Singapore Insurance Market

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FIN3119 – RISK AND INSURANCE
GROUP PROJECT REPORT

SINGAPORE’S INSURANCE MARKET – SWOT ANALYSIS AND RECOMMENDATIONS

Table of Contents
EXECUTIVE SUMMARY1
INTRODUCTION TO THE MARKET3
TYPES OF INSURANCE AND MARKET SHARE4
SWOT ANALYSIS OF MARKET4
STRENGTHS4
EASE AND CONVENIENCE4
REGULATORY SYSTEM5
EDUCATED WORKFORCE & Strategic Location5
SUPPORT INFRASTRUCTURE5
INTELLECTUAL CAPITAL6
ECONOMY OF AGGLOMERATION7
PROFESSIONAL SERVICES7
WEAKNESSES7
VULNERABILITY8
HIGH SET UP COST8
SMALL SIZE9
STRICT REGULATIONS10
OPPORTUNITIES10
ASIA MARKET10
REINSURANCE MARKET11
CAPTIVE INSURANCE MARKET12
THREATS12
TAX REGIME IN HONG KONG12
GEOGRAPHICAL LOCATION OF HONG KONG MARKET13
NO CORPORATE AND INCOME TAXES IN BERMUDA MARKET13
FINANCIAL CRISIS AND IMPACT ON MARKET14
LEARNING POINTS16
RECOMMENDATIONS16
CONCLUSION19
REFERENCES21

EXECUTIVE SUMMARY
Singapore is one of the most open economies in the world and the Singapore Government has strived to market Singapore as the Asian hub for all businesses. Keeping in line with that ambition, this report seeks to discuss the feasibility of Singapore being the Asian hub for the insurance market and make recommendations to enhance growth of the local insurance market. A SWOT (strengths, weakness, opportunities and threats) analysis on the Singapore insurance business environment was first conducted to determine the current condition of the insurance market, as well as growth projections in view of the recent global economic recovery. This report will also evaluate the competitiveness of the Singapore insurance market on both a regional and global basis, such as cross-referencing to the Hong Kong and Bermuda insurance market throughout the SWOT analysis. The analysis is summarized as follows: Strengths * Ease and convenience in doing business * Stable political environment and effective financial regulatory system * Educated workforce and strong support infrastructure * Intellectual capital and professional services * Ability to leverage on economy of agglomeration.| Weakness * Large exposure to global events * High labor cost * Unable to apply law of large numbers (in general insurance) * Strict regulations| Opportunities * Growth in captive markets * Singaporeans under insured implying that general insurance market not yet mature.| Threats * Hong Kong and Bermuda pose strong competition due to favorable tax rates. * Hong Kong has better access than Singapore to the huge emerging Chinese market| We then discussed lessons learnt from the recent financial crisis in 2008. Some of the important takeaways for the insurance market include the need for better corporate governance to improve consumer confidence and the need for prudent risk management to prevent exposure to uninsurable risks. Subsequently, this report will attempt to provide several recommendations on the current policies and issues in the Singapore insurance market, in hope that Singapore will be able to sustain its position as the top insurance market in Asia for years to come. The recommendations introduced include capitalizing on the strengths of the Singapore market; extending the reach regionally to tap on a larger market in order to increase exposure units; introducing attractive tax regime; exploiting the rise in Internet usage to provide direct insurance; working on helping Singaporeans gain awareness about the under insurance trend; improving on corporate governance and risk management framework to prevent adverse selections; and lastly to consider an offering of simple products instead of complicated bundled products to consumers, allowing for reduction in premiums.

INTRODUCTION TO THE MARKET

Singapore is one of the most open insurance markets in the world. It is also one of the most developed insurance markets in Asia. As at 17th March 2000, the market became fully open to foreign insurers and the...
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