Posted on Apr 20, 2012 by Sergio Ulloa
Zurich Insurance Group, one of the world's largest insurers, has worked to expand its presence in international insurance markets with the launch of two new offices in the Asia Pacific and Middle East, areas ripe for further business development, this past week.
On Wednesday the Swiss insurance group announced that it had successfully set up a new subsidiary in Singapore, Zurich Life Insurance (Singapore) Pte, after receiving the prerequisite license from the Monetary Authority of Singapore (MAS) to register and operate as a 'direct insurer' in the country. With its expansion plans for the city-state, Zurich Insurance aims to double its premiums generated in Singapore over the next three years
Zurich has been active in the Singaporean insurance market since 2006 but previously operated only under a defined market segment licence. This limited their business to only corporate and high net worth clients, who are able to invest more than US$5,000 a year for 10 years or more in Singapore. This market segment, comprised mainly of expatriates or high net-worth individuals, accounted for roughly 5 percent of the overall marketplace. Singapore's life insurance industry is divided into companies with normal licenses and those with 'defined market segment' (DMS) insurance licenses. DMS insurers are specifically registered with the MAS to conduct only non CPF-related business (the country's mandatory savings and retirement fund) and are required to stay within certain product lines and maintain minimum policy sizes. In addition to Zurich, several other multinational insurers currently hold a DMS license in Singapore, including Friends Provident, Generali, Royal Skandia and Transamerica. According to the Life Insurance Association of Singapore
(LIA), these insurers contributed 5 percent of new insurance sales in 2011, while insurers holding normal licenses represented the other 95 percent last year.
Now that Zurich is registered as a direct insurer, the company can target the rest of the Singapore insurance market outside of the defined market segment with a wider range of savings, investment and protection products. As part of these expansion plans, Zurich said that they will expand their multi-channel distribution strategy to include partnerships with independent financial advisers, insurance brokers, banks, and other employee benefit consultants, in order to expose their products to a wider group of investors. These new services will compliment those being offered through their existing branch office business at Zurich International Life. As part of the launch of the new subsidiary, Zurich also confirmed their intentions to double their in-house agency force in Singapore, from around 50 at present to over 100 by the end of 2012.
Zurich is choosing to expand their presence in the Singapore life insurance market
at the right time, as life insurance sales in the Asia Pacific city-state grew by a remarkable 22 percent last year. According to the LIA year-end fact sheet, four consecutive quarters of growth saw domestic insurers reap roughly S$2 billion (US$1.6 billion) in weighted new business premiums during the 2011 reporting period, up from the S$1,651.3 million (US$1.3 billion) recorded in 2010.A rising demand for protection and investment services amongst Singapore's middle-class population should provide local insurers with enough momentum to achieve sustainable premium growth in their home market going forward. Added to this, of course, is the relatively high concentration of wealth and high net worth individuals in Singapore, a fact that makes the domestic insurance and financial services market particularly attractive. In their company statement, Zurich cites a 2008 Barclays Wealth report that predicted Singapore will have the greatest concentration of per-capita wealth in Asia by 2017. Singapore currently ranks second behind Hong Kong in terms of wealth concentration in the Asia Pacific region, with just under a quarter of the population having a net worth in excess of S$1million (US$800,000).
Graham Morrall, the recently-appointed head of Zurich's new Singapore insurance subsidiary, confirmed that the company would continue to focus on the country's affluent and emerging affluent customer segments, even though their new license gives them the ability to test the greater insurance market at large. This segment, comprised of clients with monthly incomes between S$6,000 (US$4800) and S$8,000 (US$6400), and S$200,000 (US$160,000) in assets, according to Morrall, offers the most considerable growth potential for Zurich going forward and is estimated to now be worth about S$800 million (US$640 million). Singapore's mass market insurance industry is already quite crowded with several well establish companies and some 12,000 insurance agents vying for the business of an island nation with a 5 million population. Competing in this broader market segment would thus prove quite difficult for Zurich and because of this "The launch of the new subsidiary reaffirms our commitment to the Singapore market, and positions us for further profitable growth," Morrall said, adding that "we aspire to be the best insurer for the affluent and emerging affluent customer segments, as measured by our customers, distributors and employees."
Prior to his Singapore move, Morrall headed up Zurich International Life's Middle East operations, out of Dubai, an office that has also seen changes in the past week. Zurich announced on Tuesday that it will relocate its MENA general insurance offices to Sama Tower, Dubai, in order to better accommodate their growing operations in the United Arab Emirates. The move will also increase service standards for Zurich customers and business partners as it will allow more clients to settle insurance needs and register claims with their frontline staff face to face. "The relocation of our offices in Dubai is a testament to Zurich's ambitious plans for the UAE, and reflects our focus on enhancing customer convenience," said Maround Mourad, CEO of Zurich's general insurance business in the Middle East.
Many multinational insurers are now shifting their focus away from stagnant western economies to the growth markets in Asia and the Middle East in order to capitalize on the increasing affluence in the region. Zurich expects these emerging markets to account for about half of its new life insurance business by 2013, and the moves made this week surely work towards that ambition.
Insurance Company Mentioned
Headquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries and offices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world's largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers.