Munich Re closes Malaysia, Shanghai and Melbourne and bets on hub approach

“In order to keep pace with the dynamic expansion in APAC markets, Munich Re is making changes to its strategic setup in the region. The objective is to focus more closely on local markets while creating a more flexible structure. Munich Re’s offices in Tokyo, Singapore and Beijing will be expanded, while certain other locations will reduce in size or close altogether,” said the company. Ludger Arnoldussen, member of the Munich Re Board of Management with responsibility for APAC, added: “By pooling competencies in the region, we can align our property-casualty operations more closely to the needs of our clients. That is why we are strengthening our business locations in Tokyo, Beijing and Singapore. At the same time, we are streamlining our structures to be better placed to respond quickly and effectively to the challenges of these highly competitive markets.” The reinsurer explained that its regional centre in Singapore will in future serve clients from Southeast Asia and support its reinsurance activities in India, Japan and Korea.hide“The Tokyo office will be expanded in order to play a greater role in property-casualty business in Japan,” said the company. The “streamlining” process in Southeast Asia will involve the closure of the property-casualty branch in Kuala Lumpur. Munich Re said that Roland Eckl, currently responsible for property-casualty business in Australia, Japan and India, will move from Munich to Singapore and will assume responsibility for the regional centre. The company said that Singapore, in particular, will see an increase in the number of staff employed to cover the regional centre’s new roles. More than 200 employees currently work in the Munich Re Singapore office. Mr Eckl will clearly bring some key staff over to Asia from Munich too. “Some of the tasks – in particular those that are client-facing – previously undertaken in Munich will in future be carried out in Tokyo and Singapore. This will affect a number of employees in Munich, for whom new functions will be sought,” said the company. Munich Re said that, in future, Chinese clients will mainly be managed out of Beijing. The Hong Kong presence will be “greatly reduced” and the Shanghai property-casualty office closed altogether. The group’s Taipei liaison office will remain. Munich Re added that customers in Australia and New Zealand will be managed from Sydney and Auckland, and the Melbourne office will close. “China, Hong Kong, Taiwan and Australasia will continue to report directly to Munich, specifically to Tobias Farny, who is currently responsible for China, Southeast Asia and Korea,” added the company. Subject to approval of the co-determination bodies and supervisory authorities, the new structure will be in place by the end of 2017. The closure of offices such as Malaysia will obviously raise questions about Munich Re’s commitment to the region and it was clearly keen to allay such fears as the German reinsurance group stated: “Munich Re believes that the emerging markets of Asia in particular will continue to be the key drivers of insurance sector growth in the medium term. This year and next, premium volume in life primary insurance in this region is likely to see double-digit growth, with that in property-casualty insurance only slightly behind. According to the latest figures, in 2015 China pushed the UK from third place (behind the US and Japan) in the ranking of the largest primary insurance markets. China is expected to become the world’s second-largest insurance market, behind the US, by 2017.” But it is a simple fact that extricating decent profit from this highly competitive and sometimes protectionist region is not easy. One could read a negative message into this change in tack from Munich Re. On the surface, one could assume that there is simply not enough profitable business available in the APAC region to justify offices such as Malaysia and attempting to manage them out of hubs makes more economic sense. It could also be supposed that Munich Re has simply made a pragmatic decision to shift resource around – shrinking or closing here and expanding there – to make more effective use of limited resources. The bottom line is that this does not look like a significant withdrawal from one of the world’s most important and fastest-growing regional markets by one of the world’s leading reinsurance (and increasingly corporate insurance) players, but rather a tactical reshuffle.

Munich Re closes Malaysia, Shanghai and Melbourne and bets on hub approach

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