Demand for global programmes on the rise in Asia-Pacific: Zurich

Fernando Denes, head of international sales and distribution, Asia-Pacific at Zurich told Commercial Risk Asia in interview that it has experienced a 7% annual growth in the number of programmes in the past three years. He believes that the pace will increase, driven by the continuous internationalisation of Asian companies and the inevitable adoption of more sophisticated risk management practices. Mr Denes added that customers that already have programs in place for property or liability are looking to include new lines, such as directors’ and officers’, a portfolio that has had double-digit growth in the past years.hideThe role of the risk manager is still new to many large corporations across Asia-Pacific but this is beginning to change, he said. China will be another key driver in the Asian global programmes market, as Chinese companies intensify their international merger and acquisition (M&A) activity along with the foreign investment policies such as the ‘One Belt One Road’ initiative, according to Mr Denes. “When a Chinese company buys an American or European corporation, they inherit insurance structures that are usually more sophisticated and include international programmes. We are now supporting these companies to optimise these programs after the M&A,” he told Commercial Risk Asia. “In Australia, international programmes have been common for quite a while but they are restricted to very large customers that usually have a captive. Now, new demand is being driven by the continuous need for brokers to differentiate their offering in a very competitive market, and expansion to smaller international customers that may operate in only a few countries,” added Mr Denes. Zurich has offered international programmes in Australia since 2008 and wrote the first programme in Asia in 2010. “Since we have a globally consistent approach to international programmes, customers have access to the same services, expertise and tools that we offer in the US or in Europe,” explained Mr Denes. Today, the group has specialist underwriting teams in China, Taiwan, Hong Kong, Japan, Singapore and Australia. It also has a service hub in Malaysia that manages the relationships and issuance of policies in most other countries in Asia and the Pacific islands. “We expect to end 2016 with a portfolio of 500 programmes. While Australia continues to represent more than 50% of the premium, Asia leads the growth in number of programmes, mainly due to growth in the liability and financial lines spaces,” said Mr Denes. Asked whether it has recently become more or less difficult to construct global programmes in Asia, the Zurich global programmes expert said that an international programme is designed to support the customer’s risk management strategy and service needs whether they operate in “more or less difficult” countries. “From an international insurance perspective, Asia has a very good mix of countries. On one hand, you have very open markets like Hong Kong, Singapore and Taiwan. They usually permit cover from abroad and also have a good product offering in their local markets. China and Japan, on the other hand, usually require local policies if the customer is expecting to have local claims payment and services in these territories,” explained Mr Denes. “A third group would be other southeast Asian markets, not because they have similar rules but rather because we observe a faster pace of change in their regulation—for example, Indonesia, which had significant new rules implemented in 2015,” he continued. The challenge in insuring overseas risk is not in the amount of the regulation in a particular country but rather the uncertainty caused if these rules are unclear or nonexistent, added Mr Denes. “Asian companies operating overseas are increasingly concerned about both the certainty of local claims payments and regulatory alignment,” he added. Risk managers in Europe and the US often bemoan the lack of consistency and clarity with national insurance regulations, particularly in so-called emerging economies. There is a belief among some that national regulators make it as complicated as possible for multinationals to construct their programmes to try and retain as much premium as possible locally. Mr Denes said Zurich does not believe regulators have an explicit goal to make the insurance-buying process more complicated. But he did concede that it is true that some new regulations might limit the ability to buy adequate coverage or increase the cost of doing so. Mr Denes said that, besides the usual increase in (re)insurance and/or restrictions in allowable cessions to overseas reinsurers, some countries have been active in the following areas: Implementation of new prem-ium tariffs. Mr Denes said this has an obvious final impact and limits the ability of multinationals to purchase limits consistently, leading to customers having to pay more for lower limits in these countries than they would normally pay in countries where there is significant higher exposure Creation of market-standard wordings/coverage. This reduces the ability of a customer to have consistent cover in all territories where they operate, said Mr Denes. “In markets where there’s little flexibility in the design of the local coverage, multinationals often face the challenge of significant differences in conditions between their global and local cover,” he added. “Most of the new regulation in place would usually only consider the domestic market. Therefore, customers that have a global approach to insurance-buying might find it more difficult to satisfy local needs while trying to optimise their insurance cover across all territories where they operate,” explained Mr Denes. There is also an effort underway by risk management federations and associations, including the Pan-Asia Risk Management Association, to try and persuade the International Association of Insurance Supervisors to implement minimum standards.

Demand for global programmes on the rise in Asia-Pacific: Zurich

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