Singapore: AXA sale to HSBC highlights growth potential of life insurance sector

| 31 Aug 2021

The recent agreement to acquire AXA Insurance Pte Ltd (AXA Singapore) by HSBC Insurance (Asia-Pacific) Holdings (HSBC Insurance) demonstrates the continued growth potential of Singapore's life insurance segment, according to a new AM Best commentary.

In its new Best’s Commentary, “HSBC’s Acquisition of AXA Singapore Highlights Singapore Life Insurance Growth Prospects”, AM Best states that demand for long-term financial planning and health protection is continuing to support Singapore’s life insurance market prospects.

The HSBC Insurance-AXA Singapore deal takes place at a time when the Singapore life market has seen a strong rebound in weighted new business premiums recorded in the first half of 2021. In addition, recent and future life insurance growth is expected to be supported by the city-state’s attractiveness as a home for affluent and high-net-worth individuals.

Generally, AM Best is of the view that life insurance companies with international expertise in investment and wealth management have notable advantages in designing sophisticated products with more attractive investment terms and features—an important value proposition amid the current low-interest-rate environment. Nonetheless, life insurers with product offerings that include significant investment risks/guarantees have to balance the attractiveness of these products with the capital requirements that arise for the insurer.

Health & employee benefits

The health and employee benefits lines of business also remain important growth drivers for life insurers in Singapore. Nonetheless, AM Best notes that companies engaging in these lines of business continue to face underwriting performance challenges, particularly for individual medical and critical illness products.

In Singapore, aside from group health business, which delivered adequate profitability in 2020, health insurance is viewed as a difficult line of business due to the weak results of long-term individual policies.