Peak Re explains the rationale for its European expansion

Hong Kong-based Peak Re has created a unit in Zurich to benefit from Solvency II equivalence and sees growth potential in proportional reinsurance business in Europe.

“It was always part of our overall strategy to go beyond Asia Pacific, the only change that really occurred was that we took the steps to do that earlier than envisaged in the business plan at the behest of our major shareholder,” Chris Kershaw, managing director global markets, told Intelligent Insurer.

Peak Re is majority-owned by China’s investment group Fosun International and underwrites both life/health and property/casualty reinsurance business. While most of its business is written in Asia-Pacific and particularly in China, the company has been growing its book in EMEA and North America in recent years.

At 2015-end, Asia Pacific represented 58.2 percent of the reinsurer’s book, Americas was 28.7 percent and EMEA 13.1 percent. Gross written premiums doubled to $582.7 million in 2015 from $288.1 million in the previous year.

In December 2016, Peak Re secured approval from the Swiss Financial Market Supervisory Authority FINMA to establish a subsidiary in Zurich.

“The point to create a capitalized Swiss subsidiary is to benefit from full Solvency II equivalence,” Kershaw said.

From Switzerland, Peak Re intends to grow its European book.

“We see a particular type of customer who is no longer that well served by the traditional European reinsurers. We are a large writer of proportional reinsurance business. There is a certain style of clients in Europe, a certain size of clients also, who still likes to buy their reinsurance on that basis,” Kershaw noted.

Like the rest of the world, the European market is suffering from soft rates, and reinsurers are struggling to find opportunities to grow profitably. But Peak Re remains optimistic.

“We see European partners as partners from whom we will make a reasonable margin over time. We expect it to be a stable margin, but not a massive margin,” Kershaw noted.

Peak Re hopes to attract clients by offering a diversification in terms of capital.

“Our capital is not derived from the same pension funds, hedge funds etc. as the capital of the bulk of their reinsurers. We have a totally different investor base,” Kershaw explained.

Peak Re also believes that it will be able to attract clients in Europe through its record of paying claims quickly. However, the bulk of Peak Re’s business is likely to remain in the Asia Pacific region.

“The reason we were founded was to be part of and to benefit from that trend of growth that we see going forward for Asia Pacific through the next decade and the decade after that and beyond,” Kershaw said.

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