The Hong Kong government has recently suffered an angry reaction from the insurance industry in response to its proposed standardised medical insurance plan. Insurers argue that the government has backed down, in this new move, from regulating the costs of private hospitals. Under the new Health Protection Scheme (HPS), insurance companies would offer clients the choice of not paying, or paying a known extra amount, for certain procedures. Read more
The most recent reports from China confirm that over 60 people have been diagnosed with bird flu, and 13 have died. So far, there are no cases of the disease being passed from one human to another – all of those people infected contracted the disease directly from infected poultry.
The absence of human-to-human transmission means that this particular strain of bird flu, H7N9, has less chance of spreading – a person unknowingly infected with the illness will not be able to simply board a bus or plane and spread the virus to other parts of the world.
Premium rates over recent years in Hong Kong, and the majority of the Asian region, have consistently been above average in comparison to the rest of the world. A number of reasons lie behind this, but the main contributing factor is down to the fact that the cost of Hong Kong’s private healthcare facilities rank at the second most expensive in the world after the United States.
Hong Kong’s private hospitals are renowned for their 5 star hotel style accommodation and exceptional standards of care and service. However, this comes at a price and without suitable health insurance coverage, patients will be left with extortionate bills, even for basic procedures.
2012 saw the best financial results for international medical insurer William Russell, with a 30 percent increase in business from the previous year. The opening of a new sales support office in Hong Kong has also enabled the insurer to reach more clients in Asia, and ensures better service and support. Read more
Leading international health insurance provider, IHI Bupa recently announced their premium increases for 2013, which have come in at the lowest percentage increase recorded by the company in five years. This tapering off of increasing health insurance premiums is a trend that seems to be occurring across the health insurance industry. Globalsurance, one of the largest distributors of IHI Bupa plans, has seen many other providers offering premiums that are slowing down in their rate of increase and believes this is likely due to falling medical inflation worldwide.
For more than 30 years, IHI Bupa has been a leading provider of international health insurance policies for expatriates and high-net worth individuals all over the world. Distributors and customers all tout IHI Bupa to be one of the best in the industry, and the company has formed an especially strong presence in Asia. Their policies include coverage in all parts of the world, including in the USA and are guaranteed renewable for life, an option that other providers are often apprehensive about offering.
Hong Kong’s economic development over the last few decades has led to improved measures for dealing with natural disasters. With the installation of the Hong Kong Observatory in 1883, early storm warnings and procedures were gradually established to handle the region’s seasonal typhoons. The numbered Signal System, ‘T1, T3, T8 & T10’, promoted public awareness of typhoons and arranged a platform to notify residents of each storm’s potential severity. (When T8 is hoisted workers are released and encouraged to go home.) Now Hong Kong residents handle five or six typhoons annually, but there are growing concerns that many of them are severely underinsured for the long term effects of a natural catastrophe.
Filed Under Aetna, Africa, Allianz, Asia, AXA PPP, BUPA, China, China insurance, DKV, Europe, Expat Insurance, Health Insurance, Hong Kong, IHI Bupa, Insurance Company, International Healthcare, Medical Insurance, Middle East, Philippines, UAE Insurance, United Kingdom | 9 Comments
In this article we will first present our findings of the premium increases and premium inflation rates in each region and country we studied, with specific insurance findings to be presented at the end. Overall our findings were that International Private Medical Insurance (iPMI) premium inflation was very high, at roughly 10.8 percent per year over a 5 year average. While variations exist between countries, the reality is that iPMI inflation rates were extremely consistent throughout the world. However, it is important to note that this is medical insurance premium inflation at the high end of the sector, and not necessarily with regards to the mass market.
Even presenting the argument that premium increases are fairly consistent on a global basis, there are some immediate outliers – Hong Kong, for example, runs at an iPMI premium inflation rate of roughly 13 percent per year, while Kenya’s premium inflation rate is approximately 9 percent per year. Although there is a difference in premium inflation rates between Hong Kong and Kenya, the difference is not overly substantial – as will be seen inside this report.
Globalsurance is pleased to reveal the results of our latest study on the international health insurance industry and rates of international medical insurance inflation around the world as of August 1st 2012. Read more
The rise of the middle class in East Asia is proving to be a boon for private healthcare providers. Kuala Lumpur based IHH illustrates this nicely. In their recent IPO, which was 132 times oversubscribed, IHH raised more than USD 2 billion and the shares climbed by more than 10% in the first few days of trading. The value of the company stands at around USD 8 billion. IHH is now the second largest hospital group on the planet, and the largest outside the USA.
Owned by Khazanah Nasional Bhd, a state owned investment arm, IHH tells a story of unprecedented growth. Khazanah started their move into the healthcare sector in 2005, when they bought a 13.2% stake in India’s largest private hospital group, Apollo Hospitals Enterprise. A string of acquisitions and investments in the following years have enabled IHH to build itself into the powerhouse that it is today, able to ride the wave of opportunity created by the growing economies of East Asia.
According to Frost & Sullivan, the market for healthcare in Asia Pacific region will grow by 8 % until at least 2015, and IHH already has plans to add another 3300 new beds and 17 hospital developments in China, Singapore, Malaysia and India, as well as expansion plans Turkey, Egypt and Lybia by the end of 2016.
The success of IHH has been largely due to their ability to fill the gap created by lagging national healthcare infrastructure and rising demand for quality medical services in countries like Indonesia and Malaysia. The strategic positioning of their Singapore based hospitals, all within a relatively short 3-4 hour flight from Malaysia, Indonesia, Vietnam, Myanmar and Bangladesh, has created a healthcare hub which IHH has been well positioned to exploit.
IHH is now applying their winning formula to expansion in other developing regions of the world. It recently bought a 60 percent stake in the owner of Turkey’s largest hospital group, Acibadem Saglik Hizmetleri & Ticaret AS, which it bought for $826 million. Turkey is conveniently situated within easy reach of Central and Eastern Europe, the Middle East and Africa, much like Singapore is to East Asia. IHH hopes to develop their Turkish operation into another global healthcare hub, alongside Singapore and Malaysia.
The growth of private healthcare, especially in the developing world, is certainly a good thing, providing top medical services to those who can afford it, and easing some of the burden on national healthcare systems by providing an alternative source of treatment and the associated networks of training and development facilities. IHH owns a private medical university and a nursing training centre in Malaysia. Private healthcare is also the incubator for new healthcare technologies and techniques, as public sector healthcare often doesn’t have the budget or the staff to invest in much other than proven technologies and treatments.
There is a downside to this success story though. The draw of shiny new hospitals, new technology, a better working environment and higher salaries is proving to be too much for many healthcare professionals to resist, and is causing a slow but steady exodus from the public health systems all over the world, from the poorest and most underdeveloped, to the wealthiest and most advanced, basically without exception. Patients in private healthcare enjoy the luxury of not having to wait for treatment, of being treated by doctors who are well paid, have had enough sleep and who have enough time in their day to carefully consider a patient’s diagnosis and treatment.
The state of public health services is not quite so utopian. Even in somewhere as developed as Hong Kong, the public Health Authority struggles to find staff, and is left with no choice but to require the staff it does have to work unsustainably long hours for pay which is well below the equivalent in the private sector. This situation is not only making it difficult to convince new personnel to work in the public sector, but also creates an environment that is prone to mistakes and accidents.
President of the Hong Kong Doctors Union Henry Yeung Chiu-fat said many young doctors nowadays want easier jobs. Their preference for less stressful fields has exacerbated staffing problems. For example, becoming an ophthalmologist (eye doctor) is much more competitive with less-demanding on-call work than internal medicine or emergency room jobs.
Public hospitals In Malaysia, Thailand, China, India, UAE, South Africa, Australia, and even Europe have all been struggling with this issue, with some areas being so short of staff that they are having to close departments when a particular specialist is away for any reason.
While some of the problem can be alleviated by increased salaries and reform of health departments to be able to offer more flexibility to staff, there is another factor brought on by the rise in private medical services which could make the brain drain even worse.
The option for overseas treatment offered by a growing number of private medical insurance companies, as well as the relatively cheaper cost of treatment in developing countries, has created a massive growth in medical tourism. This lucrative market requires staff who are not only medically qualified, but who are also multi-lingual and culturally sensitive. This is a relatively unique demand of the private sector, since public sector hospitals treat a relatively small percentage of foreign language speakers.
This begs the question: If the unprecedented growth in international private health services continues, which it probably will (IHH alone are building 17 new hospitals), and the private sector continues to draw in much of the top talent in the medical industry, how will the public health services maintain a high standard of care, with fewer experienced personnel and many young doctors looking elsewhere for employment?
The crisis is very real, and there needs to be some serious thinking done on the part of the public health systems, especially those of developing countries. Stop gap measures will only work for so long, as human doctors and nurses will get tired and frustrated which can lead to them making potentially serious mistakes or quitting.
In China the problem is just as real, although slightly different. The private sector is still very small in comparison to public health system, instead, the problem China faces has to do with the urban – rural divide. China has recently spent more than USD 100 billion to try and bridge this gap, providing health insurance cover to 98% of rural Chinese, and ensuring access to improved primary healthcare facilities in a massive investment in rural infrastructure. While a large proportion of the rural population now have access to modern medical facilities, and are now more able to afford it, the State has still not been able to convince doctors and nursing staff to choose to work in more rural locations. Any career minded doctor in China would choose to work in one of the top tier city hospitals, where their case load will give them more interesting work with increased opportunity for career advancement, and where there are more opportunities for generating secondary income with some private practise on the side. In Shanghai alone 9 new hospitals are being built, which will all need to be staffed. A position in the rural areas is definitely not on the average Chinese doctor’s wish list, and the State faces some serious challenges in encouraging doctors to fill rural postings.
