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Regional Watch Asia Pacific – Established Markets
FOR BROKERS
International Markets
Market Intelligence
January 2010
Broker Version
Disclaimer
Regional Dashboard
Clic
k to
navig
ate Australia
New ZealandCurrently only available for Managing Agents in password-protected Regional Watch
Hong KongCurrently only available for Managing Agents in password-protected Regional Watch
Disclaimer
Liability46%
Motor 1%
Misc8%
MAT10%
Property35%
Market Intelligence data based on: Australian Prudential Regulatory Authority General Insurance Bulletin, Australian Securities and Investments Committee, Deloitte, Global Edge, Global Opportunities, Insurance Council of Australia (ICA), Lloyd’s crystal, PricewaterhouseCoopers, Xchanging. DWP = direct written premiums. GWP = gross written premium (includes reinsurance). Claims ratio = claims as % of DWP earned from 2005 to 2008.
click for detailed information
click for basic information
Australia: Country DashboardIN
SU
RA
NC
E
OVERVIEW
SIZE: 13th worldwide (UK ranks 3rd)
TOP 5 INSURERS: Vero, QBE Australia, Insurance Australia, Allianz Australia, Insurance Manufacturers Australia – write 50% of total DWP
KEY CLASSES: Motor with high claims ratio (90%), property and liability with medium claims ratio (65% and 50%, respectively)
REINSURANCE: USD 1.1bn (2008)
PENETRATION: ~ 2.4%
NON-LIFE DWP 2008 USD 21.3BN
DWP SIZE IN USD BN AND DWP GROWTH
Motor, 38%
MAT, 3%
Liability, 18%
Property, 30%
Misc, 12%17.5
20.1 21.3
0
5
10
15
20
25
2006 2007 2008
0%
1%
2%
3%
4%
5%
Lloyd’s
NON-LIFE GWP 2008 USD 998M
OVERVIEW
SIZE: 4th for Lloyd’s (UK ranks 2nd)
TOP 5 MAs: write 20% of non-life GWP
KEY CLASSES: liability and property
REINSURANCE: USD 180mn (2008)
PENETRATION: ~ 4.5%
STATUS: direct (re)insurance licence with certain exemptions: www.lloyds.com/crystal
TYPE 3 OFFICE: www.lloyds.com/australia
GWP SIZE IN USD BN AND DWP GROWTH
Liability49%
Motor 2%
Misc2%MAT
11%
Property36%
998
869772
0
200
400
600
800
1000
2006 2007 20080%
5%
10%
15%
Back To > Regional DashboardEC
ON
OM
Y
OVERVIEW
GDP SIZE : 14th worldwide (UK ranks 6th)
EASE OF DOING BUSINESS: 9th worldwide
GLOBAL COMPETITIVNESS: 18th worldwide
STRENGTHS: the Australian economy is open, internationally competitive and export-oriented
CHALLENGES: affected by the financial crisis, private individuals are expected to be very cautious when making new purchases
GDP 2008 USD 891BN
GDP SIZE IN USD BN AND GDP GROWTH
891910856
0
200
400
600
800
1000
2006 2007 2008
0%
2%
4%
6%
8%
10%Agriculture3%
Industry27%
Services70%
regu
lati
on
s
COMPULSORY CLASSES: aircraft liability, builders warranty, workers compensation, 3rd party motor, maritime oil pollution liability, satellite launch operators liability, professional indemnity for financial services licensees
REGULATOR OF INSURERS www.apra.gov.au
REGULATOR OF INTERMEDIARIES www.asic.gov.au
DIS
TR
IBU
TIO
N Commercial lines are broker dominated. The top 5 brokers by brokerage income are Marsh, Aon, Jardine Lloyd Thompson, Willis and OAMPS.
catastrophesHighly susceptible to hail, storms, flooding and bushfires.
Other10%
Direct9%
Broker81%
BREAKDOWN OF COMMERCIAL LINES 2008
Disclaimer
AUSTRALIA: regulators
asi
c
All brokers must either hold an AFS (Australian Financial Services) licence issued by ASIC (Australian Securities
and Investments Commission) or become an authorised representative of a separate licencee.
