ASEAN Insurance Quarterly Issue 3

EMBRACING

Change How insurers could adapt to a rapidly changing world

AIC Conference goes to Cambodia

Myanmar opens doors to insurers

Rice insurance a hit in Thailand

AIC UPDATE

Cambodia welcomes the ASEAN Insurance Council

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HE Ministry of Economy and Finance of the Kingdom of Cambodia, in partnership with the Insurance Association of Cambodia,

will have the honor to host the 18th ASEAN Insurance Regulator’s Meeting (AIRM) and the 41st ASEAN Insurance Council Meeting (AIC) from October 27 to 29 at Sokha Phnom Penh Hotel.

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AIC UPDATE The annual forum for regulators and private insurers in the region is a very important event as it is happening as ASEAN enters the era of economic integration.

Cambodia welcomes the ASEAN Insurance Council

As its objective and commitment to promote the development of insurance in the Region, the AIC has been playing a significant role in driving not only in providing

The AIC plays a strategic role as an intermediary between the private insurers and regulators to pursue a vision for the council to be a strong and prestigious association that will help facilitate cooperation and collaboration in the region’s insurance industry.

By working with the AIRM, the AIC contributes in finding ways for the sector’s strategies to improve insurance development in the region. These include recommendations from insurance companies that have been presented and submitted to the ASEAN Insurance Regulators in their meeting last year in Brunei Darussalam.

constructive inputs and recommendations to the ASEAN Insurance Regulators, but also contributing to the developments in insurance markets and its implications as the region works towards establishing an AEC. ASEAN INSURANCE QUARTERLY

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AIC UPDATE

Cambodia welcomes the ASEAN Insurance Council

This important role is likely to continue beyond the official launching of the AEC early next year. Accordingly, it is of significant important that aspirations and concerns of insurance industry in the region can be accommodated adequately in the drafting process of the post-2015 AEC. In order to facilitate greater Insurance Industry engagement on the post-2015 AEC, AIC has done several key activities in 2015, which it is expected that the outcomes of the activities will be presented to the yearly AIRM Meeting in Phnom Penh.

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The AIRM is a valuable platform for the region’s insurance regulators to have forthright and open exchanges of ideas, views, and to foster closer cooperation for the development of the insurance sector in the region. Insurance regulators and the industry will definitely need to work closely together to drive regional development successfully.

The AIRM’s long-partnership with the AIC demonstrates that the Insurance Regulators recognize the importance of collaborating with the industry to overcome challenges from the changing financial landscape and capitalize on market opportunities in the years ahead, and to promote shared ownership of desired outcomes in supervision and market development, as well as how to harness the opportunities in the insurance industry

The AIC plays a strategic role as an intermediary between the private insurers and regulators to pursue a vision for the council to be a strong and prestigious association that will help facilitate cooperation and collaboration in the region’s insurance industry.

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AIC UPDATE The 41st AIC Meeting will be held back to back with the 18th ASEAN Insurance Regulators’ Meeting and the 12th ASEAN Insurance Training and Research Institute (AITRI) Management Committee Meeting, and several other concurrent meetings to be held on 27 October 2015 as follows: • 16th ASEAN Council of Bureaux (COB) Meeting • 13th ASEAN Insurance Education Committee (AIEC) Meeting • 8th ASEAN Natural Disaster Research Works Sharing (ANDREWS) where many useful ideas and insight to be shared to increase the capacity building and to boost the industry development in the Region.

AYIM PROGRAM At the 41st AIC Meeting, under ASEAN Insurance Education Committee (AIEC) and managed by Singapore College of Insurance (SCI), the 6th ASEAN Young Insurance

Cambodia welcomes the ASEAN Insurance Council

Managers (AYIM) will be conducted from 26 October to 1 November 2015 at the Sokha Phnom Penh Hotel and Residence.

The AYIM program is designed to develop promising, high-potential young insurance managers into multifaceted leaders with an integrated view of management fundamentals and a broad market vision to assume the crossfunctional responsibilities expected of company and industry leaders.

The AYIM Program is targeted at promising, high-potential young insurance managers, between 31 and 40 years of age, from life and non-life insurance organizations across the ASEAN markets, who have been identified for increasingly significant and broader management roles in their organizations, and as being capable of providing dynamic leadership to their organizations

ASEAN INSURANCE CONGRESS The ASEAN Insurance Training and Research Institute (AITRI) is organizing the ASEAN INSURANCE QUARTERLY

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AIC UPDATE

Cambodia welcomes the ASEAN Insurance Council

10th ASEAN Insurance Congress that on 26 October 2015, one day prior to the AIC Meeting at Sokha Phnom Penh Hotel and Residence. This is a one-day congress for ASEAN insurance professionals from all over the region to network and exchange knowledge/ expertise on strategic matters and challenges in their respective market.

It is expected that the AIC will play a more pivotal role in the coming years and serve as an important platform to facilitate the

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The AIRM’s partnership with the AIC demonstrates that the Insurance Regulators recognize the importance of collaboration to overcome challenges and promote shared ownership of desired outcomes in supervision and market development.

exchange of ideas and information amongst insurance industry on the challenges and opportunities in each of ASEAN’s member respective markets.

The AIC has embarked on some important projects of mutual interest from education, talent development to catastrophic studies, which intended to support the advancement of the insurance sectors in the Region. It is also hoped that ASEAN Insurance Regulators will always support AIC initiatives by encouraging dialogues and discussions towards successful insurance growth and integration in the region.

