The gross written premium value of the Sin­gaporean
life insurance segment reached S$18.34bn (US$15.21bn) in 2011,
after recording a compound annual growth rate (CAGR) of 2.7% during
the review period.

This strong growth was achieved despite the global
economic crisis in 2009, and was driv­en by the country’s robust
economic develop­ment, ageing population, increased levels of HNWI
business and offshore business.

Singapore’s life insurance market is again expected
to record growth register positive growth at a CAGR of 5.9% from
2012-2016 to reach a value of S$24.5bn (US$20.29bn) in 2016. This
is expected to be driven by positive economic development in
Singapore, increas­ing business from HNWIs and rising financial
activity in the country.

The improving market and business condi­tions in
Singapore and its key overseas mar­kets are also expected to fuel
demand in the single-premium category as people purchase
unit-linked and pension policies.

The gross written premiums of the Singapo­rean
personal accident and health insurance segment increased from
S$1.2bn (US$0.84bn) in 2007 to S$2.2bn (US$1.80bn) in 2011,
recording a CAGR of 15.6% during the peri­od 2007-2011.

This growth was fuelled by an increase in
national healthcare expenditure and the coun-try’s aging
population. Despite the presence of a high-quality public
healthcare system, these factors are also expected to drive the
growth of the segment over the forecast period.

The Singaporean economy registered vari­able growth
rates during the period 2007­2011.

The country’s economy marginally declined by -1% in
2009 from 2008 due to the adverse effects of the global financial
crisis, which had a considerable impact on the Singaporean
economy.

However, as the global economy recovered, Singapore
posted impressive growth in 2010 and 2011 of 14.8% and 4.9%
respectively.

In addition, the International Monetary Fund (IMF)
forecasts stable economic devel­opment in Singapore at a CAGR of
4.7% over the forecast period. This positive economic trend is
likely to lead to an increase in per capita disposable income,
which will encourage the purchase of life insurance products,
especially unit-linked and pension products.

Singapore’s potential GDP growth, combined with low
life insurance penetration levels, pro­vide opportunities for both
new and existing life insurance companies.

Penetration as a percentage of GDP in the
Singaporean life insurance segment declined during the period
2007-2011, despite consid­erable growth recorded in the
segment.

This was primarily due to the global eco­nomic
recession in 2009, which brought down the country’s GDP.

The country’s life insurance penetration, defined as
gross written premiums as a per­centage of GDP, decreased from 6.1%
in 2007 to 5.6% in 2011 and is expected to be around 5.64% by
2016.

This figure is considered comparatively low in a
country which has a low population and large number of wealthy
consumers, although the low penetration level does provide the
seg­ment with strong growth potential.

The incurred loss for the Singaporean life insurance
segment grew from SGD12.0 bil­lion (US$8.3bn) in 2007 to SGD13.1bn
(US$10.9bn) in 2011, after registering a CAGR of 2.2% during the
review period.

This was mainly because of increasing levels of paid
claims as a result of natural disasters in key overseas markets,
such as floods in Aus­tralia and Thailand, and the earthquakes in
New Zealand and Japan, which led to huge losses for life insurance
companies with expo­sure to offshore business and catastrophe
risk.

The incurred loss in the Singaporean life insurance
segment is expected to increase from SGD13.1bn (US$10.9bn) in 2011
to SGD16.6bn (US$13.8bn) in 2016, to record a CAGR of 4.9% over the
forecast period.

This can be attributed to the pending claims as a
result of recent natural disasters in Japan, Australia, Thailand
and New Zealand, which caused claims to increase dramatically
during 2007-2011. Further claims are also expected over the
forecast period.

Meanwhile, the combined ratio for the Singaporean
life insurance segment increased from 100.9% in 2007 to 105.8% in
2011. This indicates that the Singaporean life insur­ance segment
has not made significant under­writing profits during
2007-2011.

The combined ratio of the life insurance segment
is expected to decrease over the fore­cast period, from 105.8% in
2011 to 101.3% in 2016. This should have positive impact on
underwriting profit.

In Singapore, life insurance companies gen­erated
91.5% revenues from the domestic market in 2011, and the remainder
generated from key overseas markets including Austral­ia, New
Zealand, China and Japan. Most Sin­gaporean life insurers sell
insurance policies through brokers in these countries, although in
the domestic market a number of distribu­tion channels have been
used.

Agencies accounted for 45.4% of the total new
written premium in 2011 in the Singapo­rean life insurance segment.
However, due to the emerging and gaining popularity of other
distribution channels, the number of new life insurance policies
sold through agencies decreased from 0.7 million in 2007 to 0.5
million in 2011.

The number of life insurance policies sold through
agencies is expected to fall at a CAGR of -4.1% over the forecast
period.

The number of partnerships between insur­ers and
domestic banks is increasing rapidly in regards to cross-selling
life insurance prod­ucts.

As a result, bancassurance is gaining popu­larity
and is being used by most life insurers. For instance, in 2009,
Singaporean bank DBS Group and UK insurer Aviva Plc signed an
agreement to extend their bancassurance con­tract until 2015.

Bancassurance is expected to play a signifi­cant
role in the growth Singapore’s life insur­ance industry, and the
number of policies sold through bancassurance grew from 189,100 in
2007 to 389,600 in 2011, at a CAGR of 19.8% during the review
period.

The number of policies sold is expected to increase
at a CAGR of 9.8% over the forecast period.

Insurance brokers accounted for the third-largest
share, 13.3%, of the total new written premium in 2011.

E-commerce

The evolution of e-commerce is also expect­ed to
play a significant role for sales of life insurance products over
the forecast period due to its cost advantages and convenience.

As a result, the number of policies sold through
e-commerce increased from 2,700 in 2007 to 4,200 in 2011. This
figure is pro­jected to reach 6,400 by 2016.

The Singaporean insurance industry is reg­ulated by
the government authorised agency, MAS, which governs and supervises
all mat­ters related to monetary and financial aspects in the
country.

A registered insurance company can per­form all
types of insurance business, such as life, non-life and general
reinsurance, in the country.

Moreover, in 2005, MAS introduced the risk-based
capital (RBC) financial model and made it compulsory for all
insurance compa­nies operating in Singapore to meet a number of
provisions.

For example, the minimum capital require­ment for
life insurance companies sell­ing investment-linked products is
fixed at SGD5m (US$4.15m).

In Singapore, MAS is the ultimate regula­tory body
which controls and licenses insur­ance broker business. Approval
and a license from MAS is required to establish an insur­ance
brokerage operation in Singapore.

For example, an insurer needs to provide detailed
business plans that are well devel­oped and show the risk elements
of the busi­ness.

In 2005, Singapore adopted RBC as its regulatory
framework, but MAS is review­ing possible changes and is
considering the adoption of regulations along the same lines as
Solvency II in Europe.

This is likely to mean an increase in the capital
requirements for insurers, which is expected to lead to market
consolidation.

For more information, contact the Insurance
Intelligence Center on +44 (0)20 7406 6596 or
info@insurance-ic.com