To obtain a licence, the applicant must meet the general obligations set out by ASIC. These obligations pertain to
responsibilities in the areas of compliance, internal systems, people and resources. ASIC monitors a licencee’s
compliance, internal systems and people through surveillance checks and its financial resources by setting a
minimum solvency margin and requiring annual financial reporting.
ap
ra
APRA (Australian Prudential Regulation Authority) is responsible for the prudential regulation of insurers in
Australia. APRA’s supervisory objectives are met by maintaining a regulatory framework within which insurers
must operate and by setting solvency, capital adequacy and financial reporting requirements.
For more information on regulators visit the PricewaterhouseCoopers Australian website, the APRA website and the ASIC website.
Australia: CatastrophesA
ust
ralia
majo
r ca
t events
19
94
-20
09
AUSTRALIAN NATURAL DISASTERS 1994 – 2009
NSW
Q
V
NT
SAWA
USD 86mn
USD 54mn
1994 - Bushfires
1996 - Hailstorms - Singleton
1996 - Hailstorms - Armidale and Tamworth
1999 - Hailstorms - Sydney
2001 - Bushfires - Sydney
2003 - Bushfires - Canberra
2005 - Hail, storm and winds
2007 - East coast storm and flood event
2007 - Severe Hailstorm - Sydney
2008 - Flooding - North Coast
1998 - Floods
1998 - Hailstorms - Brisbane
1998 - Cyclone Sid and floods
2005 - Hailstorms - Gold Coast
2006 - Tropical cyclone Larry
2008 - Flash flooding - Mackay
2003 - Hail, storm - Melbourne
2006 - Crop damage - Goulburn Valley
USD 60mn
USD 55mn
USD 47mn
USD 277mn
USD 292mn
1994 - Bushfires
1996 - Hailstorms - Singleton
1996 - Hailstorms - Armidale and Tamworth
1999 - Hailstorms - Sydney
2001 - Bushfires - Sydney
2003 - Bushfires - Canberra
2005 - Hail, storm and winds
2007 - East coast storm and flood event
2007 - Severe Hailstorm - Sydney
2008 - Flooding - North Coast
1998 - Floods
1998 - Hailstorms - Brisbane
1998 - Cyclone Sid and floods
2005 - Hailstorms - Gold Coast
2006 - Tropical cyclone Larry
2008 - Flash flooding - Mackay
2003 - Hail, storm - Melbourne
2006 - Crop damage - Goulburn Valley
USD 55mn
USD 60mn
1994 - Bushfires
1996 - Hailstorms - Singleton
1996 - Hailstorms - Armidale and Tamworth
1999 - Hailstorms - Sydney
2001 - Bushfires - Sydney
2003 - Bushfires - Canberra
2005 - Hail, storm and winds
2007 - East coast storm and flood event
2007 - Severe Hailstorm - Sydney
2008 - Flooding - North Coast
1998 - Floods
1998 - Hailstorms - Brisbane
1998 - Cyclone Sid and floods
2005 - Hailstorms - Gold Coast
2006 - Tropical cyclone Larry
2008 - Flash flooding - Mackay
2003 - Hail, storm - Melbourne
2006 - Crop damage - Goulburn Valley
USD 58mn
USD 49mn
USD 103mn
USD 1351mn
USD 40mn
USD 243mn
USD 168mn
USD 1156mn
USD 172mn
USD 13mn
1994 - Bushfires
1996 - Hailstorms - Singleton
1996 - Hailstorms - Armidale and Tamworth
1999 - Hailstorms - Sydney
2001 - Bushfires - Sydney
2003 - Bushfires - Canberra
2005 - Hail, storm and winds
2007 - East coast storm and flood event
2007 - Severe Hailstorm - Sydney
2008 - Flooding - North Coast
1998 - Floods
1998 - Hailstorms - Brisbane
1998 - Cyclone Sid and floods
2005 - Hailstorms - Gold Coast
2006 - Tropical cyclone Larry
2008 - Flash flooding - Mackay
2003 - Hail, storm - Melbourne
2006 - Crop damage - Goulburn Valley
Australia has seen a range of natural disasters over the last 15 years, with the 1999 hailstorms in Sydney still
ranking as Australia’s most expensive natural disaster and estimated to have cost insurers USD 1bn. Natural
disasters tend to cause most damage in NSW and Q. In the last 15 years, bushfires have caused approximately
USD 340m worth of damage in NSW alone. Storm related events such as cyclones and flooding have lead to
approximately USD 1.8bn worth of damage, with the majority of events located in north-eastern Australia (Q and
NT). Hailstorms were responsible for approximately 2.1bn worth of damage, with the majority of events located in
south-eastern Australia (NSW and V).
