EMERGING MARKETSeos risq report 2011

Contents

Introduction

Brazil

Russia

India

China

Egypt

1

2

4

7

10

15

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Introduction

We are all becoming more and more aware of the impact of emerging markets in our rapidly

changing business world.

With the established markets becoming increasingly saturated, our clients are looking to these new

territories to continue expanding their business which frequently brings an increased exposure to

new risks. Risk managers now have to assess and evaluate the risks that come together with doing

business in these new countries. Various legal, regulatory and commercial issues are challenging

us to develop creative insurance solutions in order to establish EOS RISQ as a trustworthy partner.

We are continually looking at ways of improving our ability to provide good local advice and

insurance placement capability wherever risk managers require it. In this EOS RISQ Report we

focus on the emerging insurance markets of Brazil, Russia, India, China and also Egypt where

recent events have completely changed the political and economic scene. Our service partners and

correspondents in these countries guide you through the evolutions and trends in their insurance

market.

We hope that this report helps you get a better and bigger picture of these new world economies.

Mark Leysen

Executive Chairman EOS RISQ

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Brazil is one of the most promising emerging markets in the world. Being the biggest country in Latin

America, this is also driving the insurance and reinsurance industry. The country has a high degree of

diversification in its product exportation base, a diversified list of trading partners, internal economic

stability and an increasingly large workforce.

Brazil

The Brazilian Government and Congress have made efforts

to improve the economic stability of the country and have

implemented changes in Brazil’s tax legislation, governance

and in the reinsurance regulatory background. Despite some

recent changes in course and discussion, these measures have

strengthened the local insurance and reinsurance industry

bringing new products and new technologies.

Brazil is demonstrating that it is becoming increasingly connected

with the international business network. There is a wide variety

of federal programs designed to encourage national economic

development and promoting regional development, an evolution

which also has a positive effect on the industry of insurance and

micro-insurance.

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One of the leading developing countries

In terms of risk exposure, Brazil is virtually free of catastrophic

risks. Brazil has a very strong industrial base from natural

resources (such as iron ore) and agricultural products (such as

soy beans, coffee and sugar) to manufactured products including

vehicle parts, airplanes, petrochemical products and ethanol. All

of these items are of insurable interest when considering the

quality of the already existing technology.

Brazil has developed a very strong expertise in the energy field

due to the discovery of the pre-salt layer and is self-sufficient in

oil & gas production. The wind-power sector is also a growing

one. The government has been annually launching tenders for

new wind-power plants, especially in the Northeast region. The

major players are all installed in the country and some of them

are considering the installation of factories to produce locally.

Brazil is one of the leading developing countries, and is one of the

four emerging markets comprising the BRICs (Brazil, Russia, India

and China). China has played an important role as Brazil’s main

commercial partner, followed by the United States. The other

countries in the top five are Argentina, the Netherlands and

Germany. Imported products include passenger cars, medicines,

vehicle parts, potassium chloride, engines and machines. Brazil

is the largest telecoms market in Latin America and Brazilian

citizens are the biggest users of the internet in the region.

Growing insurance market

The insurance market in Brazil is heavily concentrated in three

sub-branches: life insurance (life, accident and pension), cars

and health. Together these account for 85% of market revenue.

However, the market has grown significantly in non-traditional

sectors such as financial risks, agriculture and housing. The

current growth of the insurance market is a reflection of the

positive phase of the Brazilian economy, with an expected rate

of real GDP growth of 4.5% and 6% inflation, low unemployment,

the impact of large sport events like the Olympics and the World

Cup, the increase of public and private investment, the continued

improvement of income distribution and new products to be

launched.

The current growth of the Brazilian insurance market is a

reflection of the positive phase of the Brazilian economy.

After more than sixty years of state monopoly exercised by

the IRB, by Complementary Law No. 126/07 and subsequent

regulations, the authorities promoted the opening of the

reinsurance market. The opening has created the expectation of

new products and external resources as well as better pricing of

risk due to competition.

Insurance market players (2011) Total

Insurance companies 115

Capitalization companies 19

Open private pension entities 16

Specialty health 13

Insurance brokers 65

Reinsurers 93

Reinsurance brokers 32

The Brazilian insurance market has grown at high rates and

it appears that the expansion will continue in the coming

decades. The total annual premium collection currently stands

at only 3.5% of GDP which shows the possible extent of growth

when compared with other developed countries. Property

damage insurance tends to benefit from the opening of the

reinsurance market considering the possibility of expansion and

diversification of products, increased competition and better

pricing, benefiting the consumer.

The company has been present in Brazil since 1995. Initially

founded as Nelson Hurst, it became Lockton at the end

of 2006. Lockton Brazil has around 80 employees and

is headquartered in Sao Paulo, having an office in Rio de

Janeiro for local client servicing.

