Conference Issue 2016


Asia 'offers regional opportunities'

By Kate Tilley, Resolve Editor

Asia offers not a "regional opportunity but opportunities across the region", Lloyd’s Australian representative Chris Mackinnon told the AILA conference during a panel session on Asian markets.

He said too many insurers believed it was just one market, but "you have to get the cultural sensitivities right". The Asia-Pacific region accounted for 10% of Lloyd’s 2015 gross written premium, of which $US1.5 billion was from Australia, $US680million-$US700million from Singapore, $US570million from Japan, and $US470million from China.

Berkshire Hathaway’s Australasian president Chris Colahan agreed, saying a "huge mistake" some expat insurers made was thinking "this will be a walk in the park because we know insurance".

He said many Asian nations had sophisticated insurers that were "formidable competitors" and many had "huge financial resources". A lot of Asian capital was going into Lloyd’s. Mr Mackinnon agreed, saying Chinese interests even owned Lloyd’s London building.

Munich Re specialty manager Joel Pridmore said insurers required humility to accept they needed domestic help to establish in Asian nations. "You can’t write Asia-Pacific business out of Munich."

Chubb’s Australia/NZ president John French said insurance was often the "career of choice for quality" people in Asia and it was the regional hub because it offered "early incentivisation" to get insurers there, "taking Hong Kong out of the equation".

Mr Mackinnon said Singapore had a controlled and stable regulatory environment, a good tax regime and was "right in the heart of where the world’s insurance growth is coming from.

Mr Colahan said Singapore was "a great place to live; very multicultural, clean, business friendly and with a sophisticated, forward-thinking regulator".

AIG head of financial lines Dan Collinson said some insurers had over-invested in Asia and "then realised it’s tougher than they thought". Some had risked their existing business by over-investing in Asian nations.

Mr French said demand would grow as the middle class grew in nations where insurance penetration was low.

Mr Collinson agreed with session moderator Anthony Hillary, a partner with HWL Ebsworth, who said many Asian markets were very brand driven. AIG had a Chinese auto licence but "couldn’t get a foothold" because its brands "carried no weight whatsoever". "You have to get under the skin of the country."

Mr Mackinnon said Lloyd’s was the world’s best-known insurance brand, "but that only gets us in the door, we then have to put something tangible and relevant on the table".

Mr Colahan agreed. "It’s not just brand. You need a good plan and something new to offer."

Asked about the August 2015 explosions in the Port of Tianjin, in China, which Mr Hillary said was the world’s largest man-made catastrophe, Mr Colahan said the insured loss involved an accumulation of risk. "We thrive on data, but we can still get it wrong."

"We have had some shockers in the Asia-Pacific region." He said the Christchurch earthquakes were "not modelled properly". The insured loss was $30 billion, on annual premium income of $5 billion.

With the Thailand floods, "none of us understood the contingent business interruption losses". "Aggregation of risk is a big issue."

Mr Hillary asked about the difficulties of competing regulatory regimes. Mr Collinson said there were problems placing multinational risks because "everyone wants the income in their country".

Mr Mackinnon said "free trade access across the Asia-Pacific region would help but, to be frank, it’s never going to happen. There are too many barriers".

Mr French agreed there were great "variances in regulators’ attitudes".

Back to top

Resolve is the official publication of the Australian Insurance Law Association and
the New Zealand Insurance Law Association.