Unless creative solutions can be put in place, it seems that staffing issues in the public sector only going to increase around the world. With so many nations now facing economic turmoil, a significant increase in public health spending is not going to be easily managed. While investing more money into public health spending and salaries may alleviate the problem, other factors are involved in many cases.
What is certain is that all this bodes very well for the private healthcare industry. Being able to obtain first class medical care is going to become more dependent on whether patients are covered by private health insurance, and the public systems could decide, as the NHS in the UK and the Health Services Executive in Ireland have, to use the private sector to take some of the burden of healthcare off of public sector facilities. Add to all these factors the ageing world population, and it looks like the ideal environment for further growth in the private healthcare industry.
The largest challenge facing private healthcare providers may end up being that of finding and keeping their staff. Inevitable rises in salaries due to industry competition, are sure to be a major factor in the profitability and affordability of private healthcare. However, medical care will still be a necessity for everyone, and with a growing middle class in many developing parts of the world, an increasing number of people will be willing and able to pay for quality care.
Hong Kong’s Office for the Commissioner of Insurance (OCI) has released provisional statistics of the city’s insurance sector for the first quarter of 2012.
Hong Kong, recently named the world’s most competitive economy in the IMD World Competitiveness Ranking report, has a vibrant financial services industry in which the insurance sector plays a major role. According to the report from the city’s OCI this role is still vitally important in contributing to the overall strength of the territory’s financial clout.
An indication of the relative health of the city’s insurance market can be seen in the top line numbers; total HKSAR insurance premiums for the first quarter of the year came in at a staggering HK$ 62.8 billion (US$ 8.9 billion). This figure is an increase of 11.7 percent over the same period in 2011.
General Insurance lines were the biggest contributors with net premiums increasing by 6.4 percent to HK$ 10.9 billion (US$ 1.4 billion) and gross premiums rising by 8.6 percent to HK$ 7.6 billion (US$ 929 million) over their Q1 2011 numbers. Total underwriting profit for general insurance lines rose by an almost unbelievable margin, climbing from HK$ 482 million (US$ 62 million) in Q1 2011 to HK$ 853 million (US$ 109 million) in Q1 2012.
Hong Kong has long been considered an oversaturated insurance market due to the city’s relatively small population of only 7 million people and the number of large, international brand name insurers present in the local industry. However, the numbers contained in the OCI’s report reveal that there are still, very real growth prospects present for insurance providers, agents and brokers within the domestic market.
In tandem with general insurance lines, direct insurance business also posted strong growth figures for the first part of 2012 with gross premiums in direct business increasing by 10.5 percent to HK$ 8.4 billion (US$ 1.1 billion) and net premiums gaining 11.1 percent to HK$ 6.3 billion (US$ 811 million) over the same reporting period in 2011.
According to the OCI, direct business is primarily being driven by General Liability lines, which includes Employee Compensation (EC) coverage, in addition to Accident and Health Business including Hong Kong Medical Insurance. Hong Kong based analysts have speculated that a rise in the uptake of locally available health insurance coverage is, in part, being spurred by constricting availability of healthcare services within Hong Kong’s public medical system and the system’s lowered levels of financing over the last 5 years – despite Hong Kong’s high ranking in the IMD ranking report the city still lags many other nations in terms of public healthcare expenditure.
Accident and Health product lines saw gross premiums increase to HK$ 3.2 billion (US$ 412 million) while net premiums rose to HK$ 2.7 billion (US$ 347 million).
The only insurance line which did not experience the same type of growth in 2012’s first quarter were Pecuniary Loss products, which actually fell 14.7 percent to HK$ 303 million (US$ 39 million) in gross premiums and dropped 39.5 percent to HK$ 126 million (US$ 16 million) for net premiums. Pecuniary Loss lines include Mortgage Guarantee products, which have been adversely affected by a major slowdown in the Hong Kong real estate market.
However, Pecuniary Loss lines represents one of the few dark spots in an otherwise gleaming report. Underneath overall premium increases across the majority of insurance businesses are indications that the city’s underwriters are in for a stellar year.
Direct Business underwriting saw a major profit for the first quarter, increasing from HK$ 370 million (US$ 47 million) in 2011 to HK$ 634 million (US$ 81 million) in 2012, and Marine and Ship insurance has bounced back from a disappointing 2011, where the product lines saw a loss of HK$ 121 million (US$ 15 million), to a strong HK$ 27 million (US$ 3.4 million) profit so far in 2012. The OCI indicates that improved claims procedures and customer claims experience was a key factor in the rejuvenation of Ships business.
It’s not just Ships business which is seeing the benefit of refined claims procedures; both Motor Vehicle and Accident and Health business lines have experienced the benefit of improving claims experiences, which has helped the underwriting profit for both these lines of coverage.
The underwriting profit for Accident and Health business lines increased from HK$ 85 million during Q1 2011 to HK$ 137 million (US$ 17 million) in Q1 2012, while Motor business saw underwriting profits increase from HK$ 2 million (US$ 257,706) to HK$ 45 million (US$ 5 million) over the same reporting period. Again, this is mainly due to a refinement in these lines’ claims handling, pointing to significant upside for all locally situated insurers, across all product types, should they choose to refine their claims methodology.
There is good news on the Long Term product front as well, premiums for Long-Term In-Force products rose by 12.9 percent over the first quarter in 2011, coming in at HK$ 51.9 billion (US$ 6.6 billion) in quarter 1 2012. Premium revenues for Life and Annuity Non-linked plans came in at HK$ 36.2 billion (US$ 4.6 billion), a 20.9 percent increase over Q1 2011, while Linked Life products (along with Pecuniary Loss devices) actually saw a contraction of 6.3 percent with premium revenues standing at only HK$ 11.5 billion (US$ 1.4 billion).
With the vibrancy of the Hong Kong economy, and the healthiness of the first Quarter figures, it is increasingly looking like the Hong Kong insurance industry is set to record a bumper year for growth. With business up, ever increasing foreign investment, and the fact that the city is now standing at the pinnacle of the economic system, the growth in the HK insurance sector represents the growth of Hong Kong as a whole; this Asian financial juggernaut is going to keep rolling on.
Provisional market performance statistics released this past week by Hong Kong’s insurance regulatory body, The Office of the Commissioner of Insurance (OCI), show that despite recent market turmoil and ongoing global economic uncertainty, insurance sales maintained a steady growth rate in Hong Kong during 2011, in line with other Asia Pacific markets, as more residents purchased policies for investment and protection purposes throughout the year.
According to the latest figures now available on the OCI website, the Hong Kong insurance industry registered HK$225.8 billion (US$29.1 billion) in gross written premiums last year, which equated to a considerable 9 percent increase over 2010’s provisional results. In the city-state’s general insurance sector, gross and net premiums rose by 10.7 percent to HK$34.7 billion (US$4.4 billion) and 8.5 percent to HK$23.8 billion (US$3.07 billion) compared with 2010 respectively. The regulator noted that while the overall number of insurance claims continued to rise in 2011, most insurance lines have been able to maintain profitability due to prudent underwriting discipline. Indeed, over the past year Hong Kong insurers managed to record a 14.6 percent increase in overall underwriting profit, from HK$2.6 billion (US$330 million) in 2010 to HK$3billion (US$390 million) by year-end 2011, which was a considerable achievement in a catastrophe prone and claims-heavy year.
On direct business meanwhile, the OCI dataset noted that gross and net premiums in 2011 grew by 6.4 percent and 6.3 percent to HK$25.6 billion (US$3.3 billion) and HK$18.8 billion (US$2.42 billion) respectively. This development could largely be attributed to the robust performance of Hong Kong’s property damage insurance business, which registered a considerable 16.6 percent rise in gross premiums from HK$6.8 billion (US$880 million) to HK$7.9 billion (US$1.02 billion) last year. Sales of accident and health insurance, the largest segment of Hong Kong’s non-life market, were also big contributors to the industry’s continued bottom-line progress, with year-end 2011 gross and net premiums of HK$9.4 billion (US$1.21 billion) and HK$7.8 billion (US$1 billion) respectively. The OCI expects accident and health insurance sales to continue along their double-digit growth trajectory going forward, due principally to rising healthcare costs, the expansion of private medical business, and growing public awareness about upcoming changes to the state’s healthcare system.
Hong Kong’s general liability and motor vehicle insurance business were also important contributors to the industry’s sustained premium growth figures over the past year. In the report, Hong Kong’s general liability lines, which comprises the city’s employee compensation business, recorded double digit increases in both gross and net premiums to HK$7.8 billion (US$1 billion) and HK$5.6 billion (US$720 million) for the year in that order. The motor vehicle insurance industry meanwhile grew by 11.5 percent on aggregate and recorded HK$3.2 billion (US$410 million) in gross and HK$2.6 billion (US$330 million) in net premiums during 2011. The regulator attributed the auto insurance market’s continued growth to premium hikes on commercial vehicles levied on Hong Kong motorists over the past year. The only general insurance line that registered a significant loss in 2011 was pecuniary loss liability insurance, which experienced a drop in gross and net premiums of 21.4 percent and 37.7 percent to HK$1.3 billion (US$170 million) and HK$677 million (US$87.2 million) respectively as a result of the slowdown in local property transactions.
Hong Kong’s direct general insurance business managed to sustain an underwriting profit of HK$1.9 billion (US$240 million) in 2011, which despite being a more claims-intensive year, ending up being similar to that of 2010. The OCI noted that while the underwriting profit for motor insurers shrank considerably from HK$157 million (US$20.23 million) to HK$42 million (US$5.4 million) during the year, this negative impact was largely mitigated by performance of the pecuniary loss sector, including mortgage guarantee business, where underwriting profits rose sharply from HK$543 million (US$69.9 million) in 2010 to HK$744 million (US$95.85 million) by year-end 2011 due to the release of claims reserve.
