Global reinsurers focus on Chinese and wider Asian growth

Bullish China and Asia growth forecasts positive for buyers

The world’s leading reinsurers have all recently publicly revealed healthy annual and first-quarter results and made commitments to push for further growth in China and the wider Asia region. Core markets in North America and Europe remain challenging, dominated by inflation, stubbornly high interest rate and sluggish underlying economic growth.

This is good news for corporate risk and insurance managers in the Asian region as the market remains relatively hard and capacity tight in many key lines, despite a recent easing.

The recent commitment of the big reinsurers – Munich Re, SCOR, Swiss Re, Hannover Re and Everest Group – to pushing for further growth in China and the wider region will ease the pressure on regional insurers, many of which are dependent on the global reinsurers for support.

The big reinsurers also all have growth plans for the primary segment via expanding dedicated units and subsidiaries such as Swiss Re Corporate Solutions, SCOR Business Solutions and Munich Re Specialty Insurance and its primary company ERGO.

These are now significant operations that are truly global, offer chunky capacity and expertise in specialty areas and add badly needed competition in the commercial and corporate insurance space.

SCOR was the latest global reinsurer to discuss its Chinese expansion plans with state-owned China Daily as Thierry Leger, CEO of the Paris-based reinsurer, said that the Chinese market offers “incredible growth potential” and is also expected to become SCOR’s second-largest market.

Leger told China Daily that the sector’s growth prospects would be underpinned by China’s robust economic growth potential in the next ten to 20 years, as well as by the current large gap in insurance protection, which will increase the demand for insurance and reinsurance.

He also said that China’s aging population will boost the demand for life insurance and health insurance products, which is also seeing a boost for life cover, notably in Hong Kong.

Leger added that the growth of China’s industrial sector will require more property coverage, and climate change will fuel demand for coverage related to natural disasters.

China’s contribution to SCOR’s overall business is expected to increase to at least 10% to 15% in the coming ten to 20 years, with income from insurance premiums in China set to double or even triple, he said.

“I’m convinced that the Chinese reinsurance market will become number two in the world in the next ten years. So that shows the importance of the Chinese market and the need for us to continue to invest in our people, in our expertise, in our tools and in our data in the Chinese market,” added the SCOR CEO.

Leger said that under SCOR’s Forward 2026 strategic plan, the company will invest heavily in the modelling and underwriting of cyberspace risks to meet booming demand in China. It will also “massively” boost investments in China’s capital market — which now stands at about US$1bn — to leverage the country’s long-term growth prospects, he said.

Leger told China Daily that he “disagrees strongly” with arguments that China’s economic development has peaked. He said he sees great potential, for example, in reducing the gap between Chinese consumers and their peers in the US and Europe in terms of per capita spending, and in deepening digital transformation as a key growth engine.

Speaking to China Daily as Chinese President Xi Jinping arrived in Paris for a state visit to France at the invitation of French President Emmanuel Macron, Leger added that China has promoted a more open financial market step by step in recent times.

This has helped shape a higher level of confidence for investors such as insurers, and it is important for the country to continue to build a stable regulatory environment for foreign investors, added Leger.

At the end of April, Christian Mumenthaler, CEO of Swiss Re, who is leaving to be replaced by Andreas Berger on 1 July, also gave an interview to China Daily, in which he said that China’s insurance sector is expected to double in size in the coming decade amid robust economic growth. This would also make the country a more significant market for Swiss Re, he said.

Despite the recent concerns raised over an economic slowdown and property market slump, China is still among the world’s fastest-growing economies and is expected to sustain a growth rate of around 5%, said Mumenthaler.

China’s insurance market is growing faster than its economic growth rate, Mumenthaler said. “We think that premiums (in China’s insurance market) will double in ten years, so we want to be part of that,” reported China Daily. “I’m certainly excited about the opportunities (in China),” Mumenthaler said, not least because of the wide protection gap in the country and region as a whole, he added.

In 2023, Swiss Re earned net premiums and fee income totalling US$1.54bn in China, representing about 3% of its total net premiums, and making China the fifth-largest market and the largest emerging economy market for the reinsurer.

Mumenthaler said that Swiss Re, which established a wholly owned branch in Beijing in 2003, has “very close, very strong relationships” in the country as one of the biggest reinsurers, having profited from the opening up of China’s reinsurance sector since very early on.

For the P&C market, the outgoing Swiss Re CEO said that he sees the biggest opportunity arising from the interlinked areas of natural catastrophe, agriculture and green transition.

“On the decarbonisation front, I think China has a real potential competitive advantage because last year it has (probably) installed more green energy than the rest of the world,” said Mumenthaler.

German reinsurance giant Munich Re kicked off the round of interviews with China Daily back in December of last year and again in February, as its chair of the board of management Joachim Wenning said that he still sees China as an increasingly important market despite recent geopolitical tensions.

Munich Re established a branch company in China two decades ago and Wenning said that it may scale up the Chinese part in its global business pie chart over time as part of a wider investment and focus on the Asia-Pacific region, which was announced after the interview.

Wenning said that Munich Re takes annual premium income of roughly US$2.2bn in China, a figure that is predicted to rise because of the relatively low current level of coverage, especially for those risks associated with natural disasters like floods and earthquakes.

Munich Re estimates that only about 5% of natural catastrophe risks in China are currently covered by insurance or reinsurance, up from roughly 3% two decades ago.

The global average ratio stands at around 38% and so China’s insurance penetration rate for these critical risks remains relatively low and offers significant growth potential, Wenning told China Daily.