Bushfires Storm related events Hailstorms
NSW = New South Wales, NT = Northern Territory, Q = Queensland,
SA = Southern Australia, V = Victoria, WA = Western Australia
Back To > Country Dashboard
Disclaimer
For more information on the tort law reform read ‘Tort law reform throughout Australia’ by Minter Ellison. Insurance trends obtained from APRA and Pricewaterhouse Coopers Australian website.
Australia: insurance market (1 of 2)Back To > Country Dashboard
Tort
law
refo
rms
Driven by concerns over rising insurance premiums and the reported unavailability of liability insurance, the
Australian government decided to review its tort law in late 2002. In 2003 all territories legislated to both narrow
the scope of potential liability and reduce the damages that may be awarded. The ultimate objective was to
confine insurers’ exposure so that they could deliver more affordable insurance products to consumers.
Since the implementation of the tort law reforms, the Australian Competition and Consumer Commission has
reported a drop both in claims brought forward by plaintiffs and the average liability premium charged by
insurers. Notwithstanding the increased affordability of liability cover, the tort law reforms have incurred some
criticism as they are now less plaintiff friendly. Whilst some minor changes may hence be expected, there is
however very little prospect that tort law will revert back to its pre-2003 status.
INSU
RA
NC
E T
REN
D 1
99
6-2
00
8
Between 1996 and 2001 Australian non-life DWP suffered a period of slow decline before two key factors in
2001 sparked a significant growth. The first factor were the events of 9/11, which led to a reduction in world-
wide reinsurance capacity. The second factor was the collapse of HIH Insurance, at the time Australia’s second
largest insurer, which led to a reduction in local insurance capacity. The average annual growth rate from 2001
to 2003 was strong at approximately 25%. Since 2004 however, the non-life insurance market has been
softening due to stiff competition between insurers and recent tort law reforms.
INSURANCE PROFITABILITY 1996 – 2008
Underwriting Expense Ratio Claims Ratio Combined Ratio
0%
20%
40%
60%
80%
100%
120%
96 98 00 02 04 06 08
The underwriting expense ratio has remained fairly
stable over the last 13 years at approximately 30%.
The claims ratio was stable at approximately 80%
between 1996 and 2000. Between 2001 and 2006
however, it plummeted to approximately 55%. Since
2006, it has been on the rise, back towards its pre
2000 value of approximately 80%. The dip in claims
ratio observed between 2001 and 2006 coincides with
the period of strong DWP growth mentioned above.
The combined ratio closely follows the pattern set by
the claims ratio and was below 100% only between
2002 and 2007.
Disclaimer
Australia: insurance market (2 of 2)
Market Intelligence data based on information from the APRA and ICA websites.
Key c
lass
es
KEY CLASSES in the Australian Insurance Market are motor, property and liability, accounting for approximately
85% of total non-life DWP over the last four years (2005-2008). The size of the liability class (on average 20% of
total non-life DWP over the last four years) reflects the sophisticated nature of the Australian non-life insurance
market.
MOTOR is divided into third party liability and comprehensive. Liability policies provide unlimited indemnity in
respect of bodily injury or death. Recent tort law reforms have reduced premium levels for third party liability
policies. For information on class size, growth and claims ratio...
PROPERTY is divided with an approximate 50/50 premium split between household and commercial. Whilst
household rates are stable and the market is fairly profitable, commercial rates have been driven down by an
absence of large fire losses to the point where the market is barely profitable. For information on class size,
growth and claims ratio...
LIABILITY includes public, product and D&O liability and professional indemnity. Following the tort law reforms,
liability became a more profitable class, although this in turn lead to fresh capacity entering the market and a
reduction in premium rates. For information on class size, growth and claims ratio...
Regio
nal analy
sis
Australia has 7 territories: New South Wales (NSW), Northern Territory (NT),
Queensland (Q), Southern Australia (SA), Tasmania (T), Victoria (V) and Western
Australia (WA).
Key territories in terms of DWP are NSW, Q and V, which together account for
approximately 80% of total DWP.
The following slide provides detailed information on classes of business by region.
Information is given on DWP by region, DWP growth by region and claims ratio by
region for the five business classes.