Through its reinsurance brokerage arm Lockton Re, the

company is also able to access international markets and

provide differentiated solutions to its clients’ base.

Lockton Brazil mainly focuses on corporate clients and is

structured to provide a wide range of services in the area

of risk assessment and management, claims handling

and loss control. Servicing teams are supported by strong

technical specialists, particularly in property and casualty,

marine and financial lines. Lockton Brazil is one of the

leading brokers in executive aviation and one of the most

respected credit brokers in the country. The company

has also a strong employee benefits division providing

insurance and consultancy solutions in the health, life,

pension and dental lines.

About Lockton Brazil

Source: Paulo Loreto, P&C Manager, Lockton Brazil Corretora de Seguros Ltda.

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The positive macroeconomic trends of the last few years and the improved investment climate,

combined with the increased consumption capacity of the population, have created conditions for

significant insurance industry development in Russia.

Russia

The capitalization level of the Russian insurance companies has

increased by 4%, in comparison with 2010, up to EUR 3.9 billion,

according to the data published by the local supervisory authority.

According to new legal standards, starting January 2012, the

societies practicing insurance and reinsurance activities will be

obligated to increase their share capital to EUR 11.7 million. The

companies specialized in the life insurance segment will have to

increase their capital up to EUR 5.8 million, and those practicing

general insurance - up to EUR 2.9 million.

Altogether in the beginning of 2011, out of 23 reinsurance

companies, only 7 have the capitalization level required by law -

EUR 11.7 million, and 14 companies own a share capital between

EUR 2.9 million and EUR 4.9 million. Moreover, 232 companies

practicing general insurance have a maximum capital of EUR 1.4

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million, thus they must at least double their share capital in 2011,

to be able to last on the market.

The number of companies in Russia was reduced by 112 in the

previous year. At the moment, 624 insurance companies and 166

brokerage companies are registered.

In the first quarter of 2011, insurance companies in Russia have

underwritten gross premiums worth EUR 7.53 billion, 18.1%

more than in the same period in 2010. Meanwhile, claims paid

by Russian insurers in the first three months amounted to EUR

4.78 billion, up to 11.3% compared with the first quarter of 2011,

according to the report of the local supervisory authority.

Non-life structure and trends

In 2010 the development of insurance remained affected by the

attitudes and practices formed during the Soviet era. Before the

recession, there were signs that the situation was starting to

change as awareness of insurance continued to rise and, as the

economy continued to grow, individuals and companies were

able to spend more on insurance cover.

In 2010 the development of insurance remained affected

by the attitudes and practices formed during the Soviet

era.

Insurance awareness has increased through advertising and the

public debate surrounding the introduction of compulsory MTPL

in July 2003, which has played an extremely important role in the

insurance education of the general public as well as generating

a huge amount of extra premium. The inadequacy of the tariff,

emphasized by increasing claims, has produced some changes,

but results are reportedly still very poor.

Insurance penetration varies considerably in commercial

property: while most major industrial clients are insured, perhaps

only 35% to 40% of medium sized businesses are covered; only 5%

to 10% of Russia’s 800,000 small businesses have insurance. The

year 2009 saw many corporate buyers cut insurance expenditure

and together with an increase in competition for this business,

overall premium income declined.

As regards motor casco, Russia was expected to become Europe’s

largest vehicle market in 2009 and imports of (relatively high

value) foreign cars had soared to record levels in 2007 and 2008.

As a consequence sales of motor insurance (casco and MTPL) had

grown. The years 2008 and 2009 saw bank lending contract with

a consequent effect on sales of new motor policies.

As a result of an almost non-existent culture of consumer

rights and little recognition of any possible responsibility for

the consequences of negligent acts or omissions, public liability

insurance still remains undeveloped. Consumer protection

legislation is in place and puts liability on both vendors and

importers, but reportedly there has been little impact on the

insurance market.

The Russian merchant fleet is sizeable and has to be considered

as a source of important premium volume. Marine and aviation

liabilities must also be covered for domestic use and operations

outside the country. Aviation third party liability (including

passengers) is therefore compulsory. Important changes to

the Air Code in 2008 have increased limits for bodily injury and

resulted in a boost to aviation premium income.

In July 2010, the Russian Federation adopted an important and

much discussed law obliging the owners of hazardous facilities

(starting from 1 January 2012) to insure, at their own expense,

their civil liability for any harm caused to injured parties by

accidents at hazardous facilities for the entire period of the use

of such facilities. The law does not apply to legal relationships

arising from harm caused (i) outside of the Russian Federation;

(ii) through the use of nuclear energy and (iii) to the environment.