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CAMBODIA

10 things to do in

Cambodia

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AMBODIA will never disappoint when it comes to charm and allure. From the stupendous achievement of Angkor Wat and its well-known offshoots to the natural splendor of Tonle Sap Lake, one of

the world’s largest freshwater lakes, this part of the country is a fascinating and rewarding place to visit. We can all learn lessons from Cambodia’s bitter past and nowhere more so than at the Tuol Sleng Museum.

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CAMBODIA

10 things to do in Cambodia

From war to peace -- perfect peace -- at tranquil and secluded Bamboo Island, while another relatively peaceful spot is Battambang in the country’s rice bowl. Try your luck at the casinos in Sihanouksville and finally sample the culture through the performing arts in Phnom Penh’s Chatomuk Theater.

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Angkor Wat Complex

The ruins of Angkor are found to the north of the Tonle Sap Lake near modern-day Siem Reap and many people visit Siem Reap with the sole intent of using it as a base from which to visit Angkor. The largest pre-industrial city in the world at 400sqk, it is a UNESCO World Heritage Site.

Phnom Penh Royal Palace

Built in 1866, the site contains various buildings of interest, including the Khmer-style Throne Hall, now used for special ceremonial occasions. South of the Throne Hall are the Royal Treasury and the Villa of Napoleon III, built in Egypt in 1866, for the opening of the

Suez Canal, and was later presented to the Cambodian king as a gift.

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The Bayon

The Bayon is at the centre of Angkor Thom (literally ‘Great City’), which forms the heart of the Angkor complex as it is today.

This inner city is surrounded by a moat, and approached at the four cardinal points via huge stone gates and causeways flanked by statues of gods and giants.

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CAMBODIA

10 things to do in Cambodia

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The Phnom Penh Royal Palace contains various buildings of interest, including the Khmer-style Throne Hall, now used for special ceremonial occasions.

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Ta Prohm

If Angkor Wat and the city of Angkor Thom are best known for grandeur and majesty, then to the east, the temple and monastery of Ta Promh wins hands down for sheer dramatic effect. Unlike most other monuments, Ta Promh has been left the way it was originally found.

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Tonlé Sap Lake

The Tonlé Sap Lake is the largest freshwater lake in Southeast Asia. During the monsoon season between June and October the Tonlé Sap River reverses its flow and runs in the opposite direction, filling the Tonlé Sap Lake, making it the only river in the world that flows in both directions.

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CAMBODIA

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Tuol Sleng Museum

10 things to do in Cambodia

Cambodia’s tragic past can be seen less painfully through the perspactive of time and its war museum, if not the most cheerful place in the world, can be extremely instructive in terms of coming to grips with what actually happened during those terrible years.

Bamboo Island

A few days on Bamboo Island, off Sihanoukville’s coast, comes highly recommended. The boat ride takes about half an hour and once there you will find that only about 30 people live on the island. On its north-facing crescent beach Bamboo Island has three bungalow resorts, two restaurants and two bars and is very, very laid back.

Battambang

Battambang is somewhat of an ode to French colonialism. The city lies in the heart of the Northwest and until the war years it was the leading rice-producing province of the country. It offers not only one of the best

preserved examples of the French Colonial era, but also the small-town feel you expect to encounter in Cambodia as a rule.

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Sihanoukville

Sihanoukville is not exactly Southeast Asia’s answer to Las Vegas but it does offer a few venues for those who enjoy to throw the dice and play footsie with Lady Luck.

Presently there are four hotels offer gamblers their favourite games: blackjack, roulette, baccarat, gaming machines, and poker.

Apsara Dance Performance

Apsara Dance draws its inspiration from the mythological court of the gods and from its celestial dancers, the Apsaras. The dance took on its own unique form adding movements and meaning, during the reigns of Jayavarman II and Jayavarman VII as well as in the Angkor era.

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PHILIPPINES

Philippine insurers gird up for massive transformation

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AJOR changes are in the horizon. These changes would bring with them a double-edged sword that could be spell good or bad fortune for the industry.

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PHILIPPINES These are the words of Mr. Michael Rellosa, chairman of the Philippine Insurers and Reinsurers Association (PIRA) as he challenged insurance leaders in the Philippines to gird themselves up for major transformations.

“The balance of economic power is shifting from the west to the east -- with Asia being eyed as the next hotbed of economic growth,” he said.

“At present, Asia accounts for less than a third of the world’s GDP. But by 2030, experts predict that Asia -- with the growth it is experiencing right now -would account for two-thirds of the world’s economic output.

“And by that time, China is expected to have overtaken the US as the largest economy in the world.”

Philippine insurers gird up for massive transformation

What does this mean for the Philippine non-life insurance industry?

Rellosa believes this means “greater opportunity for all of us.”

“But this also means greater competition as Western insurers are obviously aware of this predictions, too. These socalled Big Boys are definitely training their sights to Asia -including the Philippines -- as we speak,” he said.

CHANGING RISKS Rellosa noted that Philippine-based insurers have to deal with another challenge -- Changing Risks.

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PHILIPPINES

Philippine insurers gird up for massive transformation

“We are facing risks brought about by the changing climate,” he said, noting that during Holy Week of 2015, a super typhoon codenamed Maysak formed in the Pacific Ocean as was forecasted to barrel through the Philippines.

“But miracle of miracles, this super typhoon quickly lost strength as it got nearer the Philippines,” he said.

“I am a Catholic and I believe in the power of prayer. But I know I have to do other things to manage the risks our clients are facing. This is why we go to us in the first place.”

He added that insurers are also facing so-called emerging risks brought about by the change in technology.

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CHANGING CUSTOMERS

Insurance companies deal with risks, and Rellosa said it is but natural for them to think of the future.

But he said they must look further ahead, way, way ahead into the future.

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Maysak was just like Haiyan and the pictures taken by NASA were frightening.

