The Insurance Industry in Palau, Key Trends and Opportunities to 2017

Transcription

1 The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Market Intelligence Report Reference code: IS0297MR Published: May Timetric John Carpenter House 7 Carmelite Street London EC4Y 0BS United Kingdom Tel: +44 (0) Fax: +44 (0)

2 EXECUTIVE SUMMARY 1 Executive Summary Palau is one of the smallest countries in the world with a population of 21,032 in The combination of several factors such as geographical isolation, scarcity of natural resources, lack of proper infrastructure and less experienced professionals is hindering the growth of the insurance industry in th e country. However, the Palauan economy witnessed a healthy growth during the review period. The GDP at current prices grew at a CAGR of 7.1% during the review period, boosting the growth of the insurance industry. The insurance industry grew in terms of gross written premiums at a CAGR of 7.7% during the review period. Despite recording such a healthy growth, insurance penetration remains very low. Increased technical assistance and improvements in inve stment environment will boost insurance demand Pacific Financial Technical Assistance Centre (PFTAC) granted technical assistance to Palau in a phased manner. In the third phase, between 2009 and 2011, more than 20 missions were held by PFTAC in Palau, providing grants to all industries in the country. However, the highest concentration was on the finance industry, especially public finance management. Various strategies were developed to strengthen the industry s performance and its supervision via the adoption of stricter regulation. Promoting the private sector by liberalizing foreign direct investment (FDI), stabilizing and simplifying investment processes, implementing rules for obtaining a license and improvements in the Foreign Investment Act (FIA) will encourage foreign investment in Palau. Such assistance and a stricter regulatory environment are expected to boost the country s industrial and economic development. High retention ratio helps insurers minimize costs Palauan insurers have a high retention ratio, especially in the case of life insurance, which demonstrates their strong in-house underwriting capabilities. A high retention ratio and low ceded ratio allows insurers to minimize costs. Insurance growth is re stricted on account of constraints of the island nation Various constraints such as a small population, geographical isolation, unavailability of expertise and skill sets, a lack of natural resources and proper infrastructure restricted the growth of the insurance industry in Palau. The small population size not only obstructs domestic market expansion but also discourages global insurers from entering the country s insurance industry. A lack of skilled professionals and expertise led to the underdevelopment of the insurance industry in the country. Although this creates an opportunity for foreign insurance companies and insurance intermediaries to provide their services in the country, the small population base discourages them from entering the market. The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 2

3 TABLE OF CONTENTS TABLE OF CONTENTS 1 Executive Summary Introduction What is this Report About? Definitions Methodology Palauan Insurance Industry Overview Palauan Insurance Industry Industry Segmentation Life Insurance Non-Life Insurance Property insurance Motor insurance Liability insurance Marine, aviation and transit insurance Personal Accident and Health Insurance Reinsurance Macroeconomic Indicators GDP at Constant Prices (US$ Million) GDP per Capita at Constant Prices (US$) GDP at Current Prices (US$ Million) Construction Output at Current Prices (US$ Million) Construction Net Output at Current Prices as a Percentage of GDP Arable Land Exports as a Percentage of GDP Healthcare Expenditure per Capita Employed Population Household Consumption Expenditure Total Population Appendix Methodology Contact Us About Timetric Disclaimer The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 3

