the Year Award, Boston Park rate environment.” Plaza Hotel.The award is presented to someone who demonstrates leadership Before Charman took the helm at Endurance, it was “just an average reinsurance company,” said and exemplifies qualities that Byrnes. “It didn’t have much of an insurance presence. The stock has doubled in his three-year engender understanding of tenure. I think that Sampo clearly agrees with John Charman’s plan to grow the insurance segment and respect for the industry. • Oct. 16-18: American materially, make it … more meaningful.” Council of Life Insurers Annual Conference, JW Endurance gains “breadth and scale in a larger geographic footprint and that is quite attractive, Marriott, Washington. About 20 breakout while management still gets to run Endurance,” along with Canopius, according to Quentin sessions addressing legal, McMillan, of Keefe, Bruyette & Woods Inc. Sompo, he said, gets “a great quality franchise within the compliance, investment/ U.S.” and more stamp capacity at Lloyd’s. Endurance is unique in the strength of its crop agriculture financial, legislative and regulatory, reinsurance, book. With $850 million in crop insurance premiums, McMillan said Endurance is a leader in a solid, retirement security and steady business. advocacy issues. • Oct. 16-19: Society of Following the announcement of the deal, A.M. Best placed the Best’s Financial Strength Rating of A Insurance Research Annual Conference & Exhibit Fair, (Excellent) of Endurance Specialty Insurance Ltd. and its rated affiliates under review with positive Hilton Scottsdale Resort & implications. The Financial Strength Rating of A+ (Superior) of Sompo Japan Nipponkoa Insurance Villas, Arizona. Topics include Inc. remains unchanged, it added. digitization and disruption, drones, disrupting the status quo and the power of The under review with positive implications status reflects the potential financial and operational consumer intent. benefits that will be derived from Endurance being a significant operation within a larger, higher- • Oct. 17-21: The Institutes’ rated organization, A.M. Best said. A.M. Best said it expects SJNK’s risk-adjusted capitalization to Business Strategy for Emerging Risk and Insurance decline based on the company’s maximum estimated goodwill of ¥223 billion (approximately Leaders, Wisconsin School US$2.2 billion), stemming from the transaction, but remains supportive of the current ratings. of Business, Madison, Moreover, SJNK is expected to gain a meaningful presence in the U.S. property/casualty specialty Wisconsin. market and achieve further diversification. • Oct. 17-19: National Association of Mutual Insurance Companies’ (By Ernesto Calucag, Hong Kong news editor: [email protected]) Communications & Marketing Workshop, Gleacher Center, Chicago. • Oct. 17-19: 16th Annual Consultants: Liberalization Leads to Target Markets Program Administrators Association Summit, Westin Kierland Paradigm Shift of Thai Nonlife Insurers Resort, Scottsdale, Arizona. Expect access to 60 Thailand’s nonlife insurance industry is well-placed to move into further liberalization, along with program carriers, including the Association of Southeast Asian Nations Economic Community’s timeline for a proposed open London Markets, reinsurance support, vendor services, market, according to consultants. program development and distribution resources. One major concern is the impact on financial viability of insurers due to unhealthy competition as A complete list of the industry’s experienced in other markets like China and India. With a risk-based capital framework ahead of upcoming conferences and events is at www.ambest.com/ liberalization, this will reduce the intensity of price wars, said Roberto Malattia, director of general conferences/index.html insurance consulting for Southeast Asia at Willis Towers Watson.

Thai nonlife industry “is generally viewed as being relatively better placed going into liberalization,”

Real-time news, see http://news.ambest.com/ Best’s Asia-Pacific Weekly, October 11, 2016 3 said Malattia. Also, Thai insurers are already subject to the compliance processes of a rating filing system. “Liberalization will lead to a paradigm shift in the manner Thailand also “stands to benefit from the experience of in which general insurance other markets” in the ASEAN region such as Singapore business is carried out in and Malaysia. With learning from markets that have Thailand.” gone through the liberalization process, Malattia said the industry “may be able to minimize the downside Roberto Malattia risks.” Willis Towers Watson “Liberalization will lead to a paradigm shift in the manner in which general insurance business is carried out in Thailand,” said Malattia.

Insurers have to revisit their product, customer and distribution strategies as the one-size-fits-all approach will need to be replaced with a more discerning model. Marketing mixes and strategies have to be aligned with various needs and customer segments’ requirements.

The strategic focus on market share gain as opposed to profitable growth could trigger price wars, at least for products that are currently profitable. Under such a situation, Malattia said “it becomes even more critical for insurers to focus on improving the overall quality of their book of business like the risk profile of customers.”

With increasing competition and pressure on premium rates, Malattia said “insurers are likely to introduce innovative variants of current products to differentiate their offerings.” This will bring more choices for consumers. For insurers, the prevailing RBC regime and experiences from other markets may act as a restraining factor.