“Cybercrime is on the rise. Our over dependence on computers is also a risk.

What if massive brownouts happen? How will our business and the business of our clients continue?” he asked.

Meanwhile, Rellosa stressed that insurance companies also have to contend with their changing customers.

“Maybe because of the empowerment they get from using the Internet, our customers are becoming more and more demanding every day,” he said.

“This is both good and bad for our industry. Good because it is forcing us to be better, to be attuned to the times. But bad because sometime we are not ready.”

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PHILIPPINES

Philippine insurers gird up for massive transformation The Philippines is one of the most disasterprone countries in the world. In 2013, it faced super typhoon Haiyan, the strongest typhoon ever to hit land.

CHANGING INDUSTRY And ready or not, Rellosa pointed out that the insurance industry is even changing without insurance companies doing anything.

He said the industry is not just losing some players but gaining some new ones -- really new ones.

“With the advent of microinsurance, we

now see pawnshops, cooperatives and other distribution channels being developed,” he said.

“We see customers whom we normally consider uninsurable being covered by insurance. And we see new technologies developed for other applications now being used for insurance.”

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PHILIPPINES

Philippine insurers gird up for massive transformation

Rellosa cited a report that American search engine giant Google has entered the insurance agency business in California through its Google Compare.

He answered his question himself.

“Ready or not, these changes will come.

We cannot avoid them. Change -- whether we like it or not, whether we are ready for it or not -- will because of the happen.”

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Rellosa said he has a feeling that Google made this move to support its project to develop a driver-less car.

“Because if Google does not engage in the insurance business, it would have a hard time later on convincing insurers to include in their coverage a driverless car,” he said.

Then Rellosa posted his challenge to the industry: “Are we ready for such a breakthrough?”

Maybe empowerment they get from using the Internet, customers are becoming more and more demanding every day. This is both good and bad for our industry. Good because it is forcing us to be better, to be attuned to the times. But bad because sometime we are not ready.

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“Now, customers just need to go to Google Compare to get the best quote for their car insurance. Google is trying to apply technology that is being used for hotels and airline tickets to car insurance,” he said.

Rellosa said insurance companies only have two options: Change by Chance and just trust their luck and go with the flow.

Or Change by Choice and study how, when and where changes will happen and develop plans to make the most of those changes.

EMBRACING CHANGE So how do insurance companies embrace change? Rellosa provided four points:

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PHILIPPINES

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1. Change Our Focus.

Insurance companies deal with risks, and Rellosa said it is but natural for them to think of the future. But he said they must look further ahead, way, way ahead into the future.

“We need to reframe our mindset from the here and now to the there and then,” he said.

2. Be Creative.

He also urged PIRA members to be creative.

“We always hear this advice: Think out of the box! But what does it really mean? It only means get out of your comfort zone, get out of your old habits,” he said.

Rellosa quoted Albert Einstein as saying that “we cannot solve new problems with the same level of thinking that created them. We have to get out of the old paradigms, the old rules.”

Philippine insurers gird up for massive transformation

rules of business are being broken every day, pointing out that the oldest and biggest companies are not necessarily the richest.

“Now, the richest companies are those that have reinvented the wheel so to speak,” he said.

He cited Facebook as an example.

Facebook, he said, is now the largest media company in the world, yet Facebook does not generate content, does not have cameras, printing presses, or even celebrities.

“Its users -- over 1.4 billion as of last count and this includes 60 million of us Filipinos -- are the ones creating the content for Facebook,” he said.

“Did you know that every 60 seconds on Facebook, 510 comments are posted, 293,000 statuses are updated, 136,000 photos are uploaded? I’m sure many of you have already checked your Facebook status while I was speaking,” he said.

The PIRA chairman noted that traditional ASEAN INSURANCE QUARTERLY

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PHILIPPINES Rellosa also cited UBER, now the largest taxi company in the world yet does not own a fleet of cars. “UBER makes use of private cars with private owners serving as drivers,” he said.

And he pointed to AIRBnB as a third case in point. “For those like me who love to travel, AIRBnB is one of the best things to happen in recent years. It allows you to rent private homes, vacation houses, even yachts,” he said.

Then Rellosa asked: “Now, how do you insure cars that are used for UBER or properties that are used for AIRBnB, or cyber risks that are created through exposure to Facebook?”

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He called all of these as “opportunities.”

3. Listen and Learn.

Rellosa said the insurance industry depends on data to survive.

“Yet what kind of data do we have? Is this data still applicable for today? Is still relevant? If our data are already old, then my

Philippine insurers gird up for massive transformation

next question is, how much new data do we generate? And how much of these data do we really analyze?” he asked.

He noted that PIRA has developed the MCIS or the Motor Claims Information System.

Its function is to gather data on the motor car insurance claims of all PIRA member companies. It is supposed to provide insurers the means to prevent fraudulent claims. And it is even designed to analyze which makes or models of cars are accident prone.

Yet, Rellosa lamented that the data that MCIS has is less than half of the total claims the industry handles, barely enough to represent the industry. Hence, useless.

“Why can’t MCIS get the data it needs to be fully functional? This is the question we are trying to address this year under my watch. We would like to encourage insurance companies to provide their data on a timely and regular manner. We also would like to upgrade our system so we could analyze these data better,” he said.

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SINGAPORE

Raising the Ante in Development

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INGAPORE is upping the ante in developing its general insurance industry as it takes a proactive stance in raising standards of practice and improving areas of the business.

The island state is doing this through strong multi-sector cooperation, education initiatives, better use of technology, and bolstering its talent pool.

