Asian Reinsurers Plan Regional Alliance
Asia Correspondent
Hong Kong
Reinsurance companies need to watch over their shoulders because some of their clients in Asia might soon turn out to be competitors, now that a group of reinsurance firms in seven Asian countries have decided to band together and reinsure each other's assets.
"We have decided to create a reinsurance [alliance] for Asia. This will help us a great deal in stabilizing prices and countering the price dictated by big players like Swiss Re and Munich Re," P.C. Ghosh, managing director of the Mumbai, India-based General Insurance Corporation of India (GIC), told National Underwriter.
Those joining the alliance include GIC, China Re in Beijing, Seoul-based Korean Re, Manila-based Universal Reinsurance Corporation of Philippines, and state-run reinsurers in Malaysia, Indonesia and Japan.
"At present, [reinsurance rates are] greatly influenced by the big international reinsurers," he said, noting that recent price hikes charged by major reinsurers are principally due to the difficulties they face in other countries and markets, such as the United States.
"We in Asia have to often bear the burden of happenings outside the region and for things [for which] we are not responsible," he said, explaining that the recent price rise charged by reinsurers is an eye-opener.
Mr. Ghosh said the major reinsurers in Asia have been talking to each other for a long time about the need to create an Asian reinsurance alliance, but they have now come close to putting the idea into practice.
"Besides, some of them like GIC and China Re are now in a better position to implement the concept than we were earlier because of further market liberalization in our respective countries," he added.
With the creation of the alliance, each member will be able to pass on "part of our reinsurance risk to fellow reinsurers in Asia and offer a better price than the international players," Mr. Ghosh said. "We hope to infuse competition and persuade the international players to lower their rates for Asia specific business."
The move could also spell new opportunities for the second rung of international reinsurers as they can now provide reinsurance support to members of this Asian alliance at competitive rates and thus compete with the big players in the reinsurance industry, market sources indicated.
The Asian reinsurers have held two meetings and will be meeting again in Tokyo shortly to finalize the management structure of the alliance, Mr. Ghosh said.
This move comes at a time when another alliance is being worked out by the three major casualty insurers in China, Japan and South Korea. These playersTokio Marine & Fire Insurance Co., Peoples Insurance Co. of China (PICC) in Beijing, and Samsung Fire & Marine Co. in Seoulhave now decided to establish a secretariat to implement the alliance structure.
It is not clear if the move to form an Asian reinsurance pool is directly linked to the move to form an alliance of direct insurers. But the fact is that these insurers and reinsurers are closely linked to each other. As a result, both alliances are expected to be linked as time goes by, thus providing an even greater challenge to international reinsurers, market sources say.
These direct insurers pass on a good part of their reinsurance business to the national reinsurer of their respective countries, partly because of local laws and partly due to reasons of convenience. The Asian reinsurers traditionally have retroceded their excess risks to international players like Munich Re.
The alliance move among direct insurers is an extension of the business and capital tie-up that took place between Tokio Marine and Samsung Fire in November 2000.
Industry sources said the new alliance will emphasize product development and market research. Tokio Marine and Samsung Fire indicated that they saw the partnership with PICC as an opportunity to increase business with Japanese and South Korean firms operating in China.
Joining hands with PICC is important because it controls a 77 percent share of China's property and casualty insurance market. For its part, PICC hopes to gain technical know-how from the Japanese and Korean firms, sources say.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 2, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.