The law, in particular, defines a list of hazardous facilities whose

owners are to take out compulsory insurance. It also sets out a

procedure for the making of compulsory insurance agreements

and defines the amount of insurance coverage and insurance

compensation. The range of insurance coverage varies from

EUR 240,000 to EUR 155 million, depending on the type of the

hazardous facility and the number of injured parties. The range

of insurance payments varies from EUR 600 to EUR 48,000.

With the approval of the law, certain amendments were made

to a number of legislative acts, including the Russian Code

on Administrative Offences which established administrative

liability for the operation of a hazardous facility in the absence

of a compulsory insurance agreement. This breach leads to the

imposition on legal entities of a maximum fine of EUR 12,000.

The business community in Russia however has a lot of questions

regarding the operation of this new law and different discussions

with official structures are still in progress.

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Life structure and trends

Before the recession hit Russia in the second half of 2008, the

economy had seen a decade of high growth (6% or 7% annually)

driven by revenues from its substantial oil, gas and other

natural resources. The economic and legislative environment

had improved so much that there was talk of a turning point in

the development of the life insurance market and an increasing

number of foreign life insurers were being established, seeking a

share of a life market estimated to reach up to USD 20 billion per

year in 2012.

Before the recession, penetration in individual life

insurance was low, and even with signs of a recovery in the

economy in 2010, it remains a difficult product to sell.

Before the economic downturn in 2008, a strong banking sector

in Russia (both foreign and local banks) had been offering more

and more consumer loans, car loans and domestic mortgages.

This was reflected in the life market, which saw important

growth in related insurance protection. In 2009 banks cut back

on their lending activity, resulting in less related cover being sold.

Before the recession, penetration in individual life insurance was

low, and even with signs of a recovery in the economy in 2010, it

remains a difficult product to sell.

Apart from foreign-owned enterprises and the wealthiest

Russian companies, employee benefits plans are still not common

amongst Russian employers as a whole but are slowly increasing

in popularity. Where there is such a scheme the main benefit

is medical expenses insurance. This segment has been (and

continues to be) subject to severe competition and premiums for

some schemes in 2010 are quoted at below reinsurance rates.

Employee benefits plans are still not common amongst

Russian employers as a whole but are slowly increasing in

popularity.

Important changes to pension legislation were passed in April

2008. Under the terms of this new legislation the state will

cofinance additional contributions to the cumulative part of the

occupational pension.

As regards third pillar savings, the insurance products sold

as individual pension products are the same as ordinary life

endowment savings plans. For years there had been no tax

benefit to these products but from 1 January 2008 there have

been some important changes in personal income taxation

including a tax allowance for pension contributions (but also

medical expenses insurance).

Voluntary group pension arrangements exist and multinational

employers are the main buyers. Apart from the larger enterprises,

among Russian-owned companies pensions are not particularly

common. In 2008 there was a lot of interest in them on the part

of many employers but the economic downturn caused many

employers to suspend any plans to start such schemes; in 2010

though there are signs that the market is slowly reviving.

Malakut Insurance Brokers is an international insurance

broker company with headquarters in Moscow (Russia),

providing consulting and insurance services for corporate

clients on various insurance and reinsurance risks. Malakut

has representative offices in Vietnam, along with daughter

companies in Kazakhstan (SP Malakut), Ukraine (SB

Malakut), United Arab Emirates (Malakut Insurance Brokers

LLC) and Panama (Malakut Corredores De Reaseguros).

Malakut is the largest insurance broker in the CIS countries

and has been voted ‘Best Insurance Broker’ for several

years by Reactions Magazine. Being a member of UNiBA

Partners, UNISON and EOS RISQ, Malakut Insurance

Brokers represents these associations in Russia and the CIS

countries.

About Malakut Insurance Brokers

Sources: Malakut Insurance Brokers, GlobalTrade.net and Axco Insurance Information Services

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In spite of having a history covering almost two centuries, the Indian insurance market took a turn after

the establishment of the Life Insurance Corporation in India in 1956. From being an open competitive

market to being nationalized and then back to a liberalized market again, the insurance sector was

open to all sorts of competition.

India

The Indian insurance market conventionally focused around

life insurance until recently, a various range of other insurance

policies covering sectors like medical, automobile, health and

other classes falling under general insurance came up, generally

provided by the private companies. The life insurance of India

added 4.1% to the GDP of the economy in 2009, an immense

growth since 1999, when the gates were opened for the private

company in the market.

Policy change in the Indian Insurance Market

The Insurance Regulatory Development Act, 1999 (IRDA Act)

allowed the entry of private companies in the insurance sector,

which was so far the sole prerogative of the public sector

insurance companies. The act was passed to protect the concerns

of holders of insurance policies and also to govern and check the

growth of the insurance sector.

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Private insurance companies, including joint ventures with

international companies, are allowed to function in India, but

they can only serve the purpose of life or general insurance or

reinsurance business. Foreign companies are not allowed more

than 26% shareholding in the joint venture.