Premium growth in the property damage, general liability and pecuniary loss businesses have also helped Hong Kong’s reinsurance industry, with gross premiums rising by 24.7 percent to HK$9.1 billion (US$1.17 billion) during 2011. According to the OCI, this growth further has also driven the reinsurance sector’s underwriting profit up from HK$702 million (US$90.4 million) to HK$1.1 billion (US$140 million). Overall property damage insurance and reinsurance companies in Hong Kong were able to benefit from a relatively uneventful year in comparison to their Asia Pacific neighbours in Japan, Thailand and the Philippines.
While 2011 was a productive year for general insurance business in Hong Kong, the country’s long-term insurance market proved more than able to hold its own as well, with sales of life insurance policies remaining the sector’s principal growth driver. The OCI report noted that total revenue premium associated with in-force long term insurance business increased by 8.7 percent in 2011 to HK$191.1 billion (US$24.6 billion). Broken down more succinctly, Hong Kong’s traditional life insurance and annuity business, products with annual premiums pooled collectively to invest and pay dividends, saw their revenues increase by 27 percent annually to HK$49.4 billion (US$6.36 million) in 2011. Investment-linked life insurance products, policies that invest client premiums into various funds at varying levels of risk and return, meanwhile saw their business grow by 3.9 percent over the same period last year, totalling HK$20.8 billion (US$20.68 billion) in terms of new office premiums.
In addition to the continued growth and development of their home market, Hong Kong insurers should continue to benefit from insurance opportunities across the Asia Pacific region, and in particular Mainland China. According to the Hong Kong Federation of Insurers (HKFI), clients from Mainland China are forecast to contribute 20 to 30 percent of all new insurance sales over the next few years. Mainland activity has already been particularly apparent in new office premiums. According to the OCI report, new policies issued to Mainland visitors amounted to HK$6.3 billion (US$810 million) in premiums in 2011, equivalent to 9 percent of all individual business. These stats demonstrate that not only does Hong Kong present an inbound market opportunity for overseas firms; the city-state will also serve as Asia’s premier insurance hub far into the future.
The Hong Kong Office of the Commissioner of Insurance is a government body that works to represent the interests of policy holders and to ensure the continued stability of the insurance industry in Hong Kong.
Prudential PLC, Britain’s largest insurer by market value, has hinted that they may move headquarters from London to Hong Kong in order to escape Europe’s upcoming Solvency II capital requirements and focus more on Asian business development.
The UK media was abuzz over the weekend on news that Tidjane Thiam, Prudential Chief Executive, had ordered a review of the company’s domicile situation, with the possibility of moving to Hong Kong or another Asian location very much on the table. The Times on Sunday first reported that Thiam asked Prudential executives to pursue relocation options in response to the tougher solvency rules being introduced in Europe next January. These new regulations will force European insurers to increase their capital levels and could leave Prudential holding billions of extra pounds in reserve.
Prudential, founded in London in 1848, is expected to admit to the domicile review when its annual report is released next week. In a separate company statement posted on Sunday, Prudential confirmed that management regularly reviews a wide range of options designed to better optimize the company’s strategic flexibility going forward. “This includes consideration of optimizing the Group’s domicile, including as a possible response to an adverse outcome on Solvency II. There continues to be uncertainty in relation to the implementation of Solvency II and implications for the Group’s businesses. Clarity on this issue is not expected in the near term,” Prudential claimed. The company had previously disavowed any talk of a break-up of its operations as an unnecessary business move that would hurt it’s credit rating.
The European Union’s new collective insurance industry regime, known as the Solvency II Directive, requires that insurance companies hold capital reserves with stricter proportion to their underwritten risks in order to reduce the threat of insolvency and further limit market-wide bankruptcy contagion. This new directive is expected to lead to an increase in capital requirements for many of Europe’s largest insurers as it will force these firms to increase their cash holdings against their divisions operating in markets that do not currently have the same rigorous capital standards. Short-term concerns persist amongst industry analysts that the new EU regime might cause insurers to increase their capital position at the expense of tackling new business ventures, which would damage their competitiveness, and indeed Europe’s, in the overall international insurance marketplace. The slow-moving implementation of Solvency II, which could be further delayed to 2014, has already proven costly and could also further strain insurers with potentially stricter risk-based capital requirements going forward. The overall cost of introducing Solvency II across Europe is already thought to have exceeded the European Union’s initial €3 billion (US$4.75 billion) forecast.
Thiam has long been critical of Solvency II and the negative impact it could have on Europe’s most prominent insurance companies. At the World Economic Forum in Davos last month, Thiam reportedly asserted that the EU’s new capital requirements would force Prudential to dispose of £11 billion (US$17 billion) worth of investments in UK infrastructure projects and would significantly reduce the amount the insurer could lend to banks as well. The rules have also been criticized for the extra costs they will likely impose on European pension annuities.
Solvency II poses a significant interruption to Prudential’s operations in particular. No decision has been made by EU regulators yet as to whether the United States’ capital rules are compatible with Solvency II. A failure to resolve this conflict between US and Euro regulators would force Prudential to significantly increase their reserves, much more so than their UK rivals, and hold billions in excess capital to protect its American life insurance unit Jackson National Life. If however, Prudential decided to instead move its chief headquarters to Hong Kong or elsewhere outside of Europe, only the company’s British business arm would be subject to the new Solvency II regulations.
The loss of Prudential, a well-regarded 163 year old company with £349.5 billion (US$552.25 billion) of assets under management, would be a symbolic blow to the City of London and its heralded status as the financial center of the international insurance industry. Prudential’s shareholders may not share the same sentiment about moving away from home however. Asia has fast become the company’s most important geographic market and relocating to Hong Kong would certainly be recognition of the region’s large and growing contribution to Prudential’s ongoing success.
Prudential has been using the cash generated from its legacy UK business to fund expansion efforts in booming Southeast Asian economies over the past decade. The region now accounts for nearly half of Prudential’s overall sales, and the company now has secondary stock market listings in both Singapore and Hong Kong. According to Prudential’s 2011 1H interim statement, between 60 to 65 percent of profits in the Asia region are coming from the sale of protection products. The bancassurance channel meanwhile accounts for 30 percent of Prudential’s combined annual premium across the Asia-Pacific, excluding India. With profits up 17 percent year-on-year to £465 million (US$72.2 million) across the region, Prudential now look forward to doubling their earnings in Asia over the next few years in an attempt to capitalize on the growing demand for insurance and financial service products among the expanding middle class populations in fast-moving Asian economies such as China, Indonesia and Malaysia. Prudential are now confident that the strength of their Asian insurance operations could protect them against the threat of another potential financial crisis in the West.
Prudential’s decision to review the location of their company headquarters follows similar warnings made by AXA, HSBC and Standard Chartered in the past year. These companies all look to Asia for a significant share of their overall business. The decision to leave the once warm confines of London for the promising Far East now warrants serious consideration.
Insurance Company Mentioned
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
A new study released this month by Canadian insurance giant Manulife reveals that too many of Hong Kong citizens are not doing enough to adequately prepare for their retirement. Although the city-state’s compulsory pension system, the Mandatory Provident Fund (MPF) Scheme, has now been in place for over a decade, eight out of ten Hong Kong workers remain unsure as to whether they have in fact saved enough for their future.
The MPF Scheme was launched in December 2000 and is administered by the Mandatory Provident Fund Schemes Authority. Under the scheme, Hong Kong workers contribute 5 percent of their salary, capped at HK$1,250 per month of HK$15,000 a year, into their MPF account. This contribution is matched by their employers, who choose which MPF service provider they all do business with. This changes however in November 2012, when the Employee Choice Accounts comes into effect, which gives employees the ability to choose their own MPF provider and puts pressure back on companies to improve their costs and service quality in order to attract these new clients.
Manulife, who have been active in Hong Kong’s pensions market for over 75 years, have ramped up their recruitment efforts for MPF agents partially in response to this long-expected development. The Canadian firm has planned to increase their agency force from their 5,000 agents at present to a staff of 7,000 by 2015. Manulife is currently the number two insurer in the MPF market, with an estimated 17.6 percent market share. With an increased sales force, the company expect to raise their share to over 20 percent by 2016, which will put them in a better position to compete with market leader HSBC.
Manulife commissioned a survey from the Nielsen Company last year to analyze Hong Kong consumer attitudes towards retirement planning and investment. Over a thousand phone interviews were conducted with local employees, all aged between 20 and 54, with questions ranging from consumer aspirations to specific brand satisfaction levels. Of the survey participants, 15 percent were Manulife MPF members while the remaining 85 percent were enrolled with other MPF service providers.
The survey revealed some interesting contradictions about Hong Kong consumer behavior. Although 81 percent of respondents claimed that their pensions would not be able to cover the costs of inflation and rising living expenses once they stopped working, only 22 percent had even considered additional retirement planning, and of this segment most admitted to doing nothing to prepare as of yet. In fact, Manulife found that fewer than 40 percent of their Hong Kong respondents had actually made any inroads into their retirement savings plans. On average, respondents began such planning at the age of 43 for a retirement they expected only 13 years later, by age 60. These findings indicate a considerable gap in average consumer aspirations and their savings capacity in Hong Kong, something MPF providers should look to address.
“Hong Kong’s working population looks for financial security in their retirement years and making better use of the MPF system will help them achieve this,” commented Luzia Hung, Manulife VP of Employee Benefits, adding that these contributions “can play a crucial part in facilitating a comfortable retirement if they manage them more pro-actively or seek professional support.” It is important to note that before the implementation of the MPF Scheme, only about one-third of the Hong Kong workforce had any form of retirement protection.
Despite the importance of proper MPF planning, most Hong Kongers appear reluctant to manage and scrutinize their portfolio properly. Manulife’s survey exposed that more than half of Hong Kong’s workers have never properly reviewed or made adjustments to their MPF portfolio, with 45 percent of respondents further claiming that they were too busy and didn’t have the time, or simply never made the habit of checking up on their investments. A general lack of knowledge about proper MPF portfolio management was also cited as a key reason for the low level of engagement in savings preparation.