REGIONAL DWP BREAKDOWN 2008
NSW 39%
NT 1%Q 19%
WA 11%
V 22%
T 2%SA 6%
Back To > Country Dashboard
Disclaimer
Market Intelligence data based on APRA General Insurance Bulletin. * NSW = New South Wales and Australian Capital Territory, NT = Northern Territory, Q = Queensland, SA = Southern Australia, T = Tasmania, V = Victoria, WA = Western Australia
Australia: Class of Business by Region*Back To > Country Dashboard
PR
OPER
TY
DWP 2008 USD 6.3BN
DWP GROWTH 2006-2008 CLAIMS RATIOS 2005-2008 80% of property DWP was written in NSW, Q and V in 2008;NT has demonstrated strong GWP growth; compared to Australian property average over last 4 yrs; Q exhibits a high claims ratio whilst NT exhibits a low claims ratio-5%
0%
5%
10%
15%
20%
NSW 40%V 24%
WA 9%
Q 18%T 2% SA 7%
NT 0% 0%
50%
100%
150%
200%
NSW NT Q SA T V WANSW NT Q SA T V WA
LIA
BIL
ITY
DWP 2008 USD 3.9BN
DWP GROWTH 2006-2008 CLAIMS RATIOS 2005-2008 75% of liability DWP was written in NSW, V and WA in 2008;GWP growth largely on the decrease or negative; erratic claims ratios; the claims ratio for Q and V are below Australian liability average over last 4 yrs
WA 23%
V 18%
Q 12%
NSW 37%
NT 2%SA 5%
T 3% -10%
0%
10%
20%
0%
25%
50%
75%
100%
NSW NT Q SA T V WANSW NT Q SA T V WA
MA
T
DWP 2008 USD 0.56BN
DWP GROWTH 2006-2008 CLAIMS RATIOS 2005-200870% of MAT DWP was written in NSW, Q and V in 2008;GWP growth largely small or negative; claims ratio for SA, T and WA are below Australian MAT average over last 4 yrs
V 17% NSW 46%
WA 10%
Q 17%
T 2% SA 6%
NT 2% -20%
-10%
0%
10%
20%
30%
0%
25%
50%
75%
100%
NSW NT Q SA T V WANSW NT Q SA T V WA
MIS
CELL
AN
EO
US DWP 2008
USD 2.4BNDWP GROWTH 2006-2008 CLAIMS RATIOS 2005-2008
V 27%
Q 21%
NSW 32%
WA 9%
T 2%SA 8%
NT 1%-20%
-10%
0%
10%
20%
30%
0%
25%
50%
75%
100%
80% of miscellaneous DWP was written in NSW, Q and V in 2008; other than in NT and SA, DWP is largely on the decrease; claims ratio for NT, SA and WA are below the Australian miscellaneous average over the last 4 yrs
NSW NT Q SA T V WANSW NT Q SA T V WA
MO
TO
R
DWP 2008 USD 8.0BN
DWP GROWTH 2006-2008 CLAIMS RATIOS 2005-2008 85% of motor DWP was written in NSW, Q and V in 2008; DWP growth has been positive in Q, SA and T but erratic in NSW and WA; claims ratio for Q, T and WA are below Australian motor average over the last 4 yrs
NSW NT Q SA T V WA
V 20%
Q 23%
NSW 44%
WA 7%
T 1% SA 5%
NT 0%-5%
0%
5%
10%
NSW NT Q SA T V WA0%
50%
100%
150%
200%
CLA
SS
OV
ER
VIE
W DWP 2008 USD 21.3BN
DWP GROWTH 2006-2008 CLAIMS RATIOS 2005-2008
-20%
-10%
0%
10%
20%
Motor, property and liability account for 85% of DWP in 2008; claims ratios have been steadily increasing from an average of 60% in 2005 to 80% in 2008; the claims ratio for liability and MAT are below the Australian average over the last 4 yrs.
Motor, 38%
MAT, 3%
Liability, 18%
Property, 30%
Misc, 12%
0%
40%
80%
120%
Disclaimer
Market Intelligence data based on information from Lloyd’s Xchanging and Lloyd’s coverholder directory.
Back To > Country Dashboard
Australia: Lloyd’s Position L
LOYD
’S T
REN
D 2
00
1-2
00
8
Lloyd’s non-life GWP growth in Australia was very strong between 2001 and 2003 at approximately 25%, before
slowing down in 2004. Since 2004, the average annual growth has been approximately 5%. This trend closely
follows that exhibited by the Australian DWP over the same period.