As with Swiss Re’s Mumenthaler, Wenning also said that Munich Re identifies emerging opportunities in China’s advancements in green technologies and energy investments that require insurance coverage.

“The need for reinsurance and for global expertise in China is unchanged. I could even say (it) is as vivid as it ever was,” Wenning said, despite an evolving geopolitical landscape marked with more tensions.

“It is strategic for Munich Re to be in the economy and in the market, locally present, which over time is going to be the largest economy in the world,” he told China Daily.

Wenning said Munich Re’s confidence in the Chinese market has been bolstered in recent times by the progress China has made in improving the business environment, such as better respect for the rule of law and the good job being done by the insurance regulator.

“I think they [Chinese regulators] have learned a lot from foreign experience. They were open to listening to foreign experience and building this into their current policies,” he said.

Wenning added that China’s pursuit of high-quality development is a “very meaningful ambition”, which, if it succeeds, will raise the sophistication level and core functionality of China’s insurance sector to one of the world’s best in the coming ten to 20 years.

The German group subsequently announced a significant set of changes to its regional leadership team, including China, that it said would “sharpen its underwriting focus” and enable local leadership to get closer to customers [see related story in this issue of Commercial Risk Asia].

The group also announced ambitious plans to further grow and invest in the Asian business of its primary insurance operation ERGO, itself forecast to hit €20bn in gross premium by the end of this year.

“Expansion in Asia is the major driver for future growth and profitability of the international segment,” said Munich Re as it announced its 2023 results.

The group said that the three core target growth markets are Indian non-life, Chinese life and Thai non-life.

For India, the group says that its non-life CAGR growth rate between 2020 and 2023 was 17% against a market rate of 12%.

This, it said, was profitable growth above market rate and placed ERGO in a top three market position among private P&C insurers. This was built on a “powerful and broad distribution platform, including strong bank sales partnership”, said the reinsurer.

ERGO’s Chinese life business has been growing at a rate of 22% versus 8% market average. It said that it predicts continued strong organic growth and a business model extension in China, such as through regulatory approval via a health broker license that was received at end of 2023.

ERGO’s Thailand non-life business has been growing at a staggering 35% versus 5% between 2020 to 2023, moving it up from a market position of 17 in 2020 to eight in 2023. The group said that it plans to improve further on that league table standing.

Hannover Re is traditionally the least outspoken of the four big European reinsurers and, true to form, gave no exclusive interview to China Dailyand supplied a perhaps less bullish outlook on China and the Asia region generally in its recently published annual report.

The German-based reinsurer said that the state of the economy in the ‘Greater China’ area, which includes mainland China as well as Taiwan, Hong Kong, and Macau, was relatively stable in 2023. Most insurers were therefore able to generate positive underwriting results.

Hannover Re said that in the aftermath of the Covid-19 pandemic, China enjoyed vigorous economic growth in the year under review, accompanied by low inflation.

This development, together with the new focus on green and sustainable economic growth (green economy), offers business opportunities for insurers and reinsurers, as noted by its rivals. At the same time, however, competition is also intensifying, noted Hannover Re.

The reinsurer added: “We scaled back our market share in China over the course of the year due to inadequate rates. However, our customer relationships remain stable and reliable. In Taiwan, claims relating to the Covid-19 pandemic affected the result of accident and health insurance on a far smaller scale than in the previous year.”

In southeast Asia –including Indonesia, Malaysia, the Philippines, Singapore and Vietnam – the 2023 financial year was notable for “restructuring in favour of significantly increasing the profitability of our portfolio”, said Hannover Re.

“Particularly in Thailand, Malaysia and South Korea, a hardening of the reinsurance market and associated appreciable improvements in conditions were noticeable. For tactical reasons, Hannover Re shifted the focus of its portfolio from proportional to more non-proportional covers,” it said.

The Indian market remains intensely competitive. Hannover Re says that it nevertheless continued to grow as planned in the property insurance lines.

And finally, Everest Group, the Bermuda-based international insurance and reinsurance group returned to a more bullish theme by reporting healthy growth in Asia in the first quarter of this year and the closure of some “outstanding” deals.

Everest only launched its Asia-Pacific operation – Everest Insurance Singapore – in 2022, following approval from the Monetary Authority of Singapore (MAS).

But as with Everest’s recent expansion and diversification into the primary insurance market space in Europe and worldwide in recent times, the group does not appear to be hanging around.

Jim Williamson, chief operating officer, stressed the outstanding progress made in Asia during recent renewals during its recent first quarter conference call with analysts, as reported by results service Seeking Alpha.

Williamson explained that at the 1 January renewal of this year, Everest grew its overall property cat business by 24%, which he described as “just excellent”.

“We did that at outstanding risk-adjusted returns. And then we were able to continue that growth at the 1 April renewal, where we grew globally just about 10% and in our North America property business, we grew property cat by 76%, again, at outstanding risk-adjusted economics,” explained Williamson, noting particularly strong growth in pro-rata (proportional) business.

Williamson told the analysts that a major contributor to pro rata property growth was the expansion of its business in Asia, “where we’ve traditionally been underweight”.

“We’re growing very nicely again with best-in-class underwriters in that market. And that market does tend to be more pro rata and very much a property market. And so you’re seeing the effects of selecting some really outstanding deals in the Asia,” said Wiliamson.

As noted at the top, this positive attitude is obviously good news for Asian primary insurers, who rely on a healthy international reinsurance market to back them up. It is also good news for primary insurance buyers as the knock-on effect of a solid reinsurance market on primary capacity is always positive for the outlook.

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