Thailand plans to implement gradual product deregulation with detariffication on nonlife insurance business. Product deregulation will be imposed on three areas, including product, premium and commission, said Suthiphon Thaveechaiyagarn, secretary general of Office of Insurance Commission. There will be a cautious approach on it (Best’s News Service, Aug. 9, 2016).

The OIC’s new insurance development plan sets out main strategies to build confidence in the insurance system while protecting the interest of the general public. Malattia said a key theme is to promote “a healthy competitive environment.”

A phased tariff liberalization approach has been proposed by gradually liberalizing commercial lines first and voluntary motor insurance in the second phase. The regulator also suggests to adopt a “file-and-use” product approval process to monitor and help preserve the financial stability of the insurance market.

One of the OIC’s key strategies to develop Thailand’s insurance industry “is to increase the potential of insurance companies by raising the standards for capital maintenance in the companies,” said Athistha Chitranukroh, of counsel at legal firm Tilleke & Gibbins. The regulator looks to implement risk-based capital 2 framework by 2020. The OIC also aims to develop Thailand insurance market as the regional headquarters location.

In 2016, Thailand’s insurance growth is expected to be better compared to 2015 if the government’s stimulus plan and mega infrastructure projects are implemented as planned. There would be possibly negative growth for motor insurance as leading car manufacturers estimate local car sales will decrease by at least 10% this year, said Chitranukroh.

(By Iris Lai, Hong Kong bureau manager: [email protected])

4 Best’s Asia-Pacific Weekly, October 11, 2016 Real-time news, see http://news.ambest.com/ Sun Life to Fully Acquire Life Subsidiary

In Vietnam, Appoints New CEO est s ournal B ’ JInsurance Issues and Analysis October 3, 2016 • Special Issue journal.ambest.com

Global Reinsurance Sun Life Assurance Company of Canada has agreed to fully acquire Vietnam-based PVI Sun Life Taiwan Earthquakes Threaten Science Parks Savings-Type Life Insurance Business Under Stricter Regulatory Oversight And Intervention in China Insurance Co. Ltd. by buying the remaining 25% equity stake held by joint venture partner PVI China Marine Insurance Withstands Challenging Operating Environment Asia-Paciﬁ c Reinsurance Movement Holdings, the group said in a statement. Hong Kong’s Life Business Facing Headwinds on New Growth Financial Strength Ratings, Sovereign Credit Risk, and Country Risk FAQ The Canadian group had earlier increased its stake in PVI Sun Life from 49% to 75% in a deal it said would be in line with its aim to further expand in Vietnam and the region (Best’s News Service, Jan.8, 2016) .

Special Report: Accelerating “Vietnam has been one of the fastest-growing economies in Asia in recent years, and the life Competitive Conditions insurance and pensions industry is expected to continue experiencing strong growth,” Sun Life said. Pressurizes Motor Insurance in the Middle East Whilst still representing only a Sun Life will become the sole owner of PVI Sun Life after the expected completion of the small proportion of their local transaction in the fourth quarter of 2016. PVI, however, will remain the distribution partner of the economies, insurance markets company. in the Middle East have seen significant growth over the past decade. (Oct. 3, 2016) “We have enjoyed a successful partnership with PVI since establishing the business together and Special Report: China look forward to continuing a close working relationship with them as our distribution partner,” Marine Insurance Withstands Kevin Strain, president of Sun Life Financial Asia, said in a statement. Challenging Operating Environment China was the largest Cargo “We have great momentum in Vietnam and remain committed to helping our Vietnamese clients insurance market and the achieve lifetime financial security by offering a strong suite of insurance and wealth management second largest Hull insurance market in the world in 2014. products,” he added. (Sept. 30, 2016) Briefing: Savings-Type Life The company said terms and conditions of all existing insurance contracts will not be changed due Insurance Business Under to the proposed transaction. Stricter Regulatory Oversight And Intervention in China On March 18, 2016, the Sun Life also recently appointed Larry Madgehas as the new chief executive officer of PVI Sun Life. Chinese Insurance Regulatory Prior to his appointment, Madgehas was the group’s global chief actuary based at the company’s Commission ordered life insurance companies to stop corporate headquarters in Toronto. offering one-year term-savings- type life insurance business, “We are extremely pleased that Larry has joined us and I am confident that with his background, and within a period of three years, reduce one-to-three-year expertise, and enthusiasm, he will continue with the great momentum we have built in Vietnam term-savings-type life insurance since we launched in 2013,” said Strain. business sales to 90%, 70%, and 50% of total sales in each consecutive year (and not more Established in 2013, PVI Sun Life is the sixth-largest life insurer in Vietnam, with gross premiums than 50% after three years). written of 273.8 billion dong (US$12.9 million) in 2014. (Sept. 30, 2016) Briefing: Asia-Pacific (By Ernesto Calucag, Hong Kong news editor: [email protected]) Reinsurance Movement The reinsurance regulatory and market structures are taking divergent approaches in Asia- Pacific countries, with a diversity Tokio Marine Kiln Builds of economic and political developments and market maturation across the region. Liability Business in Asia (Sept. 30, 2016) Tokio Marine Kiln aims to expand its liability book in Asia with the appointment of a new head in Special Report: Title Sector Delivers Strong Operating the Hong Kong office. Performance A.M. Best has maintained a The London-based affiliate of Japan’s Tokio Marine & Nichido Fire Insurance Co. Ltd. named Kin Lau stable rating outlook for the title sector with the view that as head of regional liability and the company’s office in Hong Kong. the majority of ratings will be affirmed over the near- to Lau was most recently XL Catlin’s head of the Hong Kong office and senior casualty underwriter. He medium-term. (Sept. 30, 2016) will join former colleague Wendy Law, who was appointed liability underwriter in May to establish the company’s presence in the Asia liability market.