Most non-life companies are joint ventures with leading corporate

groups in India who have interests in a variety of businesses.

In life insurance, mostly banks and financial institutions have

entered in joint ventures.

Non-life structure and trends

Most, if not all, non-life insurers are recording underwriting

losses. In 2009-10 companies’ overall results, however, were

profitable as a result of healthy investment incomes. The losses

registered by the Indian Motor Third Party Pool, which covers

commercial vehicles and is shared amongst all non-life insurers,

are having a particularly negative influence on the results.

Most, if not all, non-life insurers are recording

underwriting losses.

The industry is calling for an increase in motor third party

premium rates and has formed a committee to look into the

feasibility of premium increases. The regulator, the Insurance

Regulatory and Development Authority (IRDA), has yet to make

a decision on the question of deregulating the motor third party

tariff in spite of demands from insurers.

The concept of property damage and business interruption

insurance is still not developed. However, the demand for these

products is growing slowly but steadily. Generally the concept

of named peril cover exists. Different policies are purchased

for different perils. Terrorism cover is operated by GIC as a pool.

Premium rates are 0.03% for industrial risks and 0.02% for non-

industrial risks.

Liability insurance is a slowly developing concept in India.

The total premium across all products of liability would be

approximately 4% of overall premium in India. Covers like CGL

(completed operations), E&O, D&O and EPL are easily available.

TATA AIG has recently introduced cover for contaminated

products. Product recall cover is available with RI support on

facultative basis and is quite expensive, particularly for auto

component and pharmaceutical industries. Clinical trial is a

steadily growing business but needs RI on facultative basis.

The tariff deregulation of the non-life market as a whole

has resulted in a price war with non-technical pricing in

most cases.

The tariff deregulation of the non-life market as a whole has

resulted in a price war with non-technical pricing in most cases,

especially as the scramble for market share continues. In property

classes, for example, rates continue to be as much as 80% below

the old tariff levels.

As from 1 April 2010, remedial measures involving enhanced

deductibles for property and engineering classes have been

introduced on a voluntary basis by the insurers themselves.

The insurance sector in India has expanded dramatically since

deregulation in 1999 and potential for further growth remains

high. This is in spite of the fact that no approval has yet been

given to the legislative proposals that the foreign investment

limit will be raised from 26% to 49%. With the registration of yet

another private non-life insurer in February 2010, there is now

a total of 24 non-life companies in the market (6 public sector,

18 private and 1 reinsurance company). At year end 31 March

2009 private companies, most of which had foreign partners,

had a non-life market share of almost 40% (without taking into

account the public sector specialists, agriculture insurance and

the export credit guarantee corporation).

Life structure and trends

Private life insurers have been operating in the Indian market

for 10 years, and have continued to make inroads into the Life

Insurance Corporation of India’s (LIC) market share.

Figures from the IRDA for the year ending July 2011 show that the

LIC’s market share amounted to almost 72% of total life insurance

premium income and 65% of new business production.

The recent volatility in stock markets is likely to affect the

performance of investment products sold by insurers which may

undermine new business volumes. Prolonged fears over long-

term investment viability may turn consumers away from

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unit-linked products and towards fixed deposits and cash-based

savings.

The recent volatility in stock markets is likely to affect the

performance of investment products sold by insurers which

may undermine new business volumes. Prolonged fears over

long-term investment viability may turn consumers away from

unit-linked products and towards fixed deposits and cash-based

savings.

The development of financial services faces many challenges in

India, a country with a population of over one billion, 22 official

languages and 28 states. The insurance sector faces a severe

shortage of skilled employees, a lack of suitable product models,

limited actuarial data and a rapidly growing market.

The insurance sector in India faces a severe shortage

of skilled employees, a lack of suitable product models,

limited actuarial data and a rapidly growing market.

The initial range of life products was a reflection of the range

offered by the LIC for both savings and protection, and policies

that offered a savings element were the most popular. Recently

the pace of innovation has increased as the market has developed,

competition has become more aggressive and consumers’ needs

have become more sophisticated. A move by the regulator to

impose limits on fees for certain unit-linked plans has seen many

insurers revert back to more traditional products to generate

their core income.

The IRDA is determined to encourage greater transparency

in the life market and promote a culture of fairness for buyers

of insurance products. As part of this process the IRDA issued

instructions that from 1 July 2010, all insurers must disclose full

details of the commission paid to the agent for the policy being

sold.

Changes in both the distribution of life business and the product

ranges on offer will continue to have a major impact, although

the insurers still need to educate the population as to the

benefits of protection, as an additional benefit to the savings

products that have traditionally been the mainstay of the life

insurance industry.

The future of the Indian insurance market

As per the report of ‘Booming Insurance Market in India’ (2008-

2011), concentration of insurance markets in many developed

countries of the world has made the Indian insurance market

more magnetic in terms of international insurance players.