What can be done to encourage more Hong Kong workers to be proactive with their retirement planning and investments? Manulife’s survey found that a lot of consumers are looking for more simple and hassle-free MPF investment solutions, with nearly 40 percent of the respondents showing some preference towards target date funds. Target date funds are a type of mutual fund that provide simple investment options through a portfolio with an asset mix handled by professionals that automatically works to become more conservative and stable as the target date, in this case retirement, approaches. These types of funds are well suited to clients who are either too busy or otherwise unwilling to constantly monitor and re-balance their MPF portfolio, and are thus perhaps ideal for Hong Kong’s busy workforce. Amongst those who routinely engaged with their MPF portfolio 72 percent agreed that target date funds are useful. This sentiment shared by the 34 percent of respondents who claimed they did not have time to review their investments. “The results indicate that Manulife is on the right track with introducing the target date fund type on its MPF platform,” noted Ms Hung.
Manulife took home several other lessons from this study, and they were largely positive. The Canadian firm ranked top in terms of overall brand satisfaction versus the other major MPF service providers in Hong Kong, with its convenient online service platform, easy to understand MPF benefit statements, extensive communication channels, and comprehensive fund choices all proving particularly popular with respondents. In addition to this, 38 percent of those polled expressed satisfaction with the performance of Manulife’s many MPF intermediaries, highlighting the company’s agency model as one of its major competitive edges helping to distinguish itself from other market players, a positive reflection on the company’s agency expansion strategy. “As a trusted retirement partner of the people of Hong Kong, Manulife will continue to enhance its MPF platform and services to help members better manage their retirement investments,” Ms Hung concluded.
Solving Hong Kong’s pensions issue will be a crucial issue going forward. The city-sate has a rapidly ageing population. In 2010, the proportion of Hong Kongers over the age of 65 was around 13 percent. By 2040 the number of seniors is projected to rise to over 28 percent due to low birth rates and increased life expectancy. Life expectancy in Hong Kong is already much greater than the global average, at 86 for women and nearly 80 years for men. According to the HK government, the number of working age adults for each person over 65 will fall from six to one now to close to two to one by 2040. This ageing population means the country’s workforce will have a much larger number of retirees to support in the future, and unless smarter retirement planning and pension schemes are implemented this burden could prove too great to bear.
Insurance Company Mentioned
Manulife (International) Limited is a member of the Manulife Financial group of companies. Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 22 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners.
Big changes could soon be underway in Asia’s premier insurance centre. The Hong Kong government announced this week that they are planning to implement a new national insurance fund that would protect policyholders from insolvent insurers after reviewing the results of a three-month long public consultation.
Hong Kong insurance authorities surveyed public and stakeholder opinions on the proposed establishment of an insurance policyholders’ protection fund (PPF) from March to June 2011. Respondents were quizzed on four key areas of the proposed scheme – coverage, level of compensation, funding models and governance arrangements. Taking into account the comments received, the final proposals were collated and published on the government website, and plans are now underway to introduce the PPF bill into the Legislative Council during the 2012-13 legislative session. If approved, the fund would not likely be established until fiscal 2013-14 at the earliest.
Hong Kong’s Secretary for Financial Services and the Treasury, Professor KC Chan, said in a statement that the proposed insurance fund would enhance “the stability and competitiveness” of the Hong Kong insurance industry, while minimizing the risks of moral hazard. Chan added that “we are pleased to note that there is support from the general public and industry for the establishment of a PPF and most of the key elements of the consultation proposals.”
Under these new proposals, all authorized Hong Kong insurance companies would be required to participate in the PPF, which will in turn be comprised of separate life and non-life schemes. The PPF will be run by an independent board, with an initial target size of around HK$1.3 billion (US$168 million), that will focus on covering individual policyholders and building owner’s corporations in Hong Kong. If an insurer becomes insolvent, the PPF will work to transfer all existing life, accident and health insurance policies with guaranteed renewability to a replacement Hong Kong insurer. For non-life policies, the fund will provide full compensation for the entire coverage period until expiry. Ceding to industry feedback however, the PPF Board will have the power to grant exceptions to companies who can provide a similar protection to Hong Kong-based policyholders via an existing compensation scheme overseas.
The government has also considered adding local small and medium-size enterprises (SMEs) to the list of potentially insured entities under the PPF, identifying that they usually have less resources available to assess the insurer solvency and are less capable of protecting their own interests. SME policyholders may also soon be allowed to specifically insure their exports for places and buyers of their choice under certain circumstances, and could also be offered various premium discounts through a separate government initiative.
Abiding by the consultation proposals, the Hong Kong government has set the compensation limit for each insurer at HK$1 million (US$129,000). Industry analysts observed that any further increase in the compensation limit would merely lead to a surge in levy rates without necessarily contributing any notable enhancements in terms of policyholder protection. The government noted as well that the proposed compensation limit, as is, should be able to meet 90 to 100 percent of claims generated from in force life policies, as well as be able to fully cover the claims of around 96 percent of non-life policies. Once the fund is established, policyholder compensation will be 100 percent for the first HK$100,000 (US$12,900) of any claim, plus 80 percent of the balance up to the limit.
The PPF fund will incorporate a progressive funding mechanism that charges a moderate initial levy on participants followed by a “stepped-up” levy once any insurer becomes insolvent and pay-outs are merited. The initial levy rates of the fund will be 0.07 percent on applicable premiums and will be collected from Hong Kong-based insurers directly. According to the government proposal document, the initial target fund size for the life insurance scheme will be HK$1.2 billion (US$150 million), with HK$75 million (US$9.67 million) allocated for the non-life insurance scheme. Both funds are expected to be achieving their respective fundraising goals within the first 15 years of service. Once national insurance funds are in force, the Hong Kong government claimed they would regularly meet with local insurance industry professionals, using PPF data to review and adjust levy rates as well as the fund’s overall size accordingly. It is in the scheme’s long term interest to strike a balance between enhancing protection for policyholders and minimising the additional burden placed on the Hong Kong insurance industry.
The overall goal of the PPF is to provide a safety net for Hong Kong policyholders when an insurer becomes insolvent. Hong Kong regulators have outlined quite an ambitious set of reforms for the city-state’s financial sector. The PPF move follows measures introduced last month to liberalize yuan capital requirements for local banks, as well as the planned overhaul of the country’s mandatory provident fund scheme (MPF), which will allow local employees to choose the MPF provider they want to invest with. Currently, employees in Hong Kong contribute 5 percent of their salary, capped at HK$1,000(US$130) per month, into their MPF retirement account. This contribution is then matched by employers, who have had sole power to choose the MPF provider. This will change in November 2012, when the MPF Schemes Authority enacts the Employee Choice Accounts and puts the choice of MPF provider in the hands of employees. The government hopes the scheme will put performance and fee pressure back on MPF providers, and foster a whole new financial market to stimulate the local economy. This could in turn put downward pressure on Hong Kong medical insurance rates and other financial products as well.
Life, Automobile and Health insurance continues to be an integral part of the Hong Kong economy. Despite volatile equity markets, Hong Kong’s insurers managed to keep pace with the double-digit growth rates seen in several Asia-Pacific markets last year. According to the latest figures made available on the Office of the Commissioner of Insurance (OCI) website, the Hong Kong insurance industry recorded HK$172.8 billion (US$22.2 billion) in gross written premium for the first three quarters of 2011, a 12.6 percent annual growth rate, with underwriting profits rising from HK$1.7 billion (US$220 million) to HK$2.1 billion (US$270 million) in that period as well. While these substantial growth rates may not continue during a tepid 2012, Hong Kong’s insurance companies are sure to benefit from the business potential for insurance made available across Asia-Pacific markets and Mainland China in particular.
The Hong Kong Office of the Commissioner of Insurance is a government body that works to represent the interests of policy holders and to ensure the continued stability of the insurance industry in Hong Kong. The OCI was established in June 1990.
Hong Kong has announced new measures this week to liberalize yuan capital requirements for local banks in a bid to promote the city-state’s status as China’s main offshore currency centre. This move will likely result in more yuan-denominated insurance products and retirement funds becoming available in Asia’s premier insurance market soon.
On Tuesday, the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, declared that local banks would now be able to include both their holdings of yuan-denominated Chinese sovereign bonds that were issued locally in Hong Kong and bonds traded within Mainland China’s inter-bank market as part of their mandatory capital reserve requirements going forward. Prior to this regulation, all Hong Kong-based banks trading on the offshore yuan market had to set aside cash and settlement balances as reserves (equal to 25 percent of customer deposits) with a separate yuan-clearing bank or through the fiduciary account in the People’s Bank of China, as part of the city’s strict risk management regulations. Relaxing these requirements now will allow Hong Kong banks to take on more risks, hold more cash for mainland interbank lending, and increase their involvement overall in the fledgling offshore yuan market .
This announcement follows the HKMA and UK Treasury decision earlier in the week to launch a new joint private sector international forum designed to promote the globalization of the yuan. The forum will enhance cooperation between Hong Kong and London’s financial centers and work to support the continued development of the offshore yuan market.
After years of stringent currency isolation, the Chinese government is now attempting to promote the use of the yuan overseas as part of their long-term plan to turn their notes into an international reserve currency to compete alongside the United States dollar. China sees the growh of the Hong Kong yuan market in particular as a key component to this objective, and are working to support it’s continued development. Yuan-denominated deposits in Hong Kong increased to CNY627.3 billion (US$99.18 billion) in November 2011, up by 1.4 per cent from a month prior. London, the world’s largest foreign exchange centre, will soon be permitted a slice of this yuan action too, as the United Kingdom looks to boost its trade and investment ties with Asia’s fast-growing economies.