Real-time news, see http://news.ambest.com/ Best’s Asia-Pacific Weekly, October 11, 2016 5 “Liability is an important part of our business and, factored in with the increasing insurance penetration in Asia, it made sense to start writing the class locally in the region. Kin and Wendy are both well known in the Asian market and have the experience to allow us to build book from scratch,” Charles Franks, the company’s chief executive officer, said in a statement.

Meanwhile, Neil Wray, the current head of Asia, will return to London at the start of 2017 to take up a newly created position as head of international business. The role will involve Wray having oversight of all international underwriting and operations as the company continues to grow its international business.

The company recently completed restructuring its underwriting divisions along sector lines. From the original seven underwriting divisions, the company regrouped into four “fully integrated” underwriting departments: property/casualty; marine, aviation and special risks; accident, health and life; and reinsurance.

(By Ernesto Calucag, Hong Kong news editor: [email protected]) Chinese State-owned Investment Groups To Acquire Singapore Reinsurer ACR Shenzhen Qianhai Financial Holdings Co. Ltd. and Shenzhen Investment Holdings Co. Ltd. have agreed to fully acquire ACR Capital Holdings Pte. Ltd., the parent company of Singapore-based reinsurer Asia Capital Re.

In a statement, ACR said its major shareholders, namely 3i Group plc, Khazanah Nasional Berhad, Temasek Holdings (Private) Ltd. and Marubeni Corp., have agreed to a 100% buyout of the company by Asia Investment Capital Holdings Co. Ltd., the holding company formed by the two Chinese state- owned investment companies.

ACR said its shareholders will enter into a definitive agreement with Asia Investment Capital once regulatory and other approvals are obtained. Terms of the deal were not disclosed.

Both Chinese groups said the ACR acquisition is in line with the aim to increase their exposure in reinsurance business. Shenzhen Investment Holdings has significant shareholding in Hong Kong- listed Ping An Insurance group.

Shenzhen Qianhai Financial, meanwhile, has a 20% stake in Qianhai Reinsurance Co., which was granted an approval by the China Insurance and Regulatory Commission for preparatory establishment in March.

“We look forward to utilizing ACR’s leading pan-Asian platform and professional underwriting capacity to promote other domestic/overseas reinsurance business and the joint development of financial services. At the same time, we would promote business synergy between ACR and Qianhai Re to achieve cohesive development of the two companies,” Qiang Li, chairman of Shenzhen Qianhai Financial said in a statement.

Asia Capital Re in November set up a representative office in Shanghai in a move it said brings it “a step closer” to establishing an onshore reinsurance presence in mainland China.

6 Best’s Asia-Pacific Weekly, October 11, 2016 Real-time news, see http://news.ambest.com/ “China is ACR’s largest market and given QFH and SIHC’s strong focus on driving the development of China’s financial services sector, in particular, on developing Shenzhen Qianhai into a regional reinsurance hub, this new partnership presents ACR with great opportunities to contribute to the development of China’s reinsurance industry,” ACR Group Chief Executive Hans-Peter Gerhardt said in a statement.

“Furthermore, they share ACR’s regional growth ambitions and have the ability to support ACR’s future growth trajectory. The introduction of QFH and SIHC as long-term, strategic owners opens up a new and exciting chapter for ACR,” he added.

Recently, ACR expanded operations into South Korea with a new branch office in Seoul as it aims to be one of largest pan-Asian reinsurers.

Asia Capital Re also has branches in Hong Kong and Dubai, representative offices in Taiwan, Japan, and Vietnam, and a liaison office in India.

(By Ernesto Calucag, Hong Kong news editor: [email protected]) Sompo Japan Nipponkoa Changes Name to Sompo Holdings Sompo Japan Nipponkoa Holdings Inc. said it has changed its name to Sompo Holdings.

The change “signals a major change in focus towards establishing a strong competitive position as a global player,” said Sompo in a statement. The group’s new name “will lead to a recognition of Sompo on a global basis and generate a united brand image.”

Under its midterm management plan, Sompo said it aims to “build a well-balanced business portfolio that enables us to maximize risk diversification effect.” The proportion of domestic property/casualty business will decrease to 50% in 2020 fiscal year from 68% in 2015 fiscal year. Overseas business will increase the portfolio proportion to 25% in the 2020 fiscal year from 12% in 2015 fiscal year, according to Sompo’s financial presentation.

