Asia Listings: A closer look at Asia-Pacific

The top 30 general non-life insurers in Asia-Pacific are dominated by Japanese, South Korean and Chinese companies. Insurers in Japan and South Korea are well established and have relatively mature business models – with high levels of sophistication and penetration rates. China has huge potential for growth and the largest population in the region.

Several Japanese insurers are expanding abroad to diversify with large acquisitions and to gain a foothold in overseas markets; this is in part because of Japan’s ageing population in addition to the low cost of capital.

MSIG is buying Amlin for £3.5bn, while earlier in the year Tokio Marine agreed a deal to buy HCC for £4.8bn; the former is still subject to completion and regulatory approval.

Also in Japan, Fuji and AIU are both owned by AIG and are set to merge in 2016.
Although these acquisitions, along with some other mega global deals, are yet to be completed, AM Best is not anticipating many more imminent deals of comparable size within Asia-Pacific, although such a prediction is made with caution.

Buying in Asia
From a growth perspective, Chinese insurers are less likely to buy in the rest of Asia as that market is extremely attractive for growth opportunities in both the life and non-life markets.

Insurers in China will grow as they attempt to meet a government-designated target of rapidly increasing insurance premium in the country over the next five years. The government is looking to double per capita insurance spending from around 1250 yuan (£133) to 3500 yuan by the end of 2020 to achieve a 5% insurance gross domestic product penetration.

This means the country’s insurance market will grow over 15% a year between now and 2020.

With the government and regulator helping to achieve these figures, it explains to some extent why Chinese insurers aren’t necessarily in a hurry to buy in the rest of Asia.

Although the need for overseas expansion from a growth perspective is low, overseas investment will increase at an accelerated speed.

Chinese insurers are going to increasingly diversify their investments abroad as regulations relax. Already billions of dollars have been spent in the US, Australia and Europe on iconic commercial buildings including hotels and office skyscrapers.

This trend is likely to continue with reports of as much as $250bn being prepared to invest in overseas commercial property and insurers being encouraged to diversify their investments by the