While priority remains on ensuring a profitable business and meeting the protection and risk management needs of the market, the industry has stridden towards ASEAN INSURANCE QUARTERLY

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SINGAPORE

Raising the Ante in Development

creating a more dynamic and leading general insurance market in the region.

Key efforts to achieve all these is to boost the practices of our insurers and enhance the efficiency in the way they do business.

The motor insurance sector, the biggest segment of our industry, has benefited the most from such efforts, particularly in the success in implementing and promoting the Motor Claims Framework (MCF). The framework has been markedly effective in simplifying and speeding up motor claims that the number of motorists making reports within 24 hours of their motor accidents has jumped to 80% since the scheme was put in place in 2008.

Motor Accident Guide A recent headway Singapore has made for its motor sector was the introduction in 2014 by the State Courts of a Motor Accident Guide, which provides people a ready reference when they are involved in a motor accident.

The guide encourages the public, motorists, and insurers to settle motor accident claims out of court, which is believed to help the insurance industry bring down the cost of claims processing and settlement.

GIA Internship Programme One long-running initiative the General Insurance Association of Singapore (GIA) has proudly pioneered and consistently works on is the GIA Internship Programme (GIP), ASEAN INSURANCE QUARTERLY

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SINGAPORE

Raising the Ante in Development

a scheme that provides undergraduates with opportunities to learn and immerse themselves in a global experience with general insurance companies.

Now on its 8th year, the GIP has nurtured 181 successful interns since its launch—42 of whom have joined the industry as full-fledged general insurance professionals as of the first quarter of 2015.

Education for practitioners, customers Recognizing the importance of deepening and growing the skills and knowledge of insurance practitioners, GIA has expanded its education offerings and introduced two new series of seminars: the Actuarial Knowledge Sharing Sessions and the Property Knowledge Seminar Series.

Meanwhile, one of GIA’s longest-running and well-followed seminar series, the Maritime Knowledge Shipping Session is now on its 9th year. This features four seminars in a year on various topics focused on the maritime and marine insurance industries.

Likewise, Singapore’s Fire Education Seminar Series is now on its 5th year of educating industry practitioners on issues affecting the fire insurance sector. The GIA has been organizing this series in collaboration with the Singapore Civil Defence Force and the National Fire and Civil Emergency Preparedness Council.

The past few years have also seen the GIA stepping up its work in the area of consumer education. On this front, GIA organized a lunch talk on motor and travel insurance ASEAN INSURANCE QUARTERLY

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in 2014 to educate consumers on choosing the right type of motor and travel insurance policies and the factors to consider in making such a selection.

Motor insurance being a compulsory and hence widely used type of insurance in Singapore, the GIA has made a commitment to continue educating consumers on various issues involving motor insurance.

Among other things, GIA has been running the “General Insurance & U� series in a business newspaper, covering key issues affecting general insurance customers in Singapore. Last year, the series put the spotlight on the growing problem of motor insurance fraud in the country.

Raising the Ante in Development

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A recent headway Singapore has made for its motor sector was the introduction by State Courts of a Motor Accident Guide which provides people a ready reference when they are involved in accidents. The guide encourages out-of-court settlements which would help the insurance industry bring down the cost of claims processing.

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SINGAPORE

Demand continues to grow

Being a major regional business and financial center, Singapore is expected to continue seeing demand for commercial and specialist insurance. As witnessed the past ASEAN INSURANCE QUARTERLY

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SINGAPORE few years, the growing diversity of Singapore’s businesses and their specializations—and along with it the types of risks they manage and need to protect against—has spurred growth in our specialist lines of business.

Credit Insurance, for example, saw a spike in premiums—growing by 52% and 53.6% yearon-year in net earned premiums in 2014 and 2013 respectively—as the need for credit protection increased.

This is the reason Singapore continues to attract global players to its fold, such as the latest entrant to the market, Berkshire Hathaway Specialty Insurance Company. The company became the 35th member of the GIA in March 2015 after receiving its insurance license in late 2014.

On the personal insurance front, the sustained efforts of the general insurance industry to bring about greater awareness of the need for personal general insurance products, such as travel, personal accident and health, have borne some fruits. GIA has seen higher appreciation and take-up rate of such products as it continues its campaign

Raising the Ante in Development

to educate Singapore consumers of the need for proper and adequate insurance coverage. Health Insurance, for example, continued to be the best performer among the major classes of business in 2014, growing by 31% year-on-year in net earned premiums.

In top form In a testament to the fit form of our business, the Singapore general insurance industry delivered a robust underwriting result in 2014, posting a 37.4% increase to S$391.7 million in its underwriting performance over 2013. This was thanks in large part to the more than 500% surge in underwriting profit of Work Injury Compensation insurance.

Meanwhile total gross premiums and total net earned premiums registered modest growths. Total net earned premiums grew 3.1% year-on-year to S$2.6 billion, while total gross premiums went up 1.1% to S$3.53 billion.

For the sixth year in a row, the general insurance industry trimmed its incurred loss ASEAN INSURANCE QUARTERLY

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SINGAPORE

Total gross premiums have so far grown slimly in 2015. As of end-June 2015, gross premiums stood at S$1.9 billion, up by 0.65% over the same period in 2014. On the other hand, net earned premiums went down by 6.75% from S$1.3 billion in 2014 to S$1.2 billion this year. Meanwhile underwriting profit inched up by 2.71% to S$144 million from S$140.3 million in the first half of 2014.

More work ahead

Outside Singapore, GIA aims to step up its cooperation with our counterparts in ASEAN to ensure a smooth and timely integration of the insurance markets in the region as the region transitions into an integrated economic community.

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The General insurance Association has seen higher appreciation and take-up rate of personal insurance products as it continues its campaign to educate Singaporeans on the need for proper and adequate insurance coverage.