The group’s vision is to achieve the global top 10-level earnings size with adjusted consolidated profit of ¥300 billion (US$2.9 billion) after the 2020 fiscal year. It targets to achieve adjusted consolidated profit of ¥180 billion to ¥220 billion in 2018 fiscal year. Sompo said the group aims to increase earnings and improve return on equity further, along with its plan to provide high-quality services for customers’ security, health and well being.

With more than 120 years of history, Sompo’s domestic nonlife unit reported net written premium of ¥2.2 trillion in the 2015 fiscal year. Domestic net premiums accounted for 84.2% of the total, with the remaining 15.8% from overseas business, according to Sompo.

For overseas insurance business, Sompo said it plans to “accelerate growth by steady organic growth and disciplined mergers and acquisitions.” The group will utilize Sompo Canopius as a vehicle for growth. It will conduct well- balanced mergers and acquisitions in both developed and emerging countries. Retail business in emerging markets mainly drives organic growth.

For capital policy, Sompo said it aims to “keep robust financial soundness and improve capital efficiency by controlling balance among capital, risk and return.” For its internal solvency ratio,

Real-time news, see http://news.ambest.com/ Best’s Asia-Pacific Weekly, October 11, 2016 7 This Month In the group said it controls its domestic natural disaster risk and investment risk and keeps a robust financial soundness.

In the 2015 fiscal year ended March 31, 2016, Sompo’s net income more than doubled to ¥159 billion on a consolidated basis. Bottom line improvement of domestic nonlife insurance business and the absence of one-time merger costs contributed to the surge of consolidated net income, according to Sompo. Ordinary profit increased 4% to ¥216.8 billion on a consolidated basis, supported by increase in underwriting profit. However, investment income dropped 4.9% to ¥203.3 billion for the 2015 fiscal year.

(By Iris Lai, Hong Kong bureau manager: [email protected]) Handing Over The Keys The auto insurance industry is in the midst of a watershed Qatar Re Gets License in Singapore moment. The rise of Qatar Reinsurance Co. Ltd. has gained license to operate a branch office in Singapore in a move autonomous vehicle use and ride sharing is expected to it said will contribute to the expansion of the company’s global reinsurance footprint and risk impact the largest line in the diversification profile. property/casualty sector in a big way, with some experts predicting a precipitous drop in The new branch office will be headed by Micky Lee, who was previously in charge of Qatar Re’s premiums. While auto insurers representative office in Singapore, the company said in a statement. have time to respond – experts predict autonomous vehicles will widely begin rolling off assembly Lee will lead a team of three senior underwriters to underwrite nonlife treaty business, focusing on lines in the next 10 years, with property-per-risk, property catastrophe, casualty and key specialty lines including marine, aviation, nearly full market penetration energy, engineering, credit and surety. two decades later – carriers are already crafting ideas, products or endorsements to meet the “Singapore continues to be recognized as Asia’s leading reinsurance hub, and offers us the ability to needs of what some call the participate in a highly developed market place close to many of our clients and brokers,” Gunther “new ecosystem.” “We’re heading to a world of Saacke, chief executive officer of Qatar Re, said in a statement. self-driving cars, but on the way there we’ll have cars equipped “Fully establishing ourselves in Singapore represents a significant advance in our strategy of with assisted driving technology that will reduce the number increasing our profile in the Asian reinsurance market and we look forward to contributing to its of accidents. That’s already reputation for growth and innovation,” he added. happening,” said John Matley, a principal in Deloitte Consulting’s insurance and technology Aside from Singapore, Qatar Re also operates branch offices in Zurich and Dubai and a practices. representative office in London. Vehicle collisions aren’t the only things set to decline. Auto premiums are expected to The Bermuda-based reinsurer posted a 79% rise in first-half net income to US$23.9 million from dwindle from approximately US$13.4 million in the first half of 2015 despite what the group called “unabated headwinds from $200 billion to $40 billion by tough trading conditions in global reinsurance markets 2040, “with $100 billion of that shifting to more commercial lines,” Matley said. “Despite signs of a certain bottoming out of global reinsurance markets, trading conditions will To read the entire story, please remain challenging. Niches of profitable growth continue to exist, but are harder to come by. go to bestreview.com. Therefore, we anticipate and indeed will proactively ensure the pace of Qatar Re’s expansion will Tell Us What You moderate going forward,” Saacke said. Think As commercial drones take on a (By Ernesto Calucag, Hong Kong news editor: [email protected]) variety of new tasks the industry is offering new coverages. Are you using a drone at work or at home and how are you using it? Email your answer to Risk Modeler: Asia Needs bestreviewcomment@ ambest.com. Greater Flood Risk Management Reader responses will be published in a future issue. Flood risk management requires greater attention from both public and private sectors in Asia, given extreme flood events in the past and rising risks exposures in the region, according to risk modeler JBA Risk Management.