Furthermore, the report says:

• home insurance sector is likely to achieve a 100% growth

since home insurance are made compulsory for housing

loan approvals by the financial institutions;

• in the coming three years, the health insurance sector is

all set to become the second largest business after motor

insurance;

• during the period of 2008-09 to 2010-11, the non-life

insurance premium is likely to have a growth of 25%.

Insurance companies in India

Registration has been granted to 22 private life insurance

companies and 18 general insurance companies so far by the

IRDA. Considering the existing public sector companies in the

Indian insurance market, there are 47 companies functioning in

both life and general insurance business respectively.

Some of the major insurance companies in the public sector are:

• Life Insurance Corporation (LIC) of India

• National Insurance Company Limited

• Oriental Insurance Limited

• New India Assurance company Limited (India’s largest non

life insurer).

Some of the major insurance companies in the private sector are:

• Tata AIG Life

• HDFC Standard

• Bajaj Allianz

• ICICI Prudential

• SBI Life.

Peraj Insurance Brokers is the oldest Insurance Intermediary

Service Company in India. Established in 1952, Peraj worked

as a principle agent for three top British insurers. After the

nationalisation of the insurance business, Peraj introduced

and developed the concept of consultancy services in India.

It is the only known company to have a track record of

servicing clients for a period as long as 40 years even on a

fee basis. Peraj is appointed by some of the most reputed

Indian and multinational companies in India. Over the

years, Peraj Insurance Brokers has proven its expertise in

areas such as claims handling, project insurance and policy

drafting.

Peraj has a client retention ratio of 100%. During its entire

existence, Peraj worked only as representative of the

insured (either as consultant or direct broker) and never

ventured in any activities as surveyor or reinsurance broker.

About Peraj Insurance Brokers

Sources: Peraj Insurance Brokers, Axco Insurance Information Services and Business Maps of India

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China’s insurance sector is still in its development stage. In 2006, while China accounted for

20% of the world’s population and 5.4% of the world’s economy, it only constitutes 1.9% of the

world’s insurance market. The future is certainly promising and the low market share of foreign

companies indicates that there is still plenty of room for newcomers, but their success depends

largely on whether they are well prepared to enter this emerging market.

China

Since its reform, China has begun to gradually decrease direct

social security protection and thus insurance has become

necessary to many citizens who find themselves without the

government’s social security coverage. On 1 January 1984,

People’s Insurance Company of China (PICC) was re-established

and supervised by the People’s Bank of China (PBOC) as an

independent insurance company.

The establishment of Shenzhen Ping, an insurance company

in Shenzhen, ended the PICC’s monopoly in 1988. With the

establishment of China Pacific Insurance Co. Ltd. in Shanghai

in 1991, a competitive insurance market began to develop. In

1992, AIA became the first foreign insurer to conduct insurance

business in China. Following the establishment of AIA’s Shanghai

branch in 1992, distribution through individual agents emerged

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for the first time in the China’s life insurance market, and shortly

after, in the property and casualty insurance market. Since then,

the number of individual agents has grown significantly.

In response to rapid developments in the insurance market,

the National People’s Congress (NPC) issued the PRC Insurance

Law in 1995, which created the framework for restructuring

and rationalizing the PRC insurance industry. One of the most

important clauses of the 1995 PRC Insurance Law was to classify

insurance into property and casualty insurance (including

property, casualty, liability and credit insurance) and life insurance

(including life, accident and health insurance). A single entity

was only allowed to provide one of the two services but the 2002

amendment of Insurance Law allowed one group to have both

life insurance and property and casualty insurance subsidiaries.

Following the enactment of the PRC Insurance Law, PICC was

restructured into the PICC (Group) Company, with its businesses

being transferred to three subsidiaries: PICC Life Insurance

Company with a focus on life insurance, PICC Property Insurance

Company with focus on property and casualty insurance and

PICC Reinsurance Company with a focus on reinsurance.

PICC was once again restructured in October 1999 when the PICC

Group was split up. The three subsidiaries were re-organized into

three independent companies: PICC Property Insurance Company

became known as PICC, PICC Life Insurance Company became

China Life Insurance Company and PICC Reinsurance Company

was changed into China Reinsurance Company.

Whilst PICC remains the market leader in China in terms of gross

premium volume, their market share has reduced significantly

over the past 10 years, reflecting the increased competition

brought about by the market reforms allowing new local Chinese

insurers to compete.

Besides the structural changes in the insurance industry, the

regulatory system has also been reinforced. In 1998, the China

Insurance Regulatory Commission (CIRC) was established and

became responsible of supervising the insurance industry

previously under the control of the PBOC. This emphasises the

policy objective of encouraging the orderly development of the

Chinese insurance market.

