1 November 2017Insurance

Reinsurers grapple with ‘new world disorder’

There is a strong push back against globalisation in some parts of the world, which creates challenges for reinsurers—but also potential opportunities in the future.

This was a key theme of the discussion at an executive panel held at the 14th Singapore International Reinsurance Conference (SIRC) yesterday, Wednesday November 1.

Speakers included James Nash, president of the international division at Guy Carpenter; Doina Palici-Chehab, interim chief executive officer at AXA Asia; Jayne Plunkett, regional president for Asia and CEO of reinsurance in Asia at Swiss Re; Hermann Pohlchristoph, member of the board of management at Munich Re; and Alice Vaidyan, chairman-cum-managing director at GIC Re.

The panel examined the responsibilities and opportunities faced by reinsurers in what was termed ‘the new world disorder’, referring to fear of more widespread protectionist measures and how they may potentially limit the growth of reinsurers, limit expertise and be counterproductive to their intended goals.

Plunkett took the view that such geopolitical changes is creating risk that the industry was not necessarily expecting, and at a level not seen for a long time.

This is also occurring against a backdrop of global risks becoming more interconnected—a development she has noted over the past four to five years. She believes the geopolitical uncertainty makes this harder to manage.

However, she also eyes an opportunity for reinsurers to develop new products, look at risk in a new way, and to bring more risk into what she called the “safety net”.

“I’m not doom and gloom, I think more risk is more opportunity,” she said.

Plunkett added that the industry can do more to create more products and raise awareness of the benefits of risk transfer. She said that countries and people are more resilient when they take more risk.

Pohlchristoph was vocal around the rise in protectionism. “Protectionism is just not the solution if you want to grow and have economic success. You need to have more freedom for entrepreneurial behaviour,” he said.

He was also concerned of the state of the insurance industry, saying it was in “difficult waters”. He cited issues such as thinner margins, along with the low interest rate environment found in most parts of the world, posing challenges for many areas such as life insurance.

Nash was in agreement that the issue of protectionism is “very real”, especially as insurance companies are looking to develop outside of their boundaries and look for opportunities in Asia-Pacific.

Palici-Chehab noted that in Asia, many of the big insurers see growth potential—high single-digit growth—across the continent.

Plunkett added that there is a need in Asia to understand each of the countries more intimately in terms of their needs.

From a regulatory perspective, Palici-Chehab took a “glass-half-full” view, arguing that regimes that have implemented protectionist measures are not necessarily at fault, but it is how the industry adapts that is important.

She said it is better to have a good joint venture with a local player than to be alone, exploring new markets in Asia—and stressed the need to nurture these relationships. While there may be measures to prevent certain entrants, she said this also provides an opportunity to partner with companies in local markets.

Pohlchristoph slightly disagreed with this sentiment, and said he would rather be able to voluntarily decide which partners he would have.

“This should not be enforced by regulation. It should be a voluntary position,” he said. “Protectionism and limiting the shares you can hold in certain countries is not really an answer.”

Palici-Chehab also voiced concerns around some protectionist measures being introduced around data, and how it is shared across borders.

Vaidyan said these measures have to be viewed from the perspective of regulators in emerging countries, noting that they want to support local reinsurers. Although she is a proponent of free trade, she said that these developments in emerging countries compared to more mature markets could take time.

“We should give a chance to countries that are still developing,” she said. “Localising assets in a country is seen as invisible barriers. Even in Germany, you cannot do business until you have an office in Germany.”

Vaidyan added that the Indian markets are very different from the more mature, saturated markets of the Western world. She said she is concerned around insurance penetration levels and the protection gap.

“We need to adapt our product to Asian globalisation,” she said. “We need to be able to give protection to companies across geographies.”

Pohlchristoph added: “There is a lot of isolationism happening in these countries, which makes it very difficult in these markets to grow. Things are going in the right direction, but there are still some obstacles to come. The threat of protectionism is a major issue for all of us in business.”

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