8 Best’s Asia-Pacific Weekly, October 11, 2016 Real-time news, see http://news.ambest.com/ “If you look at natural hazard risk in Asia-Pacific, there have been more than 1,800 large flood events in the region since 1970,” said Iain Willis, managing director of JBA. “These events have impacted nearly 3.5 million people and for Asia-Pacific, with flood dominating more any other hazard in terms of its overall scale and impact.”

Extreme flood events in Asia are likely to rise dramatically and could put an extra 2.2 million people at risk, according to JBA. Vietnam could be the worst hit, with a potential increase of up to 1.1 million people exposed to flood. Also, Vietnam’s industrial parks with substantial manufacturing facilities have high exposures to flood risks, said Willis.

The Thailand flooding in 2011 raised concerns over similar events in other parts of Asia or even in Thailand again. For instance, Willis said Jakarta has high exposure to flood risk, which may lead to significant damage. The Pearl River delta region in southern China also accommodates a lot of industrial sites, leading to significant accumulation of the risks. “If you look at natural hazard risk Flood risk management involves cross-border attention, in Asia-Pacific, there have been as the river does not stop at the country border. JBA’s more than 1,800 large flood recent study on climate change impacts in the Mekong events in the region since 1970.” River basin assesses the influence on the six countries through which the river runs. As a result of increased Iain Willis carbon dioxide emissions in a future climate, extreme and Managing Director severe flood events will be a more common occurrence, JBA effectively putting an additional 2.2 million people at risks from floods.

JBA has opened its office in Singapore as its entry into Asia-Pacific. Willis said “we’re well aware of the enormous need for improved flood risk management in the region.” The company is looking to model the entire Asia-Pacific region covering various flood scenarios.

In the past 50 years, a population increase and urban infrastructure development throughout Asia-Pacific have been dramatic. “With new developments encroaching further into floodplains, increasing evidence of climate change on precipitation and sea level rise and mega-city land subsidence, lots of factors are playing a pivotal role in increasing flood risk potential,” said Willis.

This year, Taiwan and southern China have been hit by several severe typhoons, subsequently with significant flood and mudslide damages. Willis said the region definitely requires greater risk modeling and flood risk management to address its high exposures to the peril.

In September, Typhoon Meranti brought substantial losses to the region. The industrywide insured losses in mainland China from Meranti are likely to range between US$650 million and US$1.15 billion, according to risk modeler AIR Worldwide. The wide range in the insured losses estimates reflects uncertainty in the meteorological parameters associated with the event, said AIR Worldwide. There was also uncertainty in the insurance penetration rates for Xiamen and Quanzhou cities in the province of Fujian, which were directly hit by the typhoon.

PICC Property and Casualty Co. Ltd. said it has paid 20 million yuan (US$3 million) in claims to Xiamen Rail Transit Group Ltd. Corp. for losses related to Meranti. PICC P&C implemented a special natural catastrophe task force for the claims management of Meranti, which landed Xiamen on Sept. 15 as the strongest typhoon in the world this year so far. Meranti was estimated to have caused direct economic losses of 21 billion yuan in China. Meranti passed south of Taiwan prior to its landfall on Xiamen. It brought strong wind, high storm surge and flooding precipitation to southern Taiwan, resulting in dropped trees and power lines, coastal flooding and mudslide.

(By Iris Lai, Hong Kong bureau manager: [email protected])

Real-time news, see http://news.ambest.com/ Best’s Asia-Pacific Weekly, October 11, 2016 9 Nippon Life Completes 80% Acquisition Of NAB’s Life Unit for A$2.4 Billion

Nippon Life Insurance Co. has completed the acquisition of 80% of National Australia Bank’s life insurance subsidiary MLC Ltd. for A$2.4 billion (US$1.7 billion), according to a statement from the largest mutual life insurer in Japan.

The company, which will become a subsidiary of Nippon Life, will be named MLC Life. NAB will retain ownership of 20% of the new life insurance business as well as the MLC brand although it will be licensed for use by MLC Life for 10 years.

As part of the deal, the bank will also provide an exclusive bancassurance distribution arrangement with MLC Life for 20 years.

The transaction was announced in October and was Nippon Life’s first overseas majority acquisition. The company at the time noted the deal will significantly contribute to meeting the aim of increasing group profit under its midterm plan (Best’s News Service, Oct. 28, 2015).

Nippon Life said it has already appointed a number of its people to work in MLC Life’s board and operational levels to manage and monitor the new subsidiary. The group said it will provide the company with technical assistance and invest in expanding bancassurance, digital capability and cross-selling opportunities with NAB customers.

“The acquisition will increase group profit, creating a steady and sustainable profit base and helping to significantly enhance policyholder benefits,” Nippon Life said.

For NAB, its chief executive Andrew Thorburn said the completion of the deal marked the end of the bank’s major divestments as it seeks to focus on core business in the Australian and New Zealand markets.