Following China’s entry into the World Trade Organisation

in late 2001, China’s insurance industry has become the

industry that opened up the most in the financial sector.

Following China’s entry into the World Trade Organisation in late

2001, China’s insurance industry has become the industry that

opened up the most in the financial sector. However, restrictions

remain. Currently, life insurance company ownership by foreign

insurers is limited to joint ventures with a local partner, with

equity interests of up to only 50% allowed. This has provided an

initial opportunity for foreign insurers, and poses a big challenge

to China’s domestic insurers. To cope with the threat of foreign

counterparts, China’s domestic insurers started restructuring

at a rapid pace. In July 2003, PICC was restructured into three

companies: PICC Holding Company, PICC Property & Casualty

Insurance Company and PICC Asset Management Company

Limited, and in August 2003, China Life Insurance Company was

restructured into China Life Insurance (Group) Company and

China Life Co., Ltd.

Non-life structure and trends

At the end of 2008 there were 138 insurance institutions in China.

These included 31 domestic non-life companies and 16 foreign

subsidiaries and branches.

Most of the domestic industry is state-owned, either directly,

as in the case of PICC Holding Co, or indirectly through the

shareholdings of state bodies, municipalities and state-owned

enterprises. There are minority foreign shareholdings in seven

companies. The non-life market continues to be dominated by

PICC, although its market share fell from 77% to 41.5% between

2000 and 2008 as a result of competition from an increasing

number of domestic rivals. The foreign insurers had a market

share of only 1.2% in 2008.

The non-life market has been growing by around 25% a year since

2003. This rate of increase will certainly continue, partly because

of predictions of another record year for new car sales, and partly

because of high rates of fixed asset investment resulting from

loose monetary conditions and the government’s USD 600 billion

stimulus package. The government’s use of premium subsidies

to underpin farming incomes means that agriculture insurance

premiums may well exceed enterprise property premiums for the

first time in 2010. The only vulnerable sector is marine, where ship

values are down by 30% to 40% and cargo volumes are depressed

by the downturn in global trade.

The non-life insurance market remains somewhat protectionist,

with geographic branch and underwriting restrictions placed on

foreign insurers.

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Company nameRevenue

(100 million CNY)Rankings /Market share

PICC 1539 1 / 38.226%

Ping An 621 2 / 15.425%

CPIC 515 3 / 12.796%

China United 193 4 / 4.802%

CCIC 138 5 / 3.431%

Sunshine 106 6

SINOSURE 89 7

Tian An 80 8

Others 33%

Total 3984 99%

2010 Property insurance companies revenue and rankings (domestic companies)

Life structure and trends

The life market comprises 30 domestic insurers and 26 foreign life

joint ventures and branches. The market is highly concentrated,

with the top three insurers writing 65.3% of premiums in 2008.

The state-owned China Life remains the dominant insurer,

though its market share fell from 70.2% in 1998 to 43.1% in 2008

because of competition from an increasing number of rivals. In

2008 the foreign branches and joint ventures had a market share

of only 4.9%, down from 8% in 2007.

Since August 2008 the regulator, the China Insurance Regulatory

Commission (CIRC), has changed the direction of the life industry

away from “scale, market share and premium ranking” towards

the “core business of risk guarantee and long-term saving”.

Most insurers are therefore scaling back on single premiums

sold through banks and trying to increase the volume of

regular premiums sold through agents. Efforts are also being

made to develop a new model of bancassurance which can

succeed in selling regular premiums to the high net-worth

customer segment. At least four banks are expected to become

shareholders in small life companies in the course of 2010. Many

foreign insurers are re-assessing their China strategy and may

either try to change their status from joint venture partner to

minority shareholder or may exit the market altogether.

Company nameRevenue

(100 million CNY)Rankings /

Market share

Chartis 10.2 1

Tokyo Marine 4.1 2

Mitsui 4.0 3

Liberty 3.8 4

Samsung 3.6 5

Allianz 3.0 6

Generali 1.9 7

Zurich 1.8 8

Others

Total 42.8 1%

2010 Property insurance companies revenue and rankings (foreign companies)

Foreign insurers in China

As one of the more liberated industries in the service sector,

foreign insurers have been playing an increasingly important role

in China’s insurance market but there is still a long way to go.

Currently, foreign life insurers score better than their non-life

counterparts. In March 2005, Generali China Life, the first Sino-

foreign joint venture insurance company established after

China’s entry to WTO, caught the world’s attention by securing a

3 billion dollar deal with China National Petroleum Corporation

(CNPC) to provide group life insurance to CNPC’s 390,000

retirees. This single deal increased the market share of foreign

life insurers from 2.7% at the end of February 2005 to 20% by the

end of March 2005.

As one of the more liberated industries in the service

sector, foreign insurers have been playing an increasingly

important role in China’s insurance market but there is still

a long way to go.

