Aggressive growth and M&A sets China on course for reinsurance top spot

Against a backdrop of an exceptional growth rate and aggressive acquisition strategies, China is taking a more prominent role in a frantic period of re/insurance M&A activity.

Although there are signs of a slowdown in its economic activity, China continues building its reinsurance market at a very fast pace, which is now projected to be the largest in the world by 2022, according to Willis Towers Watson.

As many re/insurers start looking overseas for new business, Intelligent Insurer explored some of the drivers and motivators behind some of the big mergers seen recently.

Experts speaking to Intelligent Insurer suggest that the attitude of Chinese re/insurers towards cross-border M&A are more bullish than their Western counterparts.

“Chinese insurance companies always put scale up front, as the top priority compared to profitability. They go for scale first, before they become profitable,” Michael Guo, managing director of Hong Kong for Boston Consulting Group (BCG) and former Willis Capital Markets & Advisory co-CEO, said.

In addition, diverse structures among Chinese re/insurers resulted in a different attitude towards how they approach growth.

The big Chinese insurers such as PICC and China Life, for example, often see little need to expand overseas due to very attractive, double-digit domestic growth.

By contrast, the large Chinese conglomerates, such as Fosun Group, own insurers in China that are not top-tier in size, and in turn find it more difficult to grow domestically.

Having a strong need to deploy capital in the financial services sector to look for more stable and sustainable returns, these insurers can only grow organically, which is why they look overseas, said Guo.

However, many of these transactions between Chinese and Western companies end up not working, due to a very different set of priorities, for example in corporate culture, market focus and products.

This is just a snapshot of a longer feature by Intelligent Insurer. For a broader picture of the differences between China, Japan and the West’s strategic approach to re/insurance, please click here.

Today’s top stories

US PE firm swoops for Munich Re-backed London MGA

PartnerRe targets growth in LatAm with new hire from Aon Benfield

MS Amlin hires from XL Catlin; will expand offering in LatAm

Reinsurers may pay as insurers count cost of Sydney hailstorm

Did you enjoy reading this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.