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Multinational Landscape in Asia

One key challenge for markets in the Asia region is the growing likelihood and impact of natural catastrophe, due to climate change.
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By Diana Accordi , 

Asia Leader, Multinational Advisory Practice

08/04/2024 · 3 minute read

With increasing geopolitical tensions and challenges, the global landscape is potted with uncertainty, and evolving risks are looming on the horizon. Despite this, global trade has not slowed, and there are clear pockets of opportunity in certain regions for multinational expansion.

During a recent webinar hosted by Commercial Risk, namely “Exploring risk horizons: Insights for multinational risk managers in Asia and Latin America”, Marsh leaders discussed the principal risks and emerging challenges that multinationals are encountering in two growth regions: Latin America and Asia.

Diana Accordi, Marsh multinational advisory practice leader, took a deep dive into the growth of multinational operations in Asia and provided insight into the challenges that risk managers within global organisations should keep front of mind.

Multinational expansion in Asia

During the event, Accordi outlined that there are three key challenges that are impacting both multinational companies and insurance markets in the region: increases in natural catastrophe risk, regulatory changes, and increasing consolidation.

One key challenge for markets in the Asia region is the growing likelihood and impact of natural catastrophe, due to climate change. Over the past 10 years, the typhoon season has extended from a June to September period to an April to early November period. There are also challenges with increased flooding in countries like Japan. Furthermore, Japan has traditionally been associated with earthquake exposure and, whilst this continues, insurers are now also highly concerned with typhoons and flooding.

Regulatory change is also impacting the region. There are currently a large number of tariff regulations that predominantly relate to property insurance. In some cases these tariff rates are seeing increases, such as in Cambodia in relation to fire insurance and property natural catastrophe.

Adding to this, regulators across the region — particularly in ASEAN countries — are collaborating more. The aim is to achieve greater coordination for financial institutions across these countries. While the benefits to banks and insurance companies are clear, these developments go hand in hand with an increase in auditing. In Vietnam, for example, auditing is now taking place annually.

The changing risk and regulatory landscape is further amplified for multinational companies in the region by the third key challenge: Consolidation. Asian companies are increasingly consolidating on both a regional and global basis. One of the catalysts for the increase was the global pandemic, which triggered a trend of investment buying by multinational companies in the region. As well as consolidation within the region, Asian companies have looked to North America, Latin America, and Europe for both expansion and acquisition.

As companies expand across the region and beyond, there is a growing need for their insurance to include global programs that service their global strategies. In some instances, this involves collaborative offerings from insurers in the domicile countries and international providers. Today, with the evolving risk and regulatory landscape, both domestic and international insurance providers are finding ways to innovate their global solutions, to ensure they cater to the trends of the day.

Conclusion

Multinationals exploring expansion into Asia will need to give strong consideration to local regulation as the regulatory environment continues to evolve – particularly within the ASEAN group.

With regard to risk transfer, the appetite and capacity within the region maintains the buoyancy it has held for the past five years; this creates an environment where multinationals exploring the region are in a good position to thrive with resiliency.

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