AIA, the life insurance arm of AIG in China, is however a better

benchmark of foreign life insurers’ influence in the industry. In

2007, it collected 1.4 billion dollar worth of premiums, ranking

eighth among all life insurers and first among foreign life

insurers. In fact, AIA was the only foreign life insurer among the

top 10 life insurers.

AIA’s relative success in China is due to its long presence in the

country. It started life insurance operations in Shanghai in 1992

and was already active in other cities prior to that. As such, the

pace of AIA’s expansion in China is a much more valid benchmark

to measure the growth of foreign insurers.

|13

The performance of foreign non-life insurance businesses on

the other hand, was rather disappointing. In 2007, AIU, the non-

life insurance arm of AIG, ranked first among all foreign non-life

insurers with a premiumof 130 million dollar. However, it only

ranked 19th among all non-life insurers in China with a market

share of 0.4%.

Foreign life insurers accounted for 8% of China’s life insurance

market in 2007 as compared to only 2.6% in 2004, while foreign

non-life insurers only accounted for 1.2% of China’s non-life

market share in 2007 - a figure that remains unchanged when

compared to 2004.

With a lower possibility of competing with Chinese companies

in terms of networks, many foreign life insurance companies

are adopting a geography-focused strategy. Currently, Shanghai,

Guangdong and Beijing are the three most important markets

for foreign insurance companies. In 2007, the three markets

accounted for 78.7% of total foreign life insurance premiums

written and 93.4% of total foreign non-life insurance businesses.

Their strategy has provided them with a much stronger presence

in these key markets. For example, in 2007, the market shares of

foreign life insurers and foreign non-life insurers were 29.8% and

12% respectively in Shanghai - 3.7 times and 10 times that of the

national average respectively.

As the three regional markets are seen to be saturated, some

newcomers have begun to venture into China’s vast hinterland.

Groupama, the second largest insurance company in France, has

chosen Chengdu, the capital city of Sichuan, as its headquarters

in China. Chengdu is the largest insurance market in Central and

Western China as measured by its 2006 gross premiums.

With a lower possibility of competing with Chinese

companies in terms of networks, many foreign life

insurance companies are adopting a geography-focused

strategy.

Chengdu has also been chosen as the first expansion site of Haier

New York Life, a joint venture between New York Life Insurance

Company, the largest mutual life insurance company in the

United States, and China’s Haier Group. It launched operations in

Shanghai in late 2002.

In June 2006, Great Eastern, a Singaporean life insurance

company, set up a joint venture life insurance company in China

with its headquarters in Chongqing, the second largest insurance

market in Central and Western China.

Domestic insurance companies vs. foreign insurance companies

0

10

20

30

40

50

60

70

80

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

No. of local players 1 3 14 32 62 65 69

No. of foreign players 0 1 21 36 42 46 47

Premium (100 million) 4.6 368 2,109 4,318 9,150 11,137 14,527

1980 1992 2001 2004 2008 2009 2010

Currency: CNY

14|

Lockton’s owned Asian operation is the product of 30 years’

growth of a number of indigenous insurance businesses

in 9 countries across the region. Our Asian operation

boasts over 400 staff (including affiliates) with a wealth of

experience and local management expertise.

We currently have offices and representation in Hong Kong,

Singapore, People’s Republic of China (Wholly Owned),

Thailand, South Korea, Malaysia, Philippines, Australia and

Vietnam.

Lockton Asia provides risk and insurance services to

developing and developed countries across a diverse

range of industries, including telecommunications, power,

energy, mining & construction, transportation/logistics,

financial institutions, manufacturing, marine and import/

export.

About Lockton Asia

Sources: Lockton Asia, China Knowledge and Axco Insurance Information Services

|15

The Egyptian insurance market has actually seen tremendous growth and success in the past few years.

The market has also evolved thanks to new controls and regulations being established by Egyptian

law. All insurance companies in Egypt are closely monitored by the Egyptian Insurance Supervisory

Authority. Over the last years, the number of insurance companies in Egypt has also grown to keep up

with consumer demand. All this has to been seen in a bigger picture, because the Egyptian Revolution

of January 2011 has had considerable political and economic effects and also influenced the insurance

market. Until the elections in November 2011, everything is on a stand still.

Egypt

16|

Non-life structure and trends

The non-life market is relatively small in premium volume but

somewhat crowded with 5 of the 29 direct insurance companies

operating as composites (including the 2 remaining state

companies) and 13 more writing only non-life business. An export

credit insurer and a co-operative insurance society complete the

picture. With the merger of the state-owned companies has

come a reduction in their combined market share, though in

2009 this was still 59.3%. There are high levels of competition in

most classes.