Speaking at the annual Asia Financial Forum in Hong Kong yesterday, HKMA Chief Executive Norman Chan told attendees that the new relaxed rules on yuan capital requirements would ensure the stable development of the offshore Chinese currency market and become a boon for the rest of the international business community as well. “These measures greatly expand the scope of offshore yuan business development,” Chan said, adding that this in turn “raises the flexibility on how banks manage their yuan assets, favoring further growth in the market.” The HKMA has advised however that banks should of course continue to adopt prudent measures in measuring their foreign exchange and liquidity risk when engaging in yuan-denominated activities. “We are required to change financial rules according to market conditions. Our principle is to make gradual change while keeping risks at bay,” Chan concluded.
One of the beneficiaries of this development will of course likely be the Hong Kong insurance industry. The HKMA Chief admitted that they were already looking for ways to get insurer investment back into the Mainland interbank bond market. Increasing insurer trade would in turn lead to an increase in the number of yuan-denominated insurance products and retirement funds with longer maturity available in China. According to HKMA statistics, the value of new life insurance premiums priced in yuan hit a record CNY4.43 billion (HK$5.4 billion) during the first half of 2011, representing about 13.8 percent of the total Hong Kong life market for the year. The mainland insurance market offers business opportunities that HK insurers cannot ignore, provided they are permitted to engage with them.
One of Hong Kong’s chief insurance sector legislators, Chan Kin-por, was also on hand at the Asia Financial Forum to explain that currently only China Reinsurance is allowed to invest the yuan-denominated premiums. “If insurers could directly invest in the mainland interbank bond market, that could generate 3-4 percent return almost risk- free,” said Chan Kin-por, adding that a direct investment channel for HK insurers is long overdue. Four HK-based insurance companies have already confirmed their interest in the mainland bond market and will likely be granted an investment quota soon, with pension funds expected to wait a while longer.
Despite persistent financial market volatility, Hong Kong’s insurance industry kept pace with double-digit growth rates posted in several neighboring Asia-Pacific markets throughout 2011. According to the latest figures made available on the Office of the Commissioner of Insurance (OCI) website, Hong Kong’s insurance companies posted HK$172.8 billion (US$22.2 billion) in gross written premiums for the first three quarters of 2011, a 12.6 percent growth rate over the same period last year, with overall underwriting profit rising from HK$1.7 billion (US$220 million) to HK$2.1 billion (US$270 million) during that time.
While these double-digit premium growth rates may prove elusive in 2012, Hong Kong’s insurance companies will likely benefit from the business potential available across the Asia Pacific region, specifically Mainland China. According to a recent report issued by the Hong Kong Federation of Insurers (HKFI), Mainland Chinese customers are projected to contribute 20 to 30 percent of all new HK insurance sales over the next five years. China is now the world’s second largest economy, with an emerging middle class population ready to spend vast sums on a variety of insurance and investment products. This tremendous potential customer base has presented sizeable opportunities to major international financial markets, most notably Hong Kong of course, which is both convenient geographically and culturally as well. While this Hong Kong-China relationship has frequently been tested, made notable last year by maternity tourism abuse, overall the mainland market will provide many HK businesses with bountiful business prospects going forward. Hong Kong insurance companies that can develop both innovative and cost-effective insurance products not yet available on the Mainland will be able to capitalize upon a still under-penetrated and lucrative market.
Provisional statistics released this month by Hong Kong’s chief insurance regulatory body, The Office of the Commissioner of Insurance (OCI), show that despite recent financial market volatility, Asia’s premier insurance center has managed to keep pace with the double-digit growth rates experienced in several neighboring markets during the first three quarters of 2011.
According to the latest OCI figures, Hong Kong’s insurance industry recorded HK$172.8 billion (US$22.24 billion) in gross written premiums from January to September 2011, which represented a substantial 12.6 percent increase over the corresponding period last year. In the country’s general insurance business, gross and net premiums, rose by 12.5 percent to HK$27.4 billion (US$3.5 billion) and 10.1 percent to HK$19 billion (US$2.4 billion) during this 9 month period compared with same period in 2010 respectively. The OCI noted that while the number of claims in general has continued to rise in 2011, most insurance lines have been able to maintain an underwriting profit. Indeed, over the past year overall underwriting profit for HK insurers has increased from HK$1.7 billion (US$220 million) to HK$2.1 billion (US$270 million).
The report further shows that the gross and net premiums on direct business have grown by 7.9 percent and 7.3 percent annually to HK$20.5 billion (US$2.6 billion) and HK$15.1 billion (US$1.9 billion) through the first three quarters of the year respectively. The OCI has largely attributed this rise in general insurance premium levels to the strong performance of property damage business lines in Hong Kong, which have grown by 20.4 percent in the past year, from HK$5.1 billion (US$660 million) in gross premiums in 2010 up to HK$6.2 billion (US$800 million) by the third quarter of 2011. As the largest segment of the non-life insurance market, accident and health insurance businesses have also been key contributors to non-life sales, with gross and net premiums of HK$7.3 billion (US$940 million) and HK$6.1 billion (US$780 million) so far this year. Health and accident insurance sales are expected to continue by the OCI, due to rising care costs, the expansion of medical businesses, and growing public awareness about upcoming changes to the state’s healthcare system.
Hong Kong’s general liability and motor vehicle insurance lines have also contributed to the industry’s premium growth over the past year. In the report, general liability business, which includes the employee compensation market, recorded a double digit rise in gross and net premiums, now worth HK$5.3 billion (US$680 million) and HK$3.8 billion (US$490 million) for the year in that order. The country’s automobile insurance industry meanwhile recorded HK$2.5 billion (US$320 million) in gross and HK$2 billion (US$260 million) in net premiums for the nine month period. The OCI has attributed the motor insurance industry’s growth to premium rate increases levied on commercial vehicles over the past year.
The only line in Hong Kong that has experienced a significant loss in the past year, according to the OCI report, is pecuniary loss liability insurance, which experienced a 20.6 drop in gross premium levels as a result of the slowdown in property transactions occurring in the SAR.
Despite general insurance premiums levels increasing, the OCI noted that poor claims experiences this year had caught up with several non-life lines and had lead to a fall in underwriting profit for these sectors. Overall the underwriting profit of direct business in Hong Kong declined to HK$1.3 billion (US$170 million) in the first three quarters of 2011 from HK$1.4 billion (US$180 million) in the corresponding period of 2010. Motor insurance has so far been the most affected by a claims-heavy season, with underwriting profits falling from HK$125 million (US$16 million) down to HK$2 million (US$260,000) through the first 3 quarters of 2011. Accident and Health insurance and General Liability businesses have experienced a more limited shortfall, with underwriting profit falling from HK$388 million (US$49 million) to HK$292 million (US$37.5 million) and from HK$137 million (US$17.6 million) to HK$63 million (US$8.1 million) for the year respectively. The OCI report explained however that these losses could continue to be offset by the performance of the property damage business, where underwriting profits have risen from HK$211 million (US$27.1 million) to HK$370 million (US$47.6 million) so far this year.
Premium increases in the property damage business have also helped the country’s reinsurance industry, where gross premiums grew from HK$5.4 billion (US$690 million) to HK$6.9 billion (US$890 million) and net premiums grew from $3.1 billion (US$400 million) to $3.8 billion (US$490 million) in the first three quarters of 2011 over 2010’s results. This strong premium growth has also driven the reinsurance market’s underwriting profit to increase from HK$288 million (US$37 million) to HK$752 million (US$96.7 million). Property damage insurance and reinsurance companies in Hong Kong have benefited from a relatively uneventful year in comparison to their neighbors in Japan and Thailand.
While direct insurance lines have certainly grown this year, the OCI stats show that the long-term insurance market has been able to more than hold its own, with life insurance products continuing to be a major growth driver in Hong Kong. Office premiums for new individual life policies (excluding retirement scheme business) have increased by a considerable 33.4 percent to HK$56.6 billion (US$7.28 billlion) over the past nine months. Traditional life insurance and annuity policies, where insurers collect premiums from policyholders annually to invest with and pay dividends, increased by 21 percent to HK$96.2 billion (US$12.3 billion) in 2011. Sales of investment-linked life policies, in which buyers move their premiums into a number of investment funds at varying levels of risk and return, have risen by 33.3 percent over the same period last year, for a total of HK$16.9 billion (US$2.17 billion) in terms of new office premiums. The total revenues associated with long-term in-force business were HK$145.4 billion (US$18.7 billion) in the first three quarters of 2011, a 12.6 percent increase over the same period of 2010.
While there are no guarantees double-digit premium growth will persist in 2012, Hong Kong’s insurance market should continue to benefit from the tremendous business opportunities in the Asia Pacific region, particularly on the Mainland. According to the Hong Kong Federation of Insurers (HKFI), clients from Mainland China are expected to drive between 20 to 30 percent growth in new insurance sales over the coming years. Mainland activity has already been particularly apparent in new office premiums. According to the OCI report, new policies issued to Mainland visitors have totaled HK$4.6 billion in premiums (US$590 million) so far this year, which represents over 8 percent of all new office premiums for individual business in Hong Kong.
China is now the second largest economy in the world, with a growing middle class population ready to spend on insurance and investment-linked products. This emerging investor class presents significant opportunities to financial markets like those in Hong Kong that are both close geographically and particularly convenient to them culturally as well. While this close relationship between Hong Kong and China has presented some infamous pitfalls in the past, such as rampant maternity tourism, overall it will provide HK businesses with bountiful business opportunities going forward. Hong Kong-based insurance companies that can present innovative, stable and cost-effective insurance products and services not yet available on the mainland could attract a tremendous new client base.
The Hong Kong Office of the Commissioner of Insurance is a government body that works to represent the interests of policy holders and to ensure the continued stability of the insurance industry in Hong Kong.
