Page 24 - Digital Edition SIRC Supplement

MARKET REPORT - HONG KONG

Asian reinsurers’ drive to internationalise
– The importance of a strong home base
such as Hong Kong

Over the past 10-15 years Asia’s reinsurance markets have changed beyond recognition.
International reinsurers, whilst still dominant, are facing more vigorous competition from
regional players. In addition, as regional cedants are becoming more demanding and
sophisticated, these reinsurers increasingly offer capacity and services from regional hubs
rather than from their domestic head office locations. Mr Franz Hahn, CEO, Peak Re,
shares the importance of a strong home base such as Hong Kong in Asian reinsurers’ drive
to internationalise.

Asian reinsurers have grown in stature as a result The new global economic order
of regional or even global expansion. This is also This sea change reflects the new realities in the global economy.
true for most carriers who started off as national Since the beginning of the century, the share of the emerging
reinsurers after World War II when Asian countries regained world in global GDP has grown continuously. Despite the
their independence. Their capital bases were small and current slowdown in high-growth markets, most experts still
primarily designed to focus on domestic business only, with expect their combined GDP to outgrow the mature markets’
their key mission being the generation of funds for national during the course of the 2020s.
development and the conservation of foreign exchange. This
has changed. Once dominant domestic positions were eroded As a result of their economic rise, in combination with trade
by fierce competition from other reinsurers and improving surpluses, emerging markets have accumulated enormous
risk retention capabilities of local primary insurers, limiting amounts of capital – and to a much lesser degree have to rely
the growth prospects for local reinsurers. Therefore, also on mature market capital to support the local insurers’ growth
encouraged by stronger capital bases, many of them made and balance sheets. Many countries have even evolved from
the strategic decision to expand abroad, first within the Asian capital importers to capital exporters, embarking on major
marketplace, later globally. acquisitions of mature world assets.

Today, reinsurers from Asia’s high-growth markets play a This is also increasingly true for (re)insurers and their
significant role, also on a global scale. In 1995, Korean Re was investors domiciled in high-growth markets. Following in the
the only reinsurer from the region featuring among the global footsteps of other industries and major brands such as Lenovo
Top 50. By now, based on 2014 data, this number has grown to and Tata, they are making inroads into “Western” markets by
8, with 3 among the Top 15, according to A.M. Best. acquiring assets and operations from established (re)insurance
brands.

22 SIRC Supplement • November 2015 • www.asiainsurancereview.com Back to Contents