4 TABLE OF CONTENTS LIST OF FIGURES Figure 1: Palauan Insurance Overall Written Premium by Segment (US$ Million), Figure 2: Palauan Insurance Market Dynamics by Segment (%), Figure 3: Palauan Life Insurance Written Premium (US$ Million), Figure 4: Palauan Life Insurance Written Premium (US$ Million), Figure 5: Palauan Life Insurance Paid Claims (US$ Million), Figure 6: Palauan Life Insurance Paid Claims (US$ Million), Figure 7: Palauan Life Insurance Incurred Loss (US$ Million), Figure 8: Palauan Life Insurance Incurred Loss (US$ Million), Figure 9: Palauan Life Insurance Loss Ratio (%), Figure 10: Palauan Life Insurance Loss Ratio (%), Figure 11: Palauan Life Insurance Combined Ratio (%), Figure 12: Palauan Life Insurance Combined Ratio (%), Figure 13: Palauan Life Insurance Retentions (US$ Million), Figure 14: Palauan Life Insurance Retentions (US$ Million), Figure 15: Palauan Life Insurance Penetration (% of GDP), Figure 16: Palauan Life Insurance Premium Per Capita (US$), Figure 17: Palauan Non-Life Insurance Written Premium by Category (US$ Million), Figure 18: Palauan Non-Life Insurance Written Premium by Category (%), 2012 and Figure 19: Palauan Non-Life Insurance Market Dynamics by Category (%), Figure 20: Palauan Non-Life Insurance Paid Claims (US$ Million), Figure 21: Palauan Non-Life Insurance Paid Claims (US$ Million), Figure 22: Palauan Non-Life Insurance Incurred Loss (US$ Million), Figure 23: Palauan Non-Life Insurance Incurred Loss (US$ Million), Figure 24: Palauan Non-Life Insurance Loss Ratio (%), Figure 25: Palauan Non-Life Insurance Loss Ratio (%), Figure 26: Palauan Non-Life Insurance Combined Ratio (%), Figure 27: Palauan Non-Life Insurance Combined Ratio (%), Figure 28: Palauan Non-Life Insurance Retentions (US$ Million), Figure 29: Palauan Non-Life Insurance Retentions (US$ Million), Figure 30: Palauan Non-Life Insurance Penetration (% of GDP), Figure 31: Palauan Non-Life Insurance Premium Per Capita (US$), Figure 32: Palauan Property Insurance Written Premium (US$ Million), Figure 33: Palauan Property Insurance Written Premium (US$ Million), Figure 34: Palauan Motor Insurance Written Premium (US$ Million), Figure 35: Palauan Motor Insurance Written Premium (US$ Million), Figure 36: Palauan Liability Insurance Written Premium (US$ Million), Figure 37: Palauan Liability Insurance Written Premium (US$ Million), Figure 38: Palauan Marine, Aviation and Transit Insurance Written Premium (US$ Million), Figure 39: Palauan Marine, Aviation and Transit Insurance Written Premium (US$ Million), Figure 40: Palauan Personal Accident and Health Insurance Written Premium (US$ Million), Figure 41: Palauan Personal Accident and Health Insurance Written Premium (US$ Million), Figure 42: Palauan Personal Accident and Health Insurance Paid Claims (US$ Million), Figure 43: Palauan Personal Accident and Health Insurance Paid Claims (US$ Million), Figure 44: Palauan Personal Accident and Health Insurance Incurred Loss (US$ Million), Figure 45: Palauan Personal Accident and Health Insurance Incurred Loss (US$ Million), Figure 46: Palauan Personal Accident and Health Insurance Loss Ratio (%), Figure 47: Palauan Personal Accident and Health Insurance Loss Ratio (%), Figure 48: Palauan Personal Accident and Health Insurance Combined Ratio (%), Figure 49: Palauan Personal Accident and Health Insurance Combined Ratio (%), Figure 50: Palauan Personal Accident and Health Insurance Retentions (US$ Million), Figure 51: Palauan Personal Accident and Health Insurance Retentions (US$ Million), Figure 52: Palauan Personal Accident and Health Insurance Penetration (% of GDP), Figure 53: Palauan Personal Accident and Health Insurance Premium Per Capita (US$), Figure 54: Palauan Reinsurance Ceded by Insurance Segment (US$ Million), Figure 55: Palauan Reinsurance Market Dynamics by Insurance Segment (%), Figure 56: Palauan Life Insurance Percentage of Reinsurance Ceded (%), Figure 57: Palauan Life Insurance Percentage of Reinsurance Ceded (%), Figure 58: Palauan Non-Life Insurance Percentage of Reinsurance Ceded (%), Figure 59: Palauan Non-Life Insurance Percentage of Reinsurance Ceded (%), Figure 60: Palauan Personal Accident and Health Insurance Percentage of Reinsurance Ceded (%), Figure 61: Palauan Personal Accident and Health Insurance Percentage of Reinsurance Ceded (%), Figure 62: Palauan GDP at Constant Prices (US$ Million), The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 4

5 TABLE OF CONTENTS Figure 63: Palauan GDP Per Capita at Constant Prices (US$), Figure 64: Palauan GDP at Current Prices (US$ Million), Figure 65: Palauan Construction Net Output at Current Prices (US$ Million), Figure 66: Palauan Construction Output at Current Prices as a Percentage of GDP (%), Figure 67: Palauan Arable Land ( 000 hectares), Figure 68: Palauan Exports as a Percentage of GDP (%), Figure 69: Palauan Healthcare Expenditure Per Capita (US$), Figure 70: Palauan Employed Population (%), Figure 71: Palauan Household Consumption Expenditure (US$ Million), Figure 72: Palauan Total Population (Million), The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 5

6 TABLE OF CONTENTS LIST OF TABLES Table 1: Insurance Industry Definitions... 7 Table 2: Palauan Insurance Overall Written Premium by Segment (US$ Million), Table 3: Palauan Insurance Overall Written Premium by Segment (US$ Million), Table 4: Palauan Insurance Segmentation (%), Table 5: Palauan Life Insurance Written Premium (US$ Million), Table 6: Palauan Life Insurance Written Premium (US$ Million), Table 7: Palauan Life Insurance Paid Claims (US$ Million), Table 8: Palauan Life Insurance Paid Claims (US$ Million), Table 9: Palauan Life Insurance Incurred Loss (US$ Million), Table 10: Palauan Life Insurance Incurred Loss (US$ Million), Table 11: Palauan Life Insurance Loss Ratio (%), Table 12: Palauan Life Insurance Loss Ratio (%), Table 13: Palauan Life Insurance Combined Ratio (%), Table 14: Palauan Life Insurance Combined Ratio (%), Table 15: Palauan Life Insurance Retentions (US$ Million), Table 16: Palauan Life Insurance Retentions (US$ Million), Table 17: Palauan Non-Life Insurance Written Premium by Category (US$ Million), Table 18: Palauan Non-Life Insurance Written Premium by Category (US$ Million), Table 19: Palauan Non-Life Insurance Paid Claims (US$ Million), Table 20: Palauan Non-Life Insurance Paid Claims (US$ Million), Table 21: Palauan Non-Life Insurance Incurred Loss (US$ Million), Table 22: Palauan Non-Life Insurance Incurred Loss (US$ Million), Table 23: Palauan Non-Life Insurance Loss Ratio (%), Table 24: Palauan Non-Life Insurance Loss Ratio (%), Table 25: Palauan Non-Life Insurance Combined Ratio (%), Table 26: Palauan Non-Life Insurance Combined Ratio (%), Table 27: Palauan Non-Life Insurance Retentions (US$ Million), Table 28: Palauan Non-Life Insurance Retentions (US$ Million), Table 29: Palauan Property Insurance Written Premium (US$ Million), Table 30: Palauan Property Insurance Written Premium (US$ Million), Table 31: Palauan Motor Insurance Written Premium (US$ Million), Table 32: Palauan Motor Insurance Written Premium (US$ Million), Table 33: Palauan Liability Insurance Written Premium (US$ Million), Table 34: Palauan Liability Insurance Written Premium (US$ Million), Table 35: Palauan Marine, Aviation and Transit Insurance Written Premium (US$ Million), Table 36: Palauan Marine, Aviation and Transit Insurance Written Premium (US$ Million), Table 37: Palauan Personal Accident and Health Insurance Written Premium (US$ Million), Table 38: Palauan Personal Accident and Health Insurance Written Premium (US$ Million), Table 39: Palauan Personal Accident and Health Insurance Paid Claims (US$ Million), Table 40: Palauan Personal Accident and Health Insurance Paid Claims (US$ Million), Table 41: Palauan Personal Accident and Health Insurance Incurred Loss (US$ Million), Table 42: Palauan Personal Accident and Health Insurance Incurred Loss (US$ Million), Table 43: Palauan Personal Accident and Health Insurance Loss Ratio (%), Table 44: Palauan Personal Accident and Health Insurance Loss Ratio (%), Table 45: Palauan Personal Accident and Health Insurance Combined Ratio (%), Table 46: Palauan Personal Accident and Health Insurance Combined Ratio (%), Table 47: Palauan Personal Accident and Health Insurance Retentions (US$ Million), Table 48: Palauan Personal Accident and Health Insurance Retentions (US$ Million), Table 49: Palauan Reinsurance Ceded by Insurance Segment (US$ Million), Table 50: Palauan Reinsurance Ceded by Insurance Segment (US$ Million), Table 51: Palauan Life Insurance Percentage of Reinsurance Ceded (%), Table 52: Palauan Life Insurance Percentage of Reinsurance Ceded (%), Table 53: Palauan Non-Life Insurance Percentage of Reinsurance Ceded (%), Table 54: Palauan Non-Life Insurance Percentage of Reinsurance Ceded (%), Table 55: Palauan Personal Accident and Health Insurance Percentage of Reinsurance Ceded (%), Table 56: Palauan Personal Accident and Health Insurance Percentage of Reinsurance Ceded (%), The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 6

7 INTRODUCTION 2 Introduction 2.1 What is this Report About? This report is the result of extensive research into the Palauan insurance industry, covering the market dynamics and competitive landscape. It provides insights on the market size of, and forecast for, the life, non-life and personal accident and health insurance segments. 2.2 Definitions All data is collected in local currency. Conversions into US dollars (US$) of current and forecast data are made at the 2012 average annual conversion rate. Most values are displayed to one decimal place, and growth rates may therefore appear inconsistent with absolute values due to rounding. For the purposes of this report, the review period is and the forecast period is The key insurance industry terms covered in the report are defined below: Table 1: Insurance Industry Definitions Term Ceding company Incurred loss Claim ratio Definition A primary insurer which transfers some of its insurance risk by ceding a proportion of its total written premium through a reinsurance contract. The sum of claims paid by an insurance company and the change in the provision for outstanding claims irrespective of whether or not they have been reported. Claims payable as a percentage of premium income. Commission and expenses Comprehensive loss ratio Earned premium Endow ment policy Facultative reinsurance Gross claim Gross written premium Group annuity Insurance density and penetration Insurance fraud The sum of acquisition cost and administrative cost. The acquisition cost is the percentage of a premium produced that is retained as compensation by insurance agents and brokers. The ratio of claims incurred to net premium earned. The amount of money considered to have been earned on a policy by an insurer. It is calculated by multiplying the original premium by the percentage of the policy s term which has expired w ithout a claim being made. A scheme in which the term of the policy is defined for a specified period, such as 15, 25 or 30 years. The insurer pays the claim to the family of the assured in an event of his or her death within the policy's term or in an event of the assured surviving the policy's term. An arrangement for separate reinsurance for each risk that the primary insurer underwrites. The reinsurer can accept or reject any risk presented by the primary insurer seeking reinsurance. The amount payable by an insurance company before allowances is made for credits that may be due in the form of reinsurance, subrogation or salvage. The total amount of premiums (before deduction of reinsurance costs) customers are required to pay for insurance policies written during the year. A life insurance scheme providing annuities at retirement to a group of people under a single contract. It is usually bought by an employer for the benefit of its employees. The percentage of total written premium to the country s GDP. Any act committed w ith the intent to obtain payment from an insurer through fraudulent means. The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 7

8 INTRODUCTION Table 1: Insurance Industry Definitions Term Lapsed policy Definition A policy which is terminated due to the non-payment of the premium. Loss ratio Liability insurance The ratio of total losses paid out in the form of claims plus adjustment expenses divided by the total earned premium. A type of insurance that covers legal claims by third parties against the insured. Loss reserve The estimated amount of claims incurred but not yet settled. Maturity claim The payment made to a policyholder at the end of the stipulated term of a term life insurance policy. Per capita premium The ratio of the total written premium to the country s total population. Premium ceded The share of premiums transferred to a reinsurance company by a primary insurer. Single-premium life insurance policy A life insurance scheme in w hich a lump sum is paid into the policy in return for an assured sum of money in the event of the policyholder s death. Term insurance A life insurance scheme that provides protection for a specified period, usually between five and 20 years. The policy expires without value if the insured survives the stated period. Treaty reinsurance Direct marketing E-commerce A reinsurance agreement applying to the reinsurance of a class or some classes of business, instead of an individual risk. Direct Marketing channels for insurance policies include insurance companies sales forces, telemarketing, postal mail, , call centers and mobile phones. The distribution of insurance policies online through a company or third-party website. Agencies Insurance brokers Bancassurance Other distribution channels Individuals and corporate agencies which are licensed to sell insurance for one or more specific insurance companies. Individuals or businesses which sell insurance policies, and advise and represent the policyholder. They differ from insurance agents, which act on the behalf of an insurance company. The partnership between a bank and an insurance company in which the insurance company uses the bank s sales channel to sell insurance. Other distribution channels include post offices, convenience stores, multi-level marketing, any channel other than agencies, direct marketing, bancassurance and the above-mentioned channels. Source: Timetric analysis Timetric The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 8

9 INTRODUCTION 2.3 Methodology All Timetric insurance reports are created by following a comprehensive, four-stage methodology. This includes market study, research, analysis and quality control. 1) Market Study A. Standardization Definitions are specified using recognized industry classifications. The same definition is used for every country. Annual average currency exchange rates are used for the latest completed year. These are then applied across both the historical and forecast data to remove exchange rate fluctuations. B. Internal audit Review of in-house databases to gather existing data: Historic market databases and reports Company database C. Trend monitoring Review of the latest insurance companies and industry trends 2) Research A. Source s Collection of the latest market-specific data from a wide variety of industry sources: Government statistics Industry associations Company filings International organizations Insurance regulatory agencies B. Expert opinion Collation of opinion taken from leading insurance industry experts Analysis of third-party opinion and forecasts: Broker reports Media Official government sources C. Data consolidation and verification Consolidation of data and opinion to create historical datasets Creation of models to benchmark data across sectors and regions 3) Analysis A. Market forecasts Feeding forecast data into market models: Macroeconomic indicators Industry-specific drivers Analysis of insurance industry database to identify trends: Latest insurance trends Key drivers of the insurance industry The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 9

10 INTRODUCTION B. Report writing Analysis of market data Discussion of company and industry trends and issues Review of financial deals and insurance trends 4) Quality Control A. Templates Detailed process manuals Standardized report templates and accompanying style guides Complex forecasting tool used to ensure forecast methodologies are consistently applied Quality-control checklists B. Quality control proce ss Peer review Senior-level QC Random spot checks on data integrity Benchmark checks across databases Market data cross-checked for consistency with accumulated data from: Company filings Government sources The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 10

11 APPENDIX 3 Appendix 3.1 Methodology Timetric s dedicated research and analysis teams consist of experienced professionals with an industry background in marketing, market research, consulting and advanced statistical expertise. Timetric adheres to the Codes of Practice of the Market Research Society ( and the Society of Competitive Intelligence Professionals ( All Timetric databases are continuously updated and revised. 3.2 Contact Us If you have any queries about this report, or would like any further information, please contact [email protected]. 3.3 About Timetric Timetric is an independent economic and business research firm that provides critic al intelligence on emerging economies and key global industries. The company offers detailed economic and sector intelligence, business insights and independent and authoritative commentary. Underpinning all Timetric s research services is a belief that d ata if gained following the right technologies and analytic frameworks can provide unique and powerful economic and business insights. The Timetric economic and industry intelligence centers are premium decision tools that provide access to comprehensive research, data and expert analysis. They provide invaluable decision support, presented in an easily digestible format and grounded in rich, proprietary data and data analysis frameworks. Each year, Timetric produces hundreds of high-quality research reports across countries, industries and companies. These reports draw on in-depth primary and secondary research, propriet ary data and high - quality modeling and analysis to give its readers a deep insight into global market dynamics and economic trends. Timetric helps its clients to: Gain an unbiased, expert insight from a genuinely independent and trusted source Save time in researching, visualizing and comparing economic and industry data Access the latest and most useful data sets, indices and forecasts Gain access to a unique methodology for understanding economic trends Forecast and predict trends more accurately The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 11

12 APPENDIX Economic Re search Services Timetric s economic research services are founded on three key goals: 1. To provide the stronge st ba se data: The most accurate data The most timely and frequently updated data sets The best data curation methodologies and standardizations Unique data sets and forward-looking indicators Industry-specific, premium data sets 2. To develop the best data analysis frameworks: Unique economic indices and data analysis frameworks Forward-looking indicators Proprietary indices and surveys Data analysis frameworks, scorecards and models 3. To provide authoritative independent economic insights: To give a uniquely local perspective on developing markets Truly expert, independent economic analysis and commentary Proprietary analysis techniques and frameworks Unique forecasts Timetric believes that world-class content delivery should be the enabling factor across all it does. All its research services follow the principle that data and research should be easy to access, visualize and consume. All economic research products are built on the Timetric economic research software platform, which has four layers: Unique, proprietary aggregation and curation software for pulling together the world s data A cloud time-series database filled with top-quality statistics from across the globe Web-delivered search, discovery and research software to allow customized data searches World-class browser-based display to visualize the data searched 3.4 Disclaimer All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording o r otherwise, without the prior permission of the publisher, Timetric. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Timetric delivers will be based on information gathered in good faith from both primary and secondary sources, the accuracy of which Timetric is not always in a position to guarantee. Timetric will accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect. The Insurance Industry in Palau, Key Trends and Opportunities to 2017 Page 12