13 September 2016 Insurance

Global ambitions a talking point

The rapid growth and even bigger ambitions of a number of reinsurers based in emerging markets are starting to change the reinsurance landscape for the better—but the threat of protectionism could stymie this process.

That is the view of Brad Kading, president of the Association of Bermuda Insurers and Reinsurers (ABIR), who believes the global expansion of some of these reinsurers, often at the expense of the incumbent biggest reinsurers, is becoming a big talking point in the industry.

He cited the growth and outward reaching strategies of the likes of GIC Re, Korean Re, China Re and IRB-Brasil Resseguros (IRB) as potentially representing an industry-changing evolution as these companies make it into the top 20 and then the top 10 of the global rankings of reinsurers.

On top of these specific players, he noted that China has awarded reinsurance licences to five new domestic players in the past 18 months and a number of large Japanese companies are also building a market presence globally through subsidiaries.

“For a long time, I don’t think people have been that focused on the growth of domestic Asian reinsurers,” Kading said.

“But there are some large players starting to operate from some very robust markets with a global reach. The Singapore market has grown exponentially in recent years, for example, and is a good platform from which these companies can operate.

“If you look at what that means, we are starting to see a decline in market share for the top five players and a greater spread of the risk. That greater diversity is a good thing for the market as it also means there is a greater breadth of intellectual capital at work.”

He added that the presence of these players should also help increase insurance penetration in their domestic markets, an effect that would benefit the industry as a whole.

“They will have an engrained interest in developing their own markets for their own economic benefit. If they can help that happen, that benefits everyone,” Kading said.

It also spreads the losses in the aftermath of big events—losses that will only get bigger as economies continue to grow and populations become more concentrated. “As more hurricane risk is taken on, it can be spread around the world,” he said.

This process is threatened, however, by protectionism and a desire by some regulators to effectively ring-fence capital and keep it in their own economies.

“Where you have that kind of approach and anything approaching a government monopoly, that is bad for consumers, insurers and global reinsurers that need diversification,” he said. “We need to challenge that approach every step of the way.”

Some market commentators have also suggested that the government backing (whether implicit or otherwise) of some reinsurers offers them an advantage over rivals lacking that support. Kading believes such support means little to buyers.

“We have seen reinsurers run by governments go bust in the past. Buyers are aware of such risks in whatever form they exist,” he concluded.

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