“From today we move forward with a simpler, clearer wealth model designed to serve our customers better — with continued ability to offer leading life insurance products and services,” he said.

MLC Ltd., established in 1886, offers traditional life, income protection and group insurance products. It reported premiums in force of A$1.8 billion as of June 2016, and total assets of A$6 billion as of August, according to Nippon Life.

(By Ernesto Calucag, Hong Kong news editor: [email protected]) AIR: Insured Losses From Typhoon Meranti Could Increase to US$1.15 Billion The industrywide insured losses in mainland China from Typhoon Meranti are likely to range between US$650 million and US$1.15 billion, according to AIR Worldwide.

The wide range in the insured losses estimates reflects uncertainty in the meteorological parameters associated with the event, AIR Worldwide said in a statement. There was also uncertainty in the insurance penetration rates for Xiamen and Quanzhou cities in the province of Fujian, which were directly hit by the typhoon, the catastrophe modeler added.

10 Best’s Asia-Pacific Weekly, October 11, 2016 Real-time news, see http://news.ambest.com/ Typhoon Meranti produced prodigious precipitation, as well as strong and damaging winds when A.M. it passed through China, AIR Worldwide noted. The cities of Xiamen and Quanzhou experienced BestTV Mutual Insurers: We Are widespread power outages, flooding, disrupted water supplies, and fallen trees. Speaking the Language of the Policyholder Many flights and train services were also canceled. Schools and kindergartens in coastal cities closed Insurers at the National Association of Mutual and tens of thousands of people were evacuated, disrupting the three-day Mid-Autumn Festival Insurance Companies holiday. Convention said relevancy will not become an issue if mutuals stay abreast of In the whole Fujian province, 18 people reportedly died, according to authorities. Direct economic competitors and true to losses were estimated at 16.9 billion yuan (US$2.5 billion) and 18,300 houses were damaged. their model. http://www.ambest.com/v. In Zhejiang province, 10 people were reported killed and more than 900 houses collapsed. Rural asp?v=namic3916 MEMIC’s Leonard: Opioids, areas in the province experienced landslides and flash floods. Drugs, Medical Marijuana Upending Workers’ Comp Chinese insurer PICC Property and Casualty Co. Ltd. said it paid 20 million yuan in claims to Xiamen John Leonard, president and CEO, Maine Employers’ Rail Transit Group Ltd. Corp. for losses related to Typhoon Meranti. Mutual Insurance Co., said medical costs continue to soar PICC P&C said in a statement it promptly settled the claims related to the construction projects of for workers’ compensation insurers and now account for the subway system in order to restore the work soon after the event. The settlement was the biggest 60 cents of every claim dollar, claim so far related to Meranti, added the largest nonlife insurer in China. up from 40. http://www.ambest.com/v. asp?v=jleonard916 (By Ernesto Calucag, Hong Kong news editor: [email protected]) Consolidation Remaking Surplus Lines Sector Mergers and acquisitions, with carriers combining and MS&AD Plans to Integrate Lloyd’s insurers buying wholesalers, are adding volatility and depth to the U.S. surplus Syndicate and Reinsurance Business lines sector, attendees said at the annual conference of MS&AD Insurance Group Holdings Inc. is planning to integrate the Lloyd’s syndicate and the National Association of reinsurance operations in 2017 under MS Amlin plc in 2017, according to a financial presentation by Professional Surplus Lines the Japanese group. Offices in Atlanta. http://www.ambest.com/v. asp?v=napslo3916 The integration is expected to yield cost synergies, said MS&AD. The outward reinsurance cost RSUI’s Leonard: When Risks savings for 2017 can be realized by combining the coverage bought in 2016 separately by Mitsui Get Difficult, Wholesalers Sumitomo Insurance Co. Ltd.’s former syndicate 3210 and 2001. Show Value David Leonard, chairman and CEO, RSUI Group, said MS&AD said the group will work to maximize the synergies in business expansion and priorities as incoming NAPSLO improvement. For Lloyd’s, this will increase influence as a market leader with integration of president are to focus on expanding flood opportunities, syndicate 2001 and 3210. For reinsurance, MS&AD said this will increase “our presence in the supporting surplus lines reinsurance market with integration of MS Amlin AG and MS Frontier Re.” at the state level and to communicate the value of the wholesale insurance sector. Lloyd’s managing agents were merged in May 2016, while the syndicates plan to consolidate in http://www.ambest.com/v. January 2017. MS&AD said procedures for reinsurance business integration are underway for the asp?v=leonard916 next fiscal year’s insurance renewal. QBE’s DiBattista: Dislocation Breeds Opportunity Business integration will create revenue synergy in Asia where the group see opportunities in Jude DiBattista, senior vice project cargo, fixed premium protection and indemnity, yacht, political risk and violence, industry president, excess and surplus, and energy and bloodstock insurance lines, according to MS&AD. QBE North America, said consolidation among insurers and brokers has some In Asia, MS&AD said the MSIG networks provide MS Amlin’s specialized products directly to local organizations re-examining markets. The group will also share MS Amlin’s underwriting and business management skills with local their portfolios to determine whether to retain particular partners. In India, MS&AD said it has special focus on infrastructure projects for business expansion. types of business. http://www.ambest.com/v. For global Japanese commercial clients, this will create a facility where MSIG can use MS Amlin’s asp?v=dibattista916 Lloyd’s syndicate to provide coverage in countries in which Lloyd’s has licenses but MSIG does not. MS&AD said it can share MS Amlin’s skills in developing specialized products in Japan.