There is more work ahead for Singapore as it continues to punch above its weight and make it a world-class insurance hub.

GIA is committed to continue to strengthen the Singapore general insurance industry as a business, a service provider, and a pillar in the economy through greater knowledge sharing, innovation and use of technology, better cooperation, and more active talent building.

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ratio in 2014. It successfully cut its loss ratio by 4.8 percentage points to 48.4%, significantly higher than the reduction seen the previous year.

Raising the Ante in Development

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MALAYSIA

Sustained Growth in Challenging Times

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HE general insurance industry in Malaysia grew by 2.3% to RM 9.07 billion in gross written premiums

from January to June this year.

This growth was at a slower pace compared to 2014, which was at 6.4% ASEAN INSURANCE QUARTERLY

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MALAYSIA and reached RM8.87 billion. The slow growth was attributed to a challenging business environment due to milder business optimism and moderation in consumer spending, as a result of the economic uncertainties and increased cost of living. However, regardless of the lower growth rate, the general insurance industry still reported a RM0.2 billion increase in gross written premiums.

Sustained Growth in Challenging Times

Motor Insurance, being the largest insurance business class, registered a 2.1% growth compared to 8.35% last year. In contrast, the second largest class, Fire Insurance saw a higher growth rate of 5.0% compared to 4.22% last year. This steady growth was also recorded by the Marine, Aviation and Transit (MAT) Insurance and Personal Accident Insurance classes respectively at 6.1% (1H2015) compared to 0.44% (1H2014) and 7.4% (1H2015) compared to 4.05% (1H2014).

Health Insurance registered a decrease by 6.8% in gross written premiums at RM0.58 billion from RM0.62 billion with the corresponding period last year. On a positive note, the general insurance industry captured a higher underwriting profit from RM0.64 billion in 1H2014 to RM 0.75 billion this year, with the overall industry’s loss ratio improving to 56.7% from 58.4% with the corresponding period last year.

The recent or anticipated changes within the Malaysian insurance industry have seen ASEAN INSURANCE QUARTERLY

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the regulator, industry associations and all member companies working tirelessly and in over-drive mode.

The first on the list is the liberalization of the insurance industry which will see a transformation of the business models and operations of general insurance companies.

The general insurance industry in Malaysia has generally been tariffed based, especially for the major classes of Motor and Fire insurance. These two classes account for close to 60% of the general insurance business underwritten in the country. The industry associations here have set out on a right footing in preparing the industry for this liberalization process.

The crafting of a liberalization roadmap in close consultation with the regulator which promotes a phased approach to liberalization is being considered. The roadmap not only encompasses the aspirations of the regulator, but also includes the expectations of insurance companies amidst an open market environment. It is a known fact that total control during the transition period to a

Sustained Growth in Challenging Times

fully liberalized market is near impossible, as seen in other countries. Premiums will certainly fluctuate and insurers must realize the impact of this process on their bottom lines and be bold enough to take remedial action and thereby ensuring stability in the market.

In any liberalized market, the principal focus has always been on consumers’ interests and the primary aim has been to ensure that they get the best products with the best pricing. As they are the end-users of this product, it is important to make them fully understand the liberalization process. The regulator has stressed the importance of consumer ASEAN INSURANCE QUARTERLY

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Only one out of 86 people in Myanmar holds an insurance policy.

Insurance penetration as a share of GDP is currently only 0.05%.

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MALAYSIA

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MALAYSIA awareness and in response to this, the industry will adopt a structured educational and awareness program to enable the common man to understand liberalization better.

The fundamental characteristic of a resilient industry is a strong risk governance culture. With the changing risk landscape, it is important for insurance companies to manage their risks effectively. The regulatory landscape in Malaysia has converged towards a risk based culture with strengthened corporate governance, enterprise risk management and structured reporting to the regulator. These are all signs of a maturing market with high level principles of reserving, underwriting and addressing business and operational risks.

With this strong foundation, the new growth opportunities available through economic development are more prevalent to insurers. Insurance serves a number of valuable economic functions that are largely distinct from other types of financial services. The indemnification of risk pooling properties of insurance facilitates commercial

Sustained Growth in Challenging Times

transactions and the provision of credit for mitigating losses. The awareness of insurance as a risk management tool and most fundamentally, the availability of insurance encourages risk-averse individuals or entrepreneurs to undertake a high risk business venture on higher return, that otherwise would have been avoided.

The ASEAN Economic Community (AEC) will open up new vistas of opportunities for Malaysia and its neighbours for growth and business expansion. ASEAN member countries have been working to remove trade barriers and tariffs with the aim of having a single market which will provide an unrestricted flow of goods, services, investment and skilled labour with freer flow of capital. Sharing a similar culture in most instances within this region is a plus point for us to progress. This is an opportunity in the horizon for all market players. At PIAM we have a formed a new “Regulatory and Industry Development� Sub-committee to study the implications of AEC and how we can realise the benefits of an open market for ASEAN INSURANCE QUARTERLY

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MALAYSIA

Sustained Growth in Challenging Times

all our member companies.

Another area which will be explored further would be the evolution of various new distribution channels, primarily through the internet. Although some may comment that this is a disruptive change as it disconnects the human element between an intermediary and the insured, the reach to the public, especially the Gen Y through this channel cannot be ignored. The only way to get through the Gen Y is through the internet and the various social media platforms.

Technology itself presents challenges to insurance companies in Malaysia. With the introduction of the Personal Data Protection Act in Malaysia, excellent service standards of insurance companies now also entail ensuring customer data is secure at all times and protected from cyber-attacks. These are prudent measures which not only protect the customer’s data but reflect upon the integrity of insurance companies in managing such data.