The Hong Kong Federation of Insurers
The Hong Kong Federation of Insurers (HKFI) was established on 8 August 1988 as a self-regulatory body of insurers, designed to further the development of the insurance business in Hong Kong. The HKFI is recognized by the Government of the Hong Kong Special Administrative Region as the principal representative body of their industry.
Canadian insurance giant Manulife is looking to increase its agency force in Hong Kong in an attempt to capitalize on the resurgent demand for investment-linked insurance policies throughout the Asia-Pacific region.
In an interview with the South China Morning Post this week, Manulife Hong Kong executive vice-president and CEO, Michael Huddart, explained that while global financial market volatility has slowed down the sale of investment-linked insurance policies considerably over the past few months, insurers by and large remain confident in the long-term growth prospects for these products, and that their performance would no doubt improve when the market rebounds. “The outlook for these investment-linked plans is good, especially if we see some market recovery in 2012 and beyond. There is still a great need for accumulating wealth to pay for living costs and medical costs in retirement and these plans can be a useful vehicle to achieve this goal,” Huddart said in the piece..
Hong Kong – a special administrative region (SAR) of China – is the premier Asian insurance center, and attracts many of the world’s top insurance and financial service companies. Manulife, themselves, have had a presence in the City for over 110 years and now have around 1.6 million clients in HKSAR. Hong Kong has the largest number of authorized insurance companies in Asia at 167, and thousands of supplemental agents and brokers. The level of insurer business activity in 2010 amounted to 11.8 percent of Hong Kong’s gross domestic product (GDP), compared with 11.3 percent in 2009. Insurance continues to be an integral part of the city-state’s economy.
Investment-linked products had proven to be popular in Hong Kong due to their combination of both insurance protection and investment fund savings options. However, in the aftermath of the 2008 global financial crisis, the attractiveness of these insurance policies has now been sternly tested by waning investor confidence across most business lines. Statistics released by the Hong Kong government reveal exactly how closely the sales of investment-linked insurance policies have related to overall market performance. According to the data, when the Hang Seng Index passed the 29,000 benchmark and hit a record high in 2007, sales of investment-linked insurance policies rose in tow to HK$60.04 billion (US$7.72 billion). At that time, sales of new investment-linked insurance products accounted for around three times as many as traditional insurance policies, which totaled HK$20.31 billion (US$2.61 billion) that year.
Sales of investment-linked policies then dramatically declined to HK$15.06 billion (US$1.94 billion) in 2009, or roughly half those of traditional insurance policies, as the prevailing effects of the global financial crisis took hold. Investment-linked policies have since then seen much lower sales figures than traditional life insurance policies and have yet to fully recover as investor fears about the European sovereign debt crisis and a possible recession in the United States continue. Through the first half of this year, investment-linked products still only represent 30 percent of all insurance policies sold in Hong Kong, with traditional insurance policies making up the remaining 70 percent.
Despite this prolonged downturn in consumer confidence, Manulife and other players are continuing to invest in and market the long-term appeal of these investment-linked and other insurance products to clients throughout the Asia Pacific. The Toronto-based firm has planned to increase their insurance agency force in Hong Kong by 10 percent annually for the next 5 years, moving from roughly 4,600 agents at present to a staff of 7,000 by 2015. While this is happening, Manulife will also work to improve sales from non-agency channels, including bancassurance and independents, to hopefully account for roughly a quarter of total sales by the end of 2015, up from 13 percent currently. The company is also looking to promote yuan-denominated products, which have become increasingly in demand amongst investors who expect to benefit from the Mainland currency’s gradual appreciation. The yuan has already risen by some 20 percent since 2004.
Manulife is already reaping the rewards of its expansion strategy. In the third quarter results posted earlier this month, Manulife’s Hong Kong insurance sales were worth US$59 million, representing a 26 percent over the third quarter of 2010. The company has primarily attributed this performance to the increased number of active insurance agents, increased volumes of the popular critical illness product launched at the end of the second quarter, and higher sales made through the company’s expanded bancassurance channel.
Manulife is stepping up its agent recruitment effort primarily to grow their business and better compete in the city’s lucrative mandatory provident fund (MPF) marketplace. The MPF is Hong Kong’s compulsory retirement savings system, and is administered by the Mandatory Provident Fund Schemes Authority. With a 17.6 market share, Manulife is currently the number two insurer in Hong Kong’s MPF market. With an increased sales force, the Canadian firm hopes to successfully raise their share to over 20 percent by 2016, which would put them in a better position to compete with the predominant market leader, HSBC.
The marketplace Manulife is investing in is, however, experiencing some noted volatility at present. According to the latest figures filed by the Office of the Commissioner of Insurance (OCI), sales of retirement-related insurance policies dropped by 35.9 percent to HK$10 billion (US$1.28 billion) last year. At the end of 2010, there were 59,005 MPF contracts in Hong Kong carrying net liabilities worth HK$105.5 billion (US$13.55 billion). Local market observers have attributed this drop to a recent regulatory change regarding pensions. In 2009, The Mandatory Provident Fund Schemes Authority stipulated that all MPF funds must be held through trustees.
You don’t have to venture far outside of Hong Kong to discover one of Manulife’s other priority growth markets – Mainland China. Last week the insurer renewed their framework agreement with Bank of China, the country’s oldest bank, for another two years in a bid to further expand their bancassurance distribution network and ultimately sell more insurance products in the world’s second largest economy.
In his speech at the signing ceremony in Beijing, Mr. Donald Guloien, President and CEO of Manulife Financial, explained that China, with its robust economy and growing middle class, is an important marketplace to be in for all ambitious financial-services companies, especially considering the tepid business forecasts in their mature domestic insurance markets. Indeed, China’s insurance industry, in particular, has grown more profitable and evolved at a tremendous pace over the past decade and still has plenty of room further to develop due to generally stable economic indicators and an under-penetrated insurance and investment market. In 2010, the Chinese insurance industry grew by 30.4 percent, reaching a record US$221.4 billion in total written premiums. This momentum has continued into 2011 despite international financial market volatility and record catastrophe losses in neighboring Asian countries. The China Insurance Regulatory Commission (CIRC) interim report figures show that total premium income reported by Chinese insurance companies had increased to US$123.95 billion during the first half of 2011, maintaining double-digit growth with a 13 percent rise on last year’s interim period. At the moment, China is ranked as roughly the sixth largest insurance market in the world, and the second largest in Asia. Many industry observers fully expect the Chinese insurance market to eventually overtake the United States and become the number one overall protection and investment market in the world, possibly by as early as 2020.
Indeed, much of what may determine the future success of the Chinese insurance industry could come to a head in the coming months, as multiple Mainland insurers apply for their IPOs. More capital is needed for Chinese insurers to both capitalize on their home market and expand overseas if need be. Despite global financial market volatility, Chinese insurers remain attractive investment targets for large multinational insurance companies and investors from the financial-services sector. Over the next year, almost US$25 billion worth of dual share offerings in Hong Kong and Shanghai could be coming to the market from Chinese insurance companies alone. New China Life Insurance, China’s third-largest life insurance firm applied to the Hong Kong stock exchange for a dual listing, which could go through this week. The insurer is looking for US$4 billion in fresh funds by the end of the year. Taikang Life Insurance, China’s fifth-largest insurer by premiums, has also targeted between US$3 billion and US$4 billion from a Hong Kong listing in the next couple of years. PICC meanwhile have also expressed IPO interest and would look to raise between US$5 billion and US$6 billion in a dual listing by the end of 2012. Market analysts will be watching closely to see if these Chinese insurers and more can dual list successfully and build on their enormous domestic customer base to establish a more robust presence on the global stage.
Outside of China and it’s holdings, Manulife of course recognizes Asia as the most important market for the company’s sustained future growth and development. The region, as a whole, now accounts for over half of the company’s total insurance sales worldwide. The Canadian insurance company has seen its insurance sales across Asia jump by 22 percent to US$902.4 million in 2011, with budding businesses in less-established insurance markets like Vietnam, Indonesia and the Philippines being particular highlights. Going forward, Manulife has said they will focus on expanding insurance sales channels in these Asian countries, and will continue to upgrade the range of their core policy offerings, as the emerging middle class consumer demand in these markets matures and evolves.
Insurance Companies Mentioned
Manulife (International) Limited is a member of the Manulife Financial group of companies. Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 22 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners.
Aviva Life Insurance Company Ltd, part of Aviva PLC, has announced to its brokers and agents in Hong Kong that the company will be cancelling its line of Aviva Global LifeCare products.
The Aviva Global LifeCare plan is an individual international private medical insurance policy licensed out of Hong Kong SAR.
In a recent communication to the Aviva distributor network in Hong Kong the company has stated that ”we have decided to discontinue any new business of our Aviva Global Lifecare products with immediate effect and also the renewal of all existing Aviva Global Lifecare policies.”
This means that any policyholders in possession of an Aviva Global LifeCare plan will be unable to renew their policy. However, until the plan reaches the renewal date, now the cancellation date, Aviva has confirmed that customers will be able to seek coverage under the plan.
This poses a grave concern for many individuals and families currently covered by the Aviva plan, as the cancellation will force them to seek alternative health insurance options. Any medical conditions developed by the policyholder while enrolled on the Aviva policy would subsequently be treated as Pre-Existing with any new health insurance application.
Pre-exsiting medical conditions are normally not eligible for coverage under an international health insurance policy.
As of the time of publishing, Aviva has offered no solutions for continuing coverage to Aviva policyholders currently suffering from severe chronic conditions whose plans will be cancelled. This means that individuals experiencing life threatening medical conditions, such as cancer, are now no longer to obtain coverage from a plan which they have been enrolled on for a number of years.
Additionally, many Aviva policyholders are finding that they have only just completed the waiting periods associated with coverage benefits such as Maternity, and are now being told that their policy is no longer being offered. These individuals must find new coverage and complete a new set of waiting periods before they are able to start their family with the protection they deserve.