Real-time news, see http://news.ambest.com/ Best’s Asia-Pacific Weekly, October 11, 2016 11 “MS&AD expects MS Amlin to be the driver for the organization to become a world leading insurance and financial services group,” said the Japanese group. The combined business of MS Amlin will achieve this by establishing a leading position at Lloyd’s and globally in our property/ casualty, reinsurance, marine and aviation markets, added MS&AD.

MS Amlin has a diversified geographic coverage, with North America, Europe and the United Kingdom accounting for 35%, 27% and 24% of total gross written premium of £2.7 billion (US$3.5 billion), respectively, in 2015. Property catastrophe, marine and property insurance were the three biggest classes, representing 29%, 15% and 14% of gross written premium, respectively. Its combined ratio stood at 89 in 2015.

Earlier this year, Mitsui Sumitomo Insurance Co. Ltd. completed the acquisition of Amlin plc, which becomes its wholly owned subsidiary. The total acquisition amount was about £3.4 billion and Amlin rebranded to MS Amlin plc. “MS Amlin will manage the operations of its subsidiaries and affiliates, and together with Mitsui Sumitomo, will aim to maximize synergies to further grow the international businesses of the MS&AD Insurance Group,” said MS&AD.

(By Iris Lai, Hong Kong bureau manager: [email protected]) Swiss Re Economist: Technology Helps Comeback of Mutuals in Some Markets Technology could bring a comeback of mutual insurance in Asian markets like China, which is experiencing fast technology advancement, particularly on the peer-to-peer insurance platform, said Kurt Karl, chief economist of Swiss Re.

China’s regulator is encouraging the development of mutual insurance while technology could help promote various forms of mutual insurance set-up, said Karl. For instance, Tongjubao is a peer-to- peer community risk-sharing platform for the pooling of funds for certain events such as divorce, a lost child, or a job transfer to a new city, along with the provision of consulting services.

However, this risk sharing is not a regulated insurance product but a contractual framework for users’ risk sharing, said Tongjubao on its website.

China has come up with new regulations for mutual insurance, along with the country’s objective to boast insurance penetration under a five-year plan. Karl said mutual insurance is part of the diversification for the insurance industry in China. In 2015, the China Insurance Regulatory Commission drafted rules to promote mutual insurance pilot schemes in a move to deepen insurance penetration and to improve social cohesion.

This year, the CIRC granted approvals for the establishment of three mutual insurance companies focusing on credit insurance for small enterprises, construction insurance, and pension and health care insurance for a specific community. These first-to-be-approved three mutual insurers are Zhonghui Property Mutual, Huiyou Construction Property Mutual and Xinmei Life Mutual, according to a statement of the CIRC. This development aims to establish a multilayer protection system for China’s As mutual insurance performed insurance market. Mutual and commercial insurance play well during the financial crisis, a complementary role to each other, creating a positive this could help promote the competitive market environment. The CIRC said mutual development in the markets. insurance will further enhance insurance coverage and penetration across China, as part of the country’s insurance Kurt Karl reform. Chief Economist Swiss Re As mutual insurance performed well during the financial crisis, Karl said this could help promote the development

12 Best’s Asia-Pacific Weekly, October 11, 2016 Real-time news, see http://news.ambest.com/ in the markets. Since the financial crisis, regulators and policymakers have come to recognize the benefit of diverse organizational forms of financial sectors, and this boosted the appreciation of mutual.

Mutual insurers’ aggregated premiums outpaced the wider insurance market at the height of the financial crisis during 2008 and 2009. “Mutuals are experiencing something of a revival following significant retrenchment in the late 20th century,” said Swiss Re in its sigma report.

Recent mutual start-ups seem to reflect a renewed appreciation of the benefits of mutual insurance. “Unlike earlier episodes such as after the 1980s liability crisis when a retreat by traditional insurers from certain types of cover promoted a wave of risk retention groups to form,” said Swiss Re.

In Asia-Pacific, Karl said several mutual insurers from advanced markets have acquired operations overseas. Japan’s biggest mutual insurer, Nippon Life Insurance Co., has made market entry through acquisition or start-up in China, Indonesia, Australia, India and Thailand. Meiji Yasuda Life Insurance Co. has expanded into Germany, Indonesia, China, Poland, Thailand and the United States. Sumitomo Life Insurance Co. has built presence in Vietnam and Indonesia.

