November 20, 2018
Thanks in part to a recent surge in mergers and acquisitions in Asia, the region’s insurance industry has been growing at a fast clip. But there are challenges to this growth.
Markets are volatile, investors are increasingly seeking returns through more complex products, and regulators are becoming more stringent. So how should insurance companies in Asia be dealing with these challenges and protecting their bottom lines?
Challenges to growth and risk management
The central hurdle for most firms lies in dealing with multiple regional jurisdictions — each with its own risk issues — because it interferes with creating a common platform for streamlined reporting. “There are many moving pieces,” said Paul Carrett, chief investment officer at FWD Insurance. “The mix of securities in countries varies and each needs to be managed and executed differently. Regulatory regimes are also different. Accounting systems used across all countries may not be well supported in your country.”
Carrett’s Hong Kong-based firm is one of a number starting to employ unifying technology solutions that allow them to simultaneously share information on risk, performance and attribution across all of their offices in APAC. Smart multi-asset risk tools simultaneously grant deep visibility into the risk profile of derivatives books and enable teams to seize on timely market shifts.
Intensified regulation requirements
Since the first implementation date for International Financial Reporting Standard 9 (IFRS 9) earlier this year, firms have been working to implement solutions in line with the standard’s mandate to create greater accounting transparency for financial instruments. However, it has been a particularly tough ask for insurance companies in Asia — with a July survey showing that less than half of firms surveyed in Hong Kong, India, Singapore and Taiwan had identified an IFRS 9 solution, and that 29% had not even started looking for one.
As regulators, debtholders and shareholders push for more transparency and faster reporting, financial institutions must be readily capable of delivering information about holdings and exposure. Holistic tools that provide both the SPPI classification and ECL calculation are crucial to responsiveness for companies like FWD, whose engagement of these integrated technologies places them well ahead of the curve in terms of compliance — and competitiveness.
Integrated tech today for growth tomorrow
Order management systems (OMS) also play a key role in handling more demanding multi-asset solutions for portfolio management, trading, compliance, risk management and operations.
By centralizing their data, insurance companies like FWD are able to scale their operating platforms across offices and provide executives with greater control over the company’s positions and activities.
“If you have a good, clean book of records, you’re 90% of the way there,” says Carrett. “You can automate in a clean way instead of having mountains of spreadsheets.”
A smart OMS also has strategic value, Carrett explains. By automating back office functions, firms can free up people to work on more complex tasks. Along with ensuring accurate, accessible data, there are also clear benefits to the hiring process — where recruiting people to manage order flows across different languages, markets and platforms can be a significant challenge. Automating some functions can ease these hiring pressures.
Carrett is clear on the importance of technology to growth in Asia’s insurance industry. “We have opportunities during these sorts of volatile times and should be focused on them — not managing data,” he says. “We work better when we have good technology in place and are taking full advantage what’s happening in software.”