It is pretty clear at this point: Asia investment in the European and U.S. P/C sectors last year is widely expected to continue through 2016. Reasons why this is happening, however, remain a matter of debate.
Executives from Arch Capital Group Ltd. and XL Catlin recently offered their take on the emerging trend and what is driving it. They spoke during a panel discussion held at the Property/Casualty Insurance Joint Industry Forum in New York on Jan. 12, and moderated by Insurance Information Institute President Robert Hartwig. Below are highlights of their comments.
Constantine Iordanou, chairman, president and CEO of Arch Capital:
Iordanou said that Japan is looking to internationalize its P/C investments because demographics are working against the country: An aging population means less life insurance policies are being sold. Also, better technology is leading to fewer accidents, a limiting trend in a country where P/C operations are dominated by auto insurance.
“The alternative is to internationalize their business and that phenomenon is going to continue,” Iordanou said.
In China, the government wants to internationalize its financial services sector in an effort to import Western technology and borrow it. He predicted that China investments will continue internationally, and that companies “will be looking to invest in Western assets” such as insurance.
Stephen Catlin, executive deputy chairman, XL Catlin:
Catlin said that Japan and China are struggling to break into the Western market on their own, so the easier way to do so is through insurance-related acquisitions.
From a Western point of view, Catlin said, “The real growth opportunities for any of us in the next five years will be in the U.S., Europe and Bermuda, in terms of dollars and cents.”
Catlin noted that there will actually be much greater growth rates in Latin America and in the Asia/Pacific regions over the next 10 years, but “they start from a much smaller base than you see in Europe and in the U.S., so there is a question of how you want to invest in the future.”
Among last year’s Asian investment deal highlights:
- On Nov. 9, China’s Anbang Insurance Group Ltd., agreed to acquire Iowa-based Fidelity & Guarantee & Life, making Anbang one of the largest insurers by market share in fixed indexed annuity products in the U.S.
- Last May, China’s Fosun International Ltd. agreed to grab the shares it doesn’t already own of Ironshore Inc. for about $1.8 billion. White Mountains Insurance Group agreed in late July to sell Sirius International Insurance Group Ltd. to an arm of Shanghai’s China Minsheng Investment.
During last fall’s PCI conference, TigerRisk Partners CEO Rod Fox told Carrier Management that the trend will force North American and European companies “to think about what they’re doing in Asia, as the Asians come into other territories.”
Berto Sciolla, Gen Re’s executive vice president, regional manager for North American treaty reinsurance, said at the time that investors appear to be looking for a Western market foothold but the acquisitions are getting broad autonomy.