Optimism in Asia ‘palpable’ despite quartet of crises

03-11-2020

Re/insurers in Asia are “going through four crises at once” and all of them are affecting insurance and risk, but optimism across the continent is “palpable”.

This is the view of Zia Zaman, chief executive officer of Beaver Lake Capital.

“We have an optimistic view here in Asia. It’s really hard to imagine if you’re sitting in the UK, Europe or the US, just how much optimism there is in Asia, it’s palpable,” Zaman said.

“The four crises are the health emergency around COVID-19; the economic crisis that goes along with it; plus equity, which is 400 years old but which is finally coming to the fore as we look at the pandemic and say ‘are we taking care of people the way we should?’.

“Finally the longest-burning, and maybe the most important of them all, is the climate crisis—and that is not going away.

“Each of those is feeding into the others, so you might see a blending of one into the other like a Venn diagram.”

“Everybody in Asia is looking at how the borders between industries are blending.” Zia Zaman, Beaver Lake Capital

Blending borders and super apps
Given such huge and overlapping challenges, why is there so much hope for the future?

Zaman pointed to innovations and environmental, social, and corporate governance (ESG) factors, among other things.

“Everybody in Asia is looking at how the borders between industries are blending. There are banks, then there are newer banks and there’s alternative credit and a whole set of blurry lines emerging around how do you get the consumer the flexibility and liquidity that they need?

“Alongside that you have protection and savings and wealth preservation and management. We’re also going to get a higher percentage of people with assets to protect and things they want to invest.

“When you put that all together, you look at Asia and you say ‘who is going to have control over that consumer?’. ‘Who is going to have a share of wallet and who is going to have a share of mind?’,” he explained.

“Super apps—that offer a marketplace of services and offerings, delivered via in-house technology and through third party integrations—continue to be front and centre in all our conversations.”

Examples of this include Ant Group (formerly known as Ant Financial), Singapore-based Grab, and the VN companies in Vietnam, among many others.

Zaman said that Asia has many slightly different super apps, more than in the west, that make users consider doing more than one thing at a time.

“It’s an opportunity or a moment where you can introduce protection and that is where insurance comes in,” he said.

“If you ask people who are very knowledgeable about insurance they will say, ‘I think this is a super app play’, and they wouldn’t be wrong. We’re starting to see it with Grab getting into insurance in a big way.”

“Consumers are choosing brands that differentiate by putting sustainability at their core.”

The bigger picture
Two other areas Zaman is watching closely are segment growth and the notion of “embedding”.

He told Intelligent Insurer that he expects to see microinsurance embedded into a variety of different commerce sectors in the next three years. Microinsurance has gained more traction during the pandemic, he said.

He added that as more women and other underserved communities grow in economic importance they will become a bigger part of the overall insurance picture in the next 10 to 50 years.

“If you look at where most of the growth in insurance is going to come from, it’ll be from emerging Asia and Africa,” he said.

Changes in the way Asians think about ESG are another cause for optimism.

Zaman said: “We’re already in the Asian century with Asian gross domestic product taking over the rest of the world, and China is probably effectively bigger than the US already.

“India and Indonesia are benefiting from a demographic dividend as are Vietnam and others.”

These markets are growing for insurance simply because they have more young people and those with things to protect, he explained.

“When you see all the growth and 2.4 billion new members of the middle classes, you start to say ‘how are we going to serve them equitably?’.

“The truth is that Asia lags the rest of the developed world when it comes to sustainability and there’s a lot of white space here.”

Attitudes to the stigma around mental health are changing, as are business concerns about reputations.

“We’re starting to see second and third generation family office owners, as well as large corporations, and sovereign wealth funds, saying ‘we cannot afford to be on the outside looking in at this ESG trend’.”

For example, millennial workers are choosing to work for ESG employers, which is affecting recruitment at firms that have a less than glowing track record. Investors are seeking better returns with less downside, consumers are choosing brands that differentiate by putting sustainability at their core, and asset owners are asking to see action on the climate crisis, worker safety and inequality, Zaman said.

“To drive change forward a portfolio approach is needed. There’s going to be some incremental innovation to take existing business models and see what can we do to improve—whether it’s digitisation or making it easier for women, etc—and then there will be some differentiating innovations where a company takes a stand and says ‘we’re going to differentiate as a result of our policy, maybe sacrificing growth’, in an effort to use the prism of what ESG factors can do.

“Finally, it will be the truly disruptive business models that emerge through innovation which are going to shake up the foundations of how an industry is structured and maybe change the basis of competition.”

Zaman urged investors to start investing in ESG stocks, certainly in the public markets.

“If you are a big reinsurer or asset manager with a strong balance sheet, why not start investing in venture capital or private equity where there is strong return potential. That’s the challenge I’d throw out to investors.

“If you’re going to do that, start in Asia. You’ll have a greater impact here, because of the sheer numbers,” he concluded.

Beaver Lake Capital, SIRC, Insurance, Reinsurance, Zia Zama, Asia-Pacific

Intelligent Insurer