Asian buyers become more discerning

The need for specialty lines products is growing across Asia but buyers are becoming increasingly discerning about the reinsurers they want to work with on such products.

That is the view of Emmanuel Clarke, chief executive of PartnerRe Global, who said that while the focus on growth in many Asian markets has often been on the emergent middle classes and solving the challenge of low insurance penetration, there is also a growing demand for specialist products as companies and insurers in the region become more sophisticated.

“We are seeing a lot more demand for more technical products and this need is very much driven by the clients,” Clarke said. “We have a range of expertise and products that we know work and have been successful in other parts of the world. The question is how we can translate that success into the Asian markets.”

Clarke notes that PartnerRe was originally formed as a monoline property-catastrophe reinsurer. Over time it has developed a depth of expertise in a range of different specialty lines and now it is taking this expertise to new markets. He believes the key to this is through putting resources on the ground in the region.

“We are well positioned in a number of classes—we have a very large agricultural book globally, for example,” Clarke said. “We know there is increasing demand in Asia for such products but we understand there is also a demand for local expertise. Clients want to deal with people in the same time zones, and those who have a deep understanding of local cultures.

“We have invested heavily in doing this—we have doubled the number of underwriters in the region this year alone, for example.”

As well as agriculture, he sees opportunities in credit and surety, marine and energy and construction and engineering. In terms of which countries this applies to, he said it is difficult to generalise but while Japan and Australia represent the mature markets in the region, he also sees growth potential in Indonesia, Malaysia, Thailand, and Taiwan.

But he stresses that reinsurance buyers in the region are becoming increasingly discerning. They want to work with partners who are willing to form long-term relationships and who really understand their businesses and challenges using bespoke solutions rather than simply being sold commoditised products.

“Reinsurance buyers increasingly want flexibility and the ability to provide a customised solution,” Clarke said.

He said there is also a much greater understanding of the fundamentals that reinsurers should provide, something that has come back into sharp focus after some big losses in the region in 2010/11.

The basic attribute of paying claims on time is the first big concern for buyers. “They want the certainty that their partner will be around to pay claims—even in 10 years’ time if it is on a long-tail line,” he said.

“Catastrophes like the Thai floods reminded the market of the importance of this. Some had mixed experiences of their partners paying and it has changed their thinking on who they want to work with.

“Sustainability and good relationships are increasingly important to these companies now. They don’t want to be dealing with an entity in run-off in a few years and at a time of so many new entrants it really is a time for a lot of more seasoned reinsurers to be rethinking their value proposition now.”