A current Aviva policyholder, who did not wish to be named for this story, said of the cancellation:
“This is horrific; I’m absolutely outraged at the decision. This belies an utter lack of commitment to the customer and is, quite frankly, extremely disappointing from one of the world’s, supposedly, ‘premier’ insurance providers… How am I meant to get coverage now?”
Upon being asked if he had any pre-existing conditions which would require continuing coverage the policyholder stated:
“Yes, and it’s definitely a condition which will be excluded from my next plan – if I’m even accepted. The whole situation is verging on the criminal, in my opinion.”
One woman, asking to be called Mrs. S in this article, who had purchased the policy expressly for the maternity coverage said of the news that “this is insane! My husband and I were going to try to start a family this year…. We now have to wait another 10 months on a different policy before we can give birth? How can Aviva do this?!”
Aviva entered the international health insurance market with the Aviva LifeCare plan in 2007 and it is unknown at this moment why the company is choosing leave. Additionally, it is also unknown whether Aviva’s offerings in the United Kingdom or Singapore will be affected by this decision.
However, it should be noted that Aviva has had a history of extreme premium increases over the last 2 years with the LifeCare product, with average plan costs doubling for 2 consecutive years. This is unusual for Health insurance and may indicate a structural unsoundness at the core of the Aviva LifeCare business.
At this time International Insurance News recommends that any person holding an Aviva Global LifeCare Health Insurance policy should contact their agent, broker, or representative to establish continuing coverage options.
This week, Hong Kong’s chief insurance regulatory body, The Office of the Commissioner of Insurance (OCI), released finalized business statistics for 2010 based on the audited returns and additional actuarial information submitted by insurance companies over the past year. The government report showed that despite recent market turmoil and global economic uncertainties, insurance sales have continued to grow in Hong Kong as more people purchase policies for investment and protection against risk.
Hong Kong – a special administrative region (SAR) of China – is the leading insurance center in Asia, attracting many of the world’s top insurance companies. Hong Kong has the largest number of authorized insurance companies in Asia at 167 and thousands of supplemental agents and brokers. The level of insurer business activity in 2010 amounted to 11.8 percent of Hong Kong’s gross domestic product (GDP), compared with 11.3 percent in 2009. Insurance continues to be an integral part of the country’s economy.
According to the latest OCI figures, the total gross premium of the Hong Kong insurance industry for year end 2010 was HK$205 billion (US$26.3 billion), representing an 11 percent increase in growth over the previous year. For the country’s general insurance business, gross and net premiums, rose by 8.7 percent to HK$31.1 billion (US$3.99 billion) and 5.9 percent to HK$21.7 billion (US$2,79 billion) during this period although the overall retention ratio declined slightly from 71.9 percent to 70 percent. The OCI noted that while the overall number of claims increased in 2010, with a net claim incurred ratio of 53.6 percent compared to 52.8 percent in 2009, most insurance lines maintained an underwriting profit. The one exception were the ships insurers, who reported a HK$108 million (US$13.87 million) underwriting loss.
The OCI has largely attributed the double-digit rise in general insurance premiums to the robust performance of property damage business lines in Hong Kong, which have grown by 16.8 percent in the past year, from HK$5.7 billion (US$730 million) in premiums in 2009 up to HK$6.6 billion (US$850 million) in 2010. Accident and health insurance lines, the largest segment of the general insurance market, also contributed significantly with a 10.2 percent rise in gross premiums from HK$7.7 billion (US$1 billion) in 2009 to HK$8.5 billion (US$1.09 billion) in 2010. These two market segments, property damage and accident/health, also continued to be two of the most profitable lines for Hong Kong insurers, registering strong profit of HK$673 million (US$86.4 million) and HK$464 million (US$59.5 million) for the year respectively. The increase in health insurance proliferation is expected to continue by the OCI, in conjunction with expansion in medical business, rising care costs, and a growing awareness among the public about upcoming changes to the state’s health system.
Hong Kong’s motor insurance segment also posted strong numbers last year with a 12.7 percent annual increase in gross premiums from HK$2.8 billion (US$360 million) in 2009 to HK$3.2 billion (US$410 million) in 2010. Even more impressive, motor insurers were able to turn and make an underwriting profit of HK$105 million (US$13.48 million) following a claims-heavy term. The OCI attributed the motor insurance market’s growth to the overall premium rate increases levied on commercial vehicles over the past year. General liability insurance meanwhile remained level with HK$7.1 billion in premiums reported last year.
While 2010 certainly proved to be a productive year for general insurance business, the long-term insurance market more than held its own, with life insurance remaining a major growth driver. Both individual life insurance and investment-linked policies recorded significant premium growth last year. Office premiums for new individual life policies increased significantly by 28.2 percent to HK$57.9 billion (US7.43 billion) compared in 2010. Traditional life insurance policies, whereby insurance companies collect an annual premium from policyholders to invest and eventually pay a dividend, increased by 25.1 percent to HK$38 billion (US$4.8 billion) in 2010. Sales of investment-linked life policies, in which buyers move their premiums into a number of investment funds at differing levels of risk and return, were up 34.7 per cent over last year, for a total of HK$19.9 billion (US$2.56 billion) in terms of new office premiums. With the market begging to recover from the global financial crisis last year, investment-linked policies proved particularly popular with buyers looking to benefit quickly from the market rally. Industry observers are doubtful this trend will continue through 2011 as global market unrest in recent months continues to cut down investor appetite and spending power.
Overall Hong Kong insurance companies sold 1.01 million life policies in 2010, with the total number of new policies up 5.7 percent on the previous year. Individual life insurance products remained the dominant line in the long-term insurance market, comprising 9 million policies, HK$160.2 billion (US$20.5 billion) in premiums, and 92.1 percent of total business. While the total office premiums has increased by 11.4 percent from HK$156.1 billion (US$20 billion) in 2009 to HK$173.9 billion (US$22.3 billion) in 2010, the other insurance lines in the sector have not been able to make inroads. The number of group policies has increased by 1.1 percent to 16,263 but in-force premiums of Annuity and other business fell by 26.3 percent to HK$2.1 billion (US$270 million) and sales of retirement-related policies dropped by a further 35.9 percent to HK$10 billion (US$1.28 billion). At the end of 2010, there were 59,005 Retirement Scheme contracts in Hong Kong carrying net liabilities of HK$105.5 billion (US$13.55 billion). Local market observers have attributed this drop to a recent regulatory change regarding pensions. Last year, The Mandatory Provident Fund Schemes Authority stipulated that all MPF funds must be held through trustees.
It remains to be seen whether the Hong Kong insurance industry will be able to deliver similar performance numbers through the next financial year; given the bleak macroeconomic outlook it appears doubtful. One particularly notable development however could be the increasing proportion of business accounted for by visitors from mainland China. According to the OCI, these mainland customers are expected to drive between a 20 to 30 percent annual growth rate in the country’s total premiums this year alone. China has become the second largest economy in the world, with an emerging middle class population ready to spend on insurance and investment-linked products. This emerging investor class presents significant opportunities to financial markets like those in Hong Kong that are of close proximity and particularly convenient to them. While this close relationship between Hong Kong and China can also present some notorious pitfalls, such as maternity tourism, overall it could provide local businesses with bountiful opportunities. Hong Kong-based insurance companies that can present innovative, cost-effective and secure insurance products and services not yet entrenched on the mainland will be rewarded with a tremendous potential client base.
Ping An Insurance (Group) Co, China’s second largest insurer, announced a 33 percent rise in first-half profits this week, at the top end of market expectations. As the company’s premium income and investment returns have continued to expand, the insurer also plans to increase its stake in a Chinese bank to further strengthen its banking and asset management operations.
In a statement released to the Shanghai stock exchange, Ping An reported that the group’s net income for 2011 had climbed to CNY12.8 billion (US$2 billion), or CNY1.67 (US$0.26) a share, from CNY9.61 billion (US$1.5 billion) a year earlier. The Shenzhen-based company noted that net premiums were able to grow by 39 percent for the period despite a slowdown in automobile sales in China and tightened regulation over bancassurance policies. Individual insurance premiums rose 29 percent, while Ping An’s industrial insurance business reported a 36 percent advance. An improved focus on telemarketing and agents helped contribute to a 38 percent year-on-year rise in revenues to CNY133.81 billion (US$20.9 billion), while total equity was up 20 percent from 2010 to CNY134.33 billion (US$21 billion). The company also reported that total assets hit CNY1.31 trillion (US$200.4 billion) by the end of June, an 11.8 percent increase from the end of last year.
It was the performance of the firm’s banking sector that drew the most attention. Ping An noted that net profit from its banking businesses more than doubled to CNY2.4 billion (US$375 million) in the first half of 2011, accounting for nearly a fifth of the group’s total net profit of CNY12.76 billion (US$1.9 billion). Ping An Bank, a subsidiary of the group, contributed CNY1.21 billion (US$181 million) towards the total net profit, a 34.9 percent increase over last year, with a capital-adequacy ratio (CAR) of 10.78 percent. In an attempt to capitalize on its success in the financial services sector and establish itself as a major player in the Asia Pacific region, Ping An plans to inject up to CNY20 billion (US$3.1 billion) in fresh capital into its other majority-owned banking unit, Shenzhen Development Bank Co. This would be the second time Ping An has injected funds into the bank, having increased their stake to 52 percent from 30 percent at the end of June.
Shenzhen Development Bank has contributed CNY1.18 billion (US$180 million) towards Ping An’s net profits so far this year. The investment will be used to replenish the bank’s capital base, which had lowered to near the minimum levels required by Chinese law to operate. According to the latest figures, Shenzhen Development Bank held capital in June equal to 10.58 percent of total risk-weighting assets, with a minimum CAR of 10.5 required for banks of its size in China. Concerns were raised by a recent regulatory ruling, which could lift capital requirements further to 11.5 percent if Shenzhen Development Bank is declared systemically important. Once the deal is completed, Shenzhen Development Bank expects its CAR will improve to 13 percent, adding in a statement that “The capital replenishment will enable the bank to further expand its assets and businesses, and help it achieve sustainable profit growth.”