As articulated under the Financial Sector Blueprint, among the policy objective of Bank Negara Malaysia is to facilitate the

development of micro-insurance products.

The regulator had recently consulted the insurance industry on its framework for microinsurance; products designed to provide risk cover to the low-income community in the rural areas to enhance financial inclusion.

Generally, these products are focused towards providing adequate coverage to this customer segment and the products must be simple, accessible, protection focused and efficient. This is a new growth opportunity and neighbouring countries like Thailand, Philippines and India have successfully ASEAN INSURANCE QUARTERLY

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MALAYSIA

On the down side, we have recently experienced a bane of catastrophes which have never before anticipated to have any such occurrences. Malaysia is one of the country which had previously been on the exclusion list and this year we experienced an earthquake in Sabah. The risk landscape for Malaysian insurers is facing significant challenges, not only by volatility and external shocks to the economic system but also with more severe natural catastrophes. Insurers had to revisit their CAT strategies to address this new risk element.

PIAM had also given special focus to the industry’s most precious asset and that is human capital. Talent knows no borders and will seek new horizons wherever the opportunity lies. To sustain the growth of our industry it is important that we continue to attract, develop and retain our talent in Malaysia. PIAM has started building a pipeline of talent though its GIIFT project.

This General Insurance Internship For Talent (GIIFT) project has profiled the career opportunities in our industry to the pool of young talent at our universities. It is the foundation for us to build on to identify and groom the next generation of leaders in our industry.

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The recent or anticipated changes within the Malaysian insurance industry have seen the regulator, industry associations and all member companies working tirelessly and in overdrive mode.

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introduced such covers. Perhaps we can learn more from them through our contacts with their insurance associations.

Sustained Growth in Challenging Times

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THAILAND

Growing Demand S Drought prompts farmers to seek insurance

EVERE drought in many parts of Thailand has encouraged more rice farmers to buy main-crop insurance, as they are now increasingly aware that coverage helps hedge against harvest failure caused by natural disasters and that they can claim if their plants are damaged.

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THAILAND

Growing Demand

This developed as the Thai General Insurance Association (TGIA) will seek a discussion with the executive committee of the National Catastrophe Insurance Fund, requesting that the fund reinsure some main rice-crop insurance from local insurers, in order to encourage the use of insurance among farmers Last year, farmers of around 112,000 hectares planted to rice had purchased crop insurance.

TGIA President Anon Vangvasu projects around 240,000 hectares will be insured this year as the industry believes rice farmers now have more awareness of the importance of insurance as a risk-reduction tool.

The current drought affecting much of the country has caused rice farmers to buy insurance, while the government helps via a scheme to subsidize them to the tune of 80 per cent of the premiums, he added.

At present, seven insurers offer main ricecrop insurance through branches of the Bank for Agriculture and Agricultural Cooperatives.

This year’s coverage is available from May 6 to August 14, with about 20 percent of the expected 240,000 hectares of main ricecrop coverage projected by the association having already been purchased by farmers, Anon said. “With the major harvest starting in August, the association expects many farmers will buy ASEAN INSURANCE QUARTERLY

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THAILAND The association chief noted that in other countries, the government would not directly subsidize farmers in the event of crop failure or damage, but would use the insurance mechanism to help tackle risk from natural disasters, including drought.

In Thailand, in order to reduce the government’s subsidy, the National Catastrophe Insurance Fund should participate in the scheme by facilitating reinsurance, as local insurers are currently unable to shoulder all the risk and need to transfer some of it to foreign reinsurers, he explained.

“Local insurers would prefer to shoulder more of the coverage and reduce the transfer of cover to international reinsurance companies, as premiums from Thai clients should be handled by Thai firms,” he said.

The National Reform Council agrees with the reinsurance idea, which the TGIA will discuss further with the National Catastrophe Insurance Fund, he said.

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Thailand is one of the largest producers of rice in the region, with a total of 10.08 million hectares of paddy fields planted to rice. For this year, the budget for the compensation of insured rice fields was set at US$14.5 million.

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insurance that month,” he said.

Growing Demand

Moreover, the association projects that the main-crop rice-farming area covered by insurance next year will soar to 480,000 hectares.

“We will track the performance of insurance for the main rice crop for at least three years before proposing to the government that it expand insurance coverage to other economic crops, such as corn and sugar cane,” Anon said.

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THAILAND Meanwhile, Arnon Opaspimoltum, deputy managing director of Viriyah Insurance - one of the seven main ricecrop insurance providers - said rice farmers now had more awareness of the benefits of buying insurance due to the uncertainty and risk of the weather.

Thailand is one of the largest producers of rice in the region, with a total of 10.08 million hectares of paddy fields planted to rice.

For this year, the budget for the compensation of insured rice fields was set at US$14.5 million, Finance Minister Sommai Phasee said.

The budget for the government crop insurance program was included in the US$82.8 billion budget bill that the Thai Cabinet approved for 2016.

In recommending for the increase in the number of insured rice fields, the Finance Ministry said using proper financial instruments to manage risk will help the country’s rice farmers cope with losses and other issues caused by natural disasters.

Growing Demand

The government has endorsed an insurance plan for rice crops harvested in the 2015 harvest year in its effort to help farmers get good prices for their rice. Less than 2 percent of farmlands entered the crop insurance scheme last year.

But the government expects more to avail of insurance since the state-run Bank of Agriculture and Agricultural Cooperatives (BAAC) now arranges the insurance scheme along with insurance companies to compensate farmers.

Farmers who avail of crop insurance pay a premium of about US$10 per hectare, depending on the degree of risk of the location of their farmlands while the government will contribute between about the same amount per hectare.