Several new non-life companies have been authorised in recent

years, though they have yet to achieve any meaningful market

share. The change in law during 2008 allowing corporate

insurance brokers to be established should eventually have a

far-reaching impact on the way in which business is conducted,

though this had not yet become evident in 2010.

Life structure and trends

The market was served by 15 life insurance companies in 2009.

A state-owned insurer is the largest life company by market

share (accounting for 38% in 2009) and increased in size when

it absorbed the operations of another state (re)insurer in 2007.

Following the requirements laid down in Law No. 118 of 2008,

composite insurers were required to split into separate life

and non-life insurance businesses within two years from May

2008. This has led to the restructuring of both state-owned and

private insurers into separate life and non-life businesses. The

government announced in July 2009 an intention to privatise the

state-owned company.

Despite continued market growth and promotional efforts,

there is still limited penetration and limited awareness of

the need for life insurance.

Since the market began opening up in 2000, foreign insurers

have driven innovation in the market introducing universal life

and unit-linked covers. Despite continued market growth and

promotional efforts led by the regulator, there is still limited

penetration and limited awareness of the need for life insurance.

The market is also constrained to that portion of the population,

estimated at 10%, able to afford life insurance.

Future market growth rests on evidence of some spread of

wealth, but often it is that segment of society that is already

wealthy that has benefited from the growth in the Egyptian

economy in recent years.

Demand is centred on savings rather than protection and price

is less important than service, especially in the individual life

segment. Group life and health are becoming increasingly

popular as employee benefits.

Compulsory insurance

The following policies are mandatory in Egypt:

• motor third party bodily injury

• aviation third party liability

• decennial liability for architects and contractors

• third party liability on lifts

• workmen’s compensation insurance is a part of the social

insurance system.

Non-admitted insurance is not permitted. By law, all property

or responsibilities in Egypt must be insured with a company

registered to conduct insurance business in Egypt (unless

insurance cover is not available in Egypt) and the supervisory

authority permits the arrangement of insurance overseas.

Impact of the Egyptian Revolution

The Revolution has brought good and bad things to Egypt. Yet

it will be for the Egyptians to make the most out of it and put

solid foundations for a new Egypt, through real democracy. The

country needs a clear vision and a strategy for capitalizing on its

rather wealthy natural and human resources. The government

must put more efforts and fund more money for investing in the

human resources.

The country needs a clear vision and a strategy for

capitalizing on its rather wealthy natural and human

resources.

For the long run, investments in science and technology could

pave the way for a better future. It seems that the Egyptian elites

are very aware of the importance of this matter as plans are

already placed for action. The announcement for establishing Dr.

Zeweil Science and Technology City, which will be publicly funded,

is some evidence of progress. The inclusion of substantial funds

for research and science on the 2011/2012 budget is another

positive indication.

|17

As for the near future, the country needs lots of financial aids,

to offset the revolution consequences. The Ministry of Finance

is saying that at least USD 14 billion are needed in international

loans and funds at the start of fiscal year 2011/2012 to boost

the budget and help the economy growing. Eventually, lots of

promised USD billions in aids and loans from the international

community will come, yet not before political and socio-

economical reforms are seen and weighed.

Gregor Irwin, the head of the Economic Management in the British

Ministry of Foreign Affairs, who has visited Egypt recently, said

that The International Funding Associations could raise the credit

rating of Egypt only after seeing that democracy, transparency,

fighting corruption and reforms in political and socio-economical

behaviour prevailed. After all, Egypt has been and remains an

attractive place for foreign investments and businesses, for its

historical and strategic positioning in the world.

Everything seems to be on a stand still until the upcoming

November elections.

As we speak, the negative attributes of the revolution are still

very present. There is much chaos, frustration and insecurity

that lingers and this is shown through labour demonstrations

and unrests. The economy has been hot with huge losses

(investments, tourism, property, industry, etc.) and the

devaluation of the Egyptian Pound has caused inflation and high

unemployment. All this uncertainty remains in euphoria with

the upcoming November elections, which seems to be played

between the Military Powers and the Muslim Brotherhood Party.

Everything seems to be on a stand still until then.

Hadbrok Insurance Brokers (Paul Haddad Group of

Companies) has been involved in the Egyptian market

since 1982. It is Egypt’s leading insurance broker working

with the public and private sector from private individuals

to large conglomerates.

Hadbrok Insurance Brokers provides tailor made policies,

applies global programs and manages DIC/DIL conditions.

In 2006 Hadbrok Insurance Brokers established servicing

in Sudan with local partners. HB also provides technical

support, risk management and assessments for the

Egyptian, Sudanese, Libyan and Syrian market.

About Hadbrok Insurance Brokers

Sources: Hadbrok Insurance Brokers, Axco Insurance Information Services, Economy Watch

www.eosrisq.com

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and risk consultants. We specialise in the placement of multinational insurance

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