NU Online News Service, June 8, 1:40 p.m.EDT

NEW YORK—The established insurance markets in Western Europeancountries and the developing markets in Latin American countriespresent separate sets of challenges for insurers looking to grow inthese regions, but unique opportunities exist for those whounderstand and take advantage of the different businessenvironments, regional experts say.

For Western European countries, slow domestic growth means thatthere are opportunities for foreign companies to link into apresence in European insurance markets, said Karin Clemens,managing director and lead analytical manager of European InsuranceRatings for Standard & Poor’s Ratings Services at the company’sannual insurance conference held earlier this week.

Opportunities are greatest in the private sector, as governmentsenact cuts in state pension and welfare.

Clemens also believes that regulatory concerns over Solvency IIas well as doubts about the strength of the Eurozone will not havelasting negative effects for the industry in the region, althoughshe notes the dangers in trying to predict the future.

Regarding Solvency II, S&P’s notice of pending changes toits country-wide risk assessment is not reported to be causingwaves among regional business leaders. “The new country-wide indexis expected to improve transparency and compatibility of insurancerequirements between ratings and regions, but not to cause aratings change,” said Clemens.

Speaking to doubts about the strength of the Eurozone, Clemenssays, “We do not expect a breakup or major restructuring of theEurozone. But the future is difficult to predict.”

However, startup companies in Western Europe may findtrouble establishing themselves in the region’s mature insuranceindustry. “Building a business from scratch is impossible becauseof the time and capital required,” said Clemens.

Clemens said the largest Western European markets arethe UK, with 12 percent penetration of the gross domesticproduct, France with 10 percent GDPpenetration, Italy with 8 percent penetration,and Germany with 7 percent saturation.

By contrast, market penetration is significantly lowerin Latin America, presenting opportunities for companiesexpanding there.

Chile, with 4 percent GDP penetration, is the best-insuredcountry in Latin America, according to Santiago Carniado,managing director and lead analytical manager of Latin AmericanFinancial Service Ratings for S&P. But the region has shown agrowth in premiums from 2011 of more than 40 percent with balanceddistribution between P&C and life lines.

“We have seen wealth growth and a rise in per capita income,although this is not a rich region,” said Carniado. He also pointedout that Latin America has shown stability through thefinancial crisis.

Challenges to insurers come from the actual sales process,Carniado said. Unlike in Asia and Europe, which are highlyprotected for flood and windstorm, Latin Americans are not used tobuying insurance.

Another challenge, he noted, is that while market penetration islow, the market that does exist is already very concentrated. Fivedominant companies, including foreign-owned institutions such asAXA and AIG, block out competition within the region. In Chile,these companies account for 45 percent of industry activity, anddominate 20 percent of the Venezuelan market, Carniadoreported.

He said the best strategy for insurers looking to enter LatinAmerican markets is to form partnerships.

Meanwhile, Asian regions, suchas Japan, China, Singapore,and Australia are between the Western European and LatinAmerican insurance worlds.

Urban East Asian countries are mature, with demand for insurancedriven by personal and family needs, said Connie Wong, managingdirector and analytical manager of S&P’s Asia Pacific InsuranceRatings.

It is an environment where earthquake, tsunami and floodcoverage is essential, butmost growth opportunities are within personal life and healthlines. “These are ‘saving societies,’” Wong said.

Attendees at the conference feel that the unique traits andchallenges of different regions will endure. In response to a pollquestion of when the world could envision a common, globalinsurance industry framework, 82 percent of audience membersanswered “never”, with 16 percent saying they could imagine thisreality occurring in 10 years or more.