Compensation for damaged crop would be around US400 per hectare, about half of of which would be subsidized by the government and the rest paid by insurance companies.

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MYANMAR

Foreign insurers enter Myanmar

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YANMAR has allowed three foreign companies to offer liability insurance in Thilawa Special Economic Zone for the first time.

Only life, fire and all-purpose vehicle insurance have been available from foreign insurers in Myanmar until now.

Foreign insurers must have a three-year term for opening an office, at least 30 years’ experience and a minimum investment of US$3 billion to operate in the SEZs. ASEAN INSURANCE QUARTERLY

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MYANMAR They pay a licence fee of US$30,000 and an annual charge of US$10,000.

Myanmar Investment Commission has permitted more than 30 foreign investors to operate at Thilawa with a total investment of more than US$400 million.

Insurance is uncommon in Myanmar, but demand is expected to grow in this poor country of 51.5 million people, said the Wall Street Journal (WSJ) in a report published in September.

The report entitled “Private Insurers Take Hold in Myanmar,” WSJ said that as part of economic liberalization, the Burmese government has been taking steps to open up what until 2013 had been an industry ruled for a half-century solely by state-run Myanma Insurance.

“Over the last two years, the government has slowly begun allowing domestic companies into the insurance market. And in May, the government permitted the first foreign insurance company, Sompo Japan

Foreign insurers enter Myanmar

Nipponkoa, to operate within the Thilawa special economic zone, followed by two others. But the transition has been rocky,” the report said.

According to WSJ, Myanma Insurance still has advantages over foreign companies -- it offers more than 40 products while private companies are restricted to about six, including a health insurance product launched in July.

“Breaking out from the pack is difficult because the Insurance Business Regulatory Board fixes prices for the products of Myanma Insurance and its private rivals. And the roughly dozen foreign companies that have opened up resident offices remain in a holding pattern until they are told they can tap into the market,” the WSJ said.

The report added that the Burmese government is weighing a plan to allow foreign insurers to partner with local ones and open local branch offices, though no timeline has been set yet.

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MYANMAR

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Foreign insurers enter Myanmar

Only one out of 86 people in Myanmar holds an insurance policy. Insurance penetration as a share of GDP is currently only 0.05%.

According to U.K. research firm Timetric, only one out of 86 people in Myanmar holds an insurance policy.

Insurance penetration as a share of GDP is currently only 0.05%, but insurance premium revenues could reach US$2.8 billion every year once the industry grows to reach its full potential over the next decade, the research company said.

That expectation partly reflects the growth in per-capita GDP in Myanmar, which was $1,197 last year, up from $1,101 in 2013, according to the World Bank.

The government’s push started two years ago when it gave out 12 licenses to private companies, which had to be able to set aside steep reserves for future claims payments. The amounts—$5.8 million for life insurance and $44 million for life and nonlife insurance— proved prohibitive for many companies.

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VIETNAM

Overcoming difficulties through new policies

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N the first six months of 2015, the socio-economy took place in the context of the world economy is forecast to continue to rebound, but not sustainable with the different

growth rate between regions, partly because oil prices and commodity prices fell down and made some impact at different levels to each area.

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VIETNAM

Overcoming difficulties through new policies

Total domestic product (GDP) in the first six months of 2015 increased by 6.28% estimated over the same period of 2014, the agriculture, forestry and fisheries increased by 2.36%, contributing 0.42 percentage points; industrial areas and construction increased 9.09%, contributing 2.98 percentage points; service sector increased 5.90%, contributing 2.22 percentage points.

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Credit markets, securities, real estate has recovered bringing about the competition to attract idle savings of life insurance, creating financial investment opportunities of insurance businesses with better efficiency.

State management regime for the insurance business was completed with the implementation of Circular 194 effective February 2015 which do not allow coinsurance after application and debt insurance without asset guarantee. The insurance industry that suffered loss for two consecutive years must stop doing business and follow the direction of the Ministry of Finance. The administrative procedures for opening branches and approval of

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In the country, gasoline prices fell that made a strong support for businesses and boost consumer spending. Policies enacted in 2014 and early 2015 were to take effect, enabling the enterprise sector to overcome difficulties.

An advantage for life insurance market in Vietnam is that saving interest rates kept reducing while investment risks increased more and more which fostered the need for saving insurance.

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VIETNAM

Overcoming difficulties through new policies

product, agent training and appointment of key officials had been ventilated and shortening one-third of the time The Ministry of Finance has approved the terms and tariff of motor vehicle insurance business for implementation in the first of May 2015 which resulted in better growth and safety performance of the market and reduced indebtedness incurred to insurers or handling of old debt.

The Finance Ministry is conducting amended Circular 126 on compulsory motor vehicle insurance

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VIETNAM which shall escalate liability level up to 100 million VND / person, amended Circular 103 which raises humanitarian assistance to 30 million / people, building a decree on obligatory insurance of construction activities include construction and laborer on construction site.

The Association of Vietnamese Insurers held its 4th Congress on 26th August in which amended the Charter, certified operation program, elected the Executive Committee and Board of inspection for the fourth term.

NON-LIFE INSURANCE MARKET The insurance companies continue to focus on the restructuring of insurance products, distribution channels, network operations, financial capacity, governance and build a database of information technology. Many insurers actively expanded utility services and customer care after sales creating competitive advantage.

Many insurance companies made use of the opportunity to open branches in some locations.

Overcoming difficulties through new policies

In the first half of the year, premium income of non-life insurance reached VND 15,329 billion with growth of 13.26% over the same period. According to ISA, quality of growth is better, creating good business efficiency.

