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where the motor market alone is estimated to be the size of that of a significant western country, and is considering its expansion options. “We are looking to understand what the regulators are ready to allow us to do,” Mr Riddell told Insurance News. “We want to increase our general insurance licences and we want a Shanghai licence.” The company’s investment in China is regarded as a longterm proposition. Mr Riddell can see Zurich as a leading foreign player there in 30 years but says it is “pretty meaningless” to set goals two or three years out. QBE, which has a representative office in Guangzhou in China and operates in locations including Hong Kong, Singapore, the Philippines, Thailand and India, says AsiaPacific regulatory and solvency requirements are falling more in line with established markets elsewhere. The company has a positive outlook for its Asian business even as markets are increasingly fought over by local insurers and global players seeking growth. “There is keen competition on rates as a number of players focus on top line expansion in the short-term with the expectation of increased profitability in later years,” the company says. “QBE’s approach is to carefully select risks and price 40

business suitably from the outset.” The company’s Asia-Pacific business, which excludes Australia and New Zealand, reported GWP of $US578 million last year, up 24% from the previous year. Its 2013 GWP is forecast at $US730 million, boosted by the acquisition of Hang Seng Bank’s general insurance operations. Michael Vine says expansion in Asia makes sense for QBE and IAG given their size in the mature Australian market. “The investment markets like premium growth, and arguably the Australian and New Zealand markets are relatively lower growth and those companies have reached a critical mass,” he says. IAG’s Asia division reported a profit of $20 million for the year ended June 30, 2013, up from a loss of $62 million the previous year. GWP rose to $295 million from $219 million. The company says it’s focusing on accelerating expansion plans beyond the countries in which it has an existing presence and on achieving the “enormous potential” of its Indian joint venture. IAG wants Asia to represent 10% of GWP by 2016. Mr Wilkins says building relationships and having a well thought-out strategy are critical to success, while employees need sophisticated cross-cultural communication skills and an open mindset. They need to insuranceNEWS

be comfortable with new ways of working. “It is naive for Australian businesses to think that they can just show up and find masses of people clambering for their particular widget,” Mr Wilkins says. “Quite the opposite is more than likely true. IAG had a very slow and deliberate strategy with a view to driving long-term value – success is built around patience and realistic expectations.” But not everyone is joining the Asian stampede. Suncorp, which has business diversity through its banking interests, says it is focusing on Australia and New Zealand, two countries it knows and understands well. “Growth into any other worldwide region has not been a consideration as the group has strong growth opportunities in its existing chosen markets,” a spokesman says. Wesfarmers Insurance is also satisfied with a geographic spread of underwriting and broking operations in Australia and New Zealand, although it does have a significant broking presence in the UK. “We have no plans to look at opportunities elsewhere, including Asia, at present, as we feel there are significant opportunities for us to leverage and optimise the value we bring to customers in the markets in which we already operate,” a spokesman October/November 2013

told Insurance News. There are advantages to entering a market early, particularly in terms of building brand recognition and establishing relationships ahead of rivals, but the potential and allure of Asia is not likely to disappear any time soon as new opportunities continue to emerge. Swiss Re says emerging Asia may increase its share of global non-life premiums to 17% by 2023 and China will become the second-largest market behind the US. It says growth in Asian economies and insurance markets will continue for the next 50 years, although will likely slow. The momentum may also shift from China to other emerging countries, which have low insurance penetration rates but generally stable political and economic systems. Companies lured by the big numbers and growth forecasts will need to do their homework and spend timing laying the groundwork, or they risk having to salvage the wreckage of dashed expectations. Professor Dick adds that any firm interested in a longterm investment in Asia would be well-advised to send an advance group of people to the chosen country first to hone language skills, build connections and “generally wise up”. “If they are not prepared to do that, they should stay home.”

Profile for Insurance News (the magazine)

OCT/NOV 2013 - Insurance News (the magazine)  

QBE CEO John Neal has spoken exclusively to Insurance News about his drive to turn the global insurer’s fortunes around. Our in-depth articl...

OCT/NOV 2013 - Insurance News (the magazine)  

QBE CEO John Neal has spoken exclusively to Insurance News about his drive to turn the global insurer’s fortunes around. Our in-depth articl...