Many other banks in China have undergone similar fundraising efforts in order to bolster their capital positions in the face of volatile global financial markets. Chinese insurance companies have duly invested in bank stocks because they believe bargains have begun to surface on expectations that the market has bottomed out following the sharp falls due to the global market turmoil earlier this summer.
For Ping An, the investment in Shenzhen Development Bank comes as part of the company’s ambitious long term plan to become a full-service financial services conglomerate, with equally proficiency in cross-selling insurance, banking and investment operations. Ping An have used HSBC as a model, who in fact hold a 16 percent stake in the Chinese insurer. According to Ping An, it’s business from non insurance operations (banking, securities, trusts) now contribute 27 percent of its net profit, up from 23 percent in 2010, and management are keen to see this continue. Injecting money into Shenzhen Development Bank will further accelerate the development of banking and investment business within the group’s business portfolio. Insurance industry analysts predict that these moves could help Ping An to perform better than its biggest rival China Life. Having a more diversified business portfolio will ultimately help protect the insurance company from adverse market volatility in the future.
The Chinese insurance market itself may become more diverse in the near future, with the introduction of prominent Hong Kong-based companies perhaps on the horizon. Speaking at a financial forum on Wednesday, China’s Vice Premier Li Keqiang told attendees that Beijing has plans to grant greater access for Hong Kong’s services sector on the massive mainland Chinese market. Li, viewed by some as a likely candidate to replace Premier Wen Jiabao, singled out Hong Kong-based insurance companies in particular, and stated that they could soon be allowed to establish separate branches and play a bigger role on the mainland as well as take up ownership stakes in their mainland Chinese subsidiaries. Li closed by saying such implementing such policies would be “consistent with our policy of opening to Hong Kong first under the ‘one country, two systems’ and aimed at taking mainland-Hong Kong economic and financial cooperation to a new high.”
Many Hong Kong insurance companies already recognize the importance of the mainland market. According to The Office of the Commissioner of Insurance (OCI), over ten percent of all insurance premiums collected this year were from policies issued to Mainland Chinese visitors. These mainland customers are expected to drive between a 20 to 30 percent annual growth rate in the country’s total premiums this year alone. China has become the second largest economy in the world, with an emerging middle class population ready to spend on insurance and investment-linked products. This emerging investor class presents significant opportunities to financial markets like those in Hong Kong that are of close proximity and particularly convenient to them. Hong Kong insurance companies that can present innovative, cost-effective and secure insurance products and services not yet entrenched on the mainland will be rewarded with a tremendous potential client base.
Insurance Companies Mentioned
Ping An Insurance (Group) Co. of China Ltd.
Ping An Insurance is the first integrated financial services conglomerate in China that blends its core insurance operations into securities brokerage, trust and investment, commercial banking, asset management and corporate pension business to create a highly efficient and diversified business profile. The group was established in 1988 and headquartered in Shenzhen, Guangdong Province, China.
As the economies of Brazil, Russia, India and China continue to grow, increasing numbers of international insurance and reinsurance companies are seeking to enter into these burgeoning regional markets. As some of the most recent international insurers to tap new country markets have found out, not only must they balance short and long-term strategies, but also provide appropriate and appealing products to local populations, sometimes even in the middle of shifting regulatory environments.
Just last week, at the Insurance Day Conference in Bermuda, Joe Plumeri, CEO and Chairman of Willis Group Holdings, spoke about the importance of maintaining growth in the Indian health insurance market along with the markets of Brazil, Russia, and China, or the “BRIC” countries as they are sometimes called. He stated that due to these countries’ developing populations, “the wealth and insurable value that an exploding global middle class will create will be unprecedented in history. The resulting demand for insurance will dwarf the capital and capacity of today’s insurance market.” Plumeri emphasized that “the new middle class will need brokers that understand them and their industries. They’ll need carriers who are innovative, financially secure, and who are there when they need them-carriers with a reputation for paying legitimate claims quickly.” A report published by Standard and Poor’s this week reaffirmed his opinion, with S&P credit analyst Magarelli stating that India’s “non-life sector, which includes property/casualty and health insurance, has one of the lowest penetration rates in Asia.” Again asserting Plumeri’s opinion on what customers will need from carriers, Magarelli proclaimed that in order to maintain the growth of the Indian insurance market, insurers need to start focusing more on key factors such as customer service, innovation, and efficiency; currently, “the insurers’ persistently poor underwriting performance..could potentially stunt the industry’s growth if it remains unchanged.”
As the demand for insurance in Brazil grows, The Travelers Companies Inc has just purchased 43 percent of Brazilian insurance company J. Malucelli Participacoes em Seguros e Resseguros SA for US$410 million, with the opportunity to increase its stake in the company to 49.9 percent over the next 18 months. As J. Malucelli already commands 30% of Brazil’s largest market, it is no surprise that Vice Chairman and head of Traveler’s Financial, Professional, and International Insurance business segment Alan Schnitzer said that J. Malucelli’s “extensive customer base provides us [The Travelers Companies, Inc.] with an exceptional platform for expanding the joint venture beyond the surety business into the growing property and casualty market.”
In accordance with projections for growth in Malaysia’s insurance sector, Zurich Insurance Company Ltd has just purchased Malaysia’s Assurance Alliance Bhd, a subsidiary of MAA Holdings Bhd, in full. A financial holding company, MAA offers general and life insurance, reinsurance, property management, investment advising, and more; Zurich purchased the general and life insurance sectors of the company. The sale comes a few months after Dan Bardin, Zurich’s chief executive of Global Life Asia Pacific and the Middle East, disclosed that the company was interested in expanding in Malaysia, saying that now is a “great time” to focus on expansion in Asia, although it can be “an enormous task to integrate.” Unfortunately, the sale effectively removed the basis of MAA, resulting in the quick descent of MAA’s shares on the Bursa Malaysia Stock Exchange from 5 sen to 67.5 sen on a volume of 32.63 million shares. MAA is also suffering other monetary issues, as without adequate internal funding, the company may not be able to pay their final principal payment of RM140 million. Whether or not they are able to do so will depend on the profit made from the RM344 million (US$114 million) sale to Zurich.
Bardin has reported that the company is also interested in expanding to Singapore and Taiwan. Contrary to S&P credit analyst Magarelli’s opinion that India has “one of the lowest penetration rates in Asia”, Zurich Regional Chairman of Asia/Pacific and the Middle East Geoff Riddell has reported that the company is currently not looking at expanding to India due to the competing prices caused by large private life insurers entering the market already. In March, Warren Buffett’s Berkshire Hathaway entered the Indian insurance market to sell automobile policies for Bajaj Allianz General Insurance, while New Zealand/Australia insurance giant IAG currently owns a 26 percent share of the Indian sector of its business alongside the State Bank of India.
Managing Director of Swiss Reinsurance’s Corporate Solutions Division Ivan Gonzalez elaborated on Swiss Re’s goals for expansion in the future in an interview last week. With 80% ownership of Brazilian insurance company UBF Seguros, Swiss Re has already gotten a footing in the Latin American insurance market, but they hope to use this ownership to expand in and out of Brazil; to grow the company “as a business”. With an eye on the other three largest Latin American markets-Mexico, Chile, and Columbia, Swiss Re is also opening an office in Miami, in order to “be closer to the Latin America market”, Gonzalez said.
Locally, Hong Kong is also trying to maintain its global financial foothold, as the Hong Kong government has begun to talk about creating an independent insurance authority; its aim will be to enhance “regulation and development of the insurance industry”, the government said. Secretary of Financial Services and the Treasury KC Chan also stated that the authority will “reinforce Hong Kong’s position as an international financial center.”
It is clear that companies will continue expanding into Brazil, Russia, India, and China, but only time will tell if they will be able to provide customer service that will maintain a good relationship between these countries and their new insurers.
Insurance Companies Mentioned:
Zurich: Although its headquarters are in Switzerland, Zurich services customers in more than 180 countries, providing insurance for markets in North America, Europe, Latin America, and the Asia Pacific. In North America, Zurich is the second-largest provider of commercial general liability insurance and the fourth-largest commercial property-casualty insurer.
Swiss Reinsurance: As the second-largest re-insurer in the world, Swiss Re maintains a presence on all continents, providing reinsurance for Property and Casualty and Life and Health related issues, as well as risk management services for corporations.
Bajaj Allianz Insurance Company: A joint venture between global insurance giant Allianz SE and Bajaj Finserv Limited, one of the 2 and 3 wheeler manufacturers in the world, Bajaj Allianz offers health, child, and pension policies in more than 1,200 offices across India.
J. Malucelli Seguradora SA is a Brazilian insurance company that provides surety insurance.
Malaysian Assurance Alliance Holding’s Berhad (MAA Bhd) is a financial holding company that provides financial services and insurance in South Asia, dominating in Malaysia while also establishing a presence in Indonesia and Malaysia.
Berkshire Hathaway: Under CEO Warren Buffet, Berkshire Hathaway manages many subsidiary companies, including Geico Auto Insurance, and can also provide financial planning help.
UBF Seguros: is a small Brazilian insurance company that provides agricultural and surety insurance.
Willis Group Holdings: As one of the world’s leading insurance brokers, Willis provides professional insurance services, reinsurance, risk management, financial and human resource consulting, and more in almost 120 countries.
The Travelers Company: One of the largest American insurance companies and the largest writer of US property-casualty insurance, The Travelers Company provides personal, business, financial, professional, and international insurance and ranks 106 on the Fortune 500 list.