Motor vehicle insurance reached premium income of VND 4,721 billion, grew 26.64%, compensated VND 1,846 billion, claim reserve VND 1,255 billion, loss ratio 65%. Insurers gradually complied with the rules, terms, and conditions of motor vehicle insurance business which have been approved by the Ministry of Finance carried out from 1st of May. Premium of motor vehicle insurance has been improved than before, insurers are gradually paid more attention to competition by quality of after-sales service.

Health and personal insurance gained VND 3,245 billion, grew 26.96%, compensated VND 1,232 billion, claim reserve VND 367 billion, loss ratio 49%. Many companies have focused on developing new health insurance ASEAN INSURANCE QUARTERLY

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VIETNAM

Overcoming difficulties through new policies

products with multiple customer preferences associated with insurance fraud control.

Insurance companies are working with the Ministry of Finance and the Association on building contract form of group health insurance.

themselves with their distribution methods (by changing the model of general agent or coperating with non-bank partners); customer segments (concentrating in enterprise customer) and continuously refreshed products.

Other lines including liability insurance gained VND 333 billion, down 1.1%; aviation insurance gained VND 324 billion, increased 24.75%; credit and financial risk insurance reached VND 69 billion, increased 48.52%; business interruption insurance reached VND 71 billion, down 7.84%; agriculture gained VND 25 billion, increased 90.34%.

Another advantage for life insurance market recently is that saving interest rate kept reducing while investment risks increased more and more which fostered the need for saving insurance.

LIFE INSURANCE MARKET In six months of 2015, life insurance market maintained its sharp growth rate of new business premium (55,2%). Beside the stable growth of top life insurers (in terms of premium), the others rose up with growth rate higher than that of the whole market. In addition to the advantageous policies for life insurance market, life insurance companies exerted all their strength to differentiate

The Insurance Supervisory Authority oriented the operational plan for life insurance market to six subjects: financial investment; tax policies in life insurance; propaganda for insurance education; improving the profession of insurance agent; developing new distribution chanel and preventing insurance fraudulent. Life insurance companies have been establishing Propaganda Fund as well as its strategy, action plan and solutions to develop life insurance market strongly and stably.

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Q&A

Vision

2025

Things you want to know about the ASEAN Community’s 10-year game plan

Q

What is the ASEAN Community Vision 2025? What is the background and purpose of the ASEAN Community Vision 2025?

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ASEAN leaders took the decision at the 23rd ASEAN Summit in November 2013 to develop a Post2015 Vision to realize a politically cohesive, economically integrated, socially responsible, and a truly people-oriented, people-centred

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Q&A

and rules-based ASEAN. The vision will be a bold, visionary, progressive and forwardlooking document to reflect the aspirations of the next generation of ASEAN nationals.

It aims to sustain the momentum of regional integration and further contribute to strengthening the ASEAN communitybuilding efforts.

ASEAN community-building is a continuous and evolving process. It is therefore important to chart the future direction of the ASEAN Community into the next decade. This vision, when realized,

Vision 2025

will further consolidate and deepen the ASEAN community-building and regional integration process.

Through the consolidation and integration process, it is envisaged ASEAN will be able to respond proactively and effectively to the emerging threats and challenges presented by the rapidly changing regional and global landscape.

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Q&A

Q A

Vision 2025

How is the 2025 visioning process being carried out?

What are the expected outputs produced by the HLTF? What consultations have been conducted and who are involved in the consultations?

Undertaking the task of developing the vision is the High Level Task Force (HLTF), comprising ten high-level Representatives from all ASEAN Member States. The HLTF, chaired by Malaysia as the ASEAN Chair 2015, is mandated to develop and formulate a robust and realizable Vision to guide ASEAN’s evolvement over the next ten years.

The final document will be presented to ASEAN Leaders in November 2015 when they meet in Kuala Lumpur for their endorsement and further guidance if necessary.

This will be a comprehensive document covering all three aspects of the ASEAN Community, namely the Political-Security Pillar (APSC), the Economic Pillar (AEC) and the Socio-Cultural Pillar (ASCC). A specific blueprint will be developed for each pillar detailing the outcomes we want to achieve in the next ten years. These blueprints referred to as blueprints will be part of the vision and will contain realizable proposals and aspirations for each pillar.

Development of the ASEAN Post-2015 Vision and the Blueprints is now work in progress and being compiled separately.

The final stage will be the consolidation of all the documents for cohesion and consistency and finalized as the ASEAN Community Vision 2025 to be presented to the ASEAN Leaders for approval. This Document will serve as a general guide to further strengthen and integrate ASEAN over the next ten years.

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Q&A

Q A

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When will this exercise be completed?

The HLTF plans to submit the final drafts of all outcome documents to the ASEAN Coordinating Council Working Group (ACCWG) by 15 October 2015.

The Kuala Lumpur Declaration, the ASEAN Community Vision 2025 and all ADs will be adopted at the 27th ASEAN Summit in November 2015.

The ASEAN community-building is a continuous and evolving process and does not end by December 31, 2015.

Q A

Vision 2025

Why ten years and not five years?

Every community needs to develop and evolve. The ASEAN Community is no different. It takes time to implement and to become deeply established in the fabric of the Community. Much more can be achieved over 10 years that will benefit all the people of ASEAN. By having in place a ten-year Vision we can establish a framework for continuous development that will help unite and integrate further our 10 countries. It is also a Vision that will enable the people of ASEAN to see and participate in the direction established by the leaders of ASEAN for its growth and development.

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PARTING SHOT

A man sits on top of one of the temples in Siem Reap to watch the setting sun.

Photo by Junep Ocampo, Philippines