The graph on the right illustrates how the different classes have been fairing, as a percentage of total non-life
GWP written by Lloyd’s, from 2001. In the last 8 years, the proportion of total GWP written in property and liability
(Lloyd’s 2 key classes) has been on the rise, whilst the proportion of total GWP written in MAT, motor and
miscellaneous has been on the decrease. Motor and miscellaneous in particular have practically disappeared.
CLASS GWP AS % OF TOTAL DWP
0%
10%
20%
30%
40%
50%
60%
01 02 03 04 05 06 07 08
LIABILITY
PROPERTY
MAT
MOTOR
MISC
LLOYD’S GWP SIZE (USD M) AND GROWTH
0
200
400
600
800
1000
02 03 04 05 06 07 08
-10%
0%
10%
20%
30%
40%
oth
er
The Lloyd’s market is fairly consolidated, with the top 10 managing agents writing approximately 30% of non-life
GWP and the top 10 brokers placing approximately 40% of non-life GWP (2008).
Lloyd’s operates 114 coverholders in Australia in 2008. The vast majority
(approximately 85%) are located in NSW, Q and V, with half of them in NSW alone.
The regional breakdown of coverholders closely follows that of the Australian DWP.
coverh
old
ers REGIONAL BREAKDOWN 2008WA
9%
V 18%
NT 0%
SA 6%T 0%
Q 18%
NSW 49%
Disclaimer
Australia: Distribution Channelsd
irect
Direct business refers to that placed directly by the insurer through local branches, call centres and the internet.
Over the last decade there has been a strong shift from branch networks to call centres as insurers attempt to cut
costs. The volume of branch business now appears to be stable, with Suncorp Metaway emerging as the main
branch distributor.
Australia has one of the largest internet penetrations in the world. The role of internet in insurance is particularly
strong in the vast interior. Some insurers note however, that the internet is used largely for insurance research
and not insurance purchase.
bro
kers
Brokers are estimated to control around 15% of personal lines business and 80% of commercial lines business.
Overall, they place about half of the total Australian Insurance business every year.
In 2008, driven by the increased cost of remaining competitive, the broking industry saw significant merger and
acquisition activity. The broking industry is also dealing with shifts in consumer behaviour towards the internet
and the impact of telemarketing and contact centres set up directly by insurers.
In 2008 the top five brokers within Australia by income were (in alphabetical order): Aon, Jardine Lloyds
Thompson, Marsh, OAMPS and Willis.
oth
er
Other distribution channels include, for example, bancassurance. There is currently little cross-ownership
between banks and non-life insurance companies in Australia.
overv
iew
PERSONAL LINES COMMERCIAL LINES
Brokers
Other
Direct
Personal and commercial lines differ considerably in their use of distribution channels. The majority of personal
lines business is sold direct (~60%) whilst the majority of commercial lines business is placed by brokers (~80%).
Over the last decade there has been no significant growth of one distribution channel (broker, other or direct) at
the expense of another, both within personal and commercial lines.
0%
20%
40%
60%
80%
100%
99 00 01 02 03 04 05 06 07 08
0%
20%
40%
60%
80%
100%
99 00 01 02 03 04 05 06 07 08
Back To > Country Dashboard
Disclaimer
Disclaimer
Please note the information contained in this document is based upon data collected from Xchanging and may be incomplete for some classes of business; for instance a substantial figure, which is missing from the REG 258 data set is comprised of UK Motor, which is not processed by Xchanging.
Gross Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but before the deduction of outward reinsurance premiums.
Lloyd’s figures are based on gross written premiums based on figures processed by Xchanging by processing year and country of origin.
Country of Origin: denotes the country from where demand for the insurance / reinsurance emanates; i.e. the coverholder or policyholder, irrespective of the country to which the risk is classified for regulatory reporting purposes.
Processing Year: relates to the calendar year in which the premium, additional or return premium is processed by Xchanging, irrespective of the actual underwriting year of account of the risks (which is determined by the inception date of each risk).
Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by Country Of Origin, but French for regulatory reporting purposes. Similarly a risk incepting on 1st December 2007 would be classified at 2007 underwriting year of account but may not be processed by Xchanging until 2008 and so be allocated to the 2008 processing year
Appendix: Lloyd’s Data LimitationsBack To > Regional Dashboard
DisclaimerThis document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or liability for any loss to any person acting or refraining from action as a result of, but not limited to, any statement, fact, figure, expression of opinion or belief obtained in this document.