In January 2016, Sumitomo Life was cleared to acquire Symetra Financial Corp. in the U.S. Sumitomo Life announced plans to acquire Symetra Financial Corp. for US$3.76 billion in August 2015. Symetra, a major U.S. stop-loss insurer, becomes a wholly owned subsidiary of Sumitomo Life and continues to operate from Bellevue, Washington.

Also in the United States, Meiji Yasuda agreed to acquire StanCorp Financial Group Inc. for approximately US$5 billion. Meiji Yasuda said in a statement the acquisition would accelerate its diversification and international growth, along with enhancing business experiences from the U.S. market.

Nippon Life agreed to acquire 80% of National Australia Bank’s insurance subsidiary MLC Ltd. for A$2.4 billion (US$1.7 billion). MLC would transform into a specialized life insurance company MLC Life, which would become a subsidiary of Nippon Life. “This transaction represents Nippon Life’s first overseas majority acquisition and will significantly contribute to meeting the aim of increasing group profit” under its midterm plan, said Nippon Life.

Mutual insurers are looking for overseas opportunities to support sustainable revenue growth. For funding sources, Karl said mutual insurers have higher reliance on reinsurance than capital markets. At the same time, a widening set of capital solutions will offer mutual insurers increased financial flexibility. Customized solutions, including innovations to allow collective access to reinsurance or other forms of risk-absorbing capital, are developing.

Watch the interview with Karl at http://www.ambest.com/v.asp?v=karl1016

(By Iris Lai, Hong Kong bureau manager: [email protected]) Chubb Names Executives to Leadership Roles in Asia-Pacific and Australia Chubb Ltd. has named several executives to new leadership roles.

Michael Frazer, named head of property, Asia-Pacific, is currently head of energy and technical lines, Asia-Pacific. He succeeds Jason Keen, who was recently promoted to the role of regional head of property/casualty for Asia-Pacific. In his new role, Frazer will continue to be based in Singapore and will report to Keen.

Frazer has more than 15 years of underwriting experience in property, energy and engineering. Since joining the legacy Ace business in 1999, he has been promoted to roles of “increasing

Real-time news, see http://news.ambest.com/ Best’s Asia-Pacific Weekly, October 11, 2016 13 responsibility,” the company said in a statement. He assumed the position as head of energy and technical lines, Asia-Pacific, in 2012.

Also, Michael Peacock, now energy and technical lines manager for Australia and New Zealand, was appointed head of energy and power, Asia-Pacific. In his new capacity, which will include oversight for the inland transit portfolio, Peacock will report to Frazer and will relocate from Sydney to Singapore.

Peacock was appointed to his current role in legacy Ace in 2012.

Stephen Hanna replaces Peacock as the new energy and technical lines manager for Australia and New Zealand. Hanna is currently product head, power for Australia and New Zealand.

Chubb had earlier expanded Adam Clifford’s role in the Asia-Pacific region Credit Rating Actions by appointing him country president for its general insurance business in Best’s Insurance News & Analysis subscribers have Singapore. Clifford’s new post was added to his current position as regional exclusive, interactive access to the latest Best’s Credit head of casualty for Asia-Pacific. Rating actions at www.bestweek.com/actions. (By David Pilla, news editor, BestWeek: [email protected])

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Editorial Editor: Caroline Saucer, 908-439-2200, ext. 5774 Managing Editor: Rick Cornejo NEWS EDITORS: Mark Dobrow, David Pilla ASSOCIATE EDITOR: Renee Kiriluk-Hill BESTWEEK CORRESPONDENT: Marie Suszynski Washington DC Bureau Manager: Thomas Harman, Washington Correspondent: Frank Klimko London News Editor: Robert O’Connor Asia/Pacific Bureau Manager:Iris Lai Hong Kong News Editor: Ernesto Calucag GROUP VICE PRESIDENT, PUBLICATION & NEWS SERVICES: Lee McDonald CIRCULATION: Linda McEntee PRODUCTION SERVICES SENIOR MANAGER: Susan L. Browne DESIGNER: Amy Herczeg BEST’S ASIA-PACIFIC WEEKLY (ISSN 2372-6474) delivers online coverage of topics impacting the insurance industry in the Asia-Pacific region. To order, call (908) 439-2200, ext. 5742, or contact [email protected]. U.S. and Canada residents can call toll-free: (800) 424-2378. All rights reserved and reproduction without permission is expressly forbidden. When presented herein, Best’s Credit Ratings reflect A.M. Best’s opinion as to the relative financial strength and performance of each insurer in comparison with others, based on analysis of the information provided to A.M. Best. However, these ratings are not a warranty of an insurer’s current or future ability to meet its contractual obligations. A.M. Best is compensated for its interactive rating services. These rating fees can vary from US$ 5,000 to US$ 500,000. In addition, A.M. Best may receive compensation from rated entities for non-rating related services or products offered.

14 Best’s Asia-Pacific Weekly, October 11, 2016 Real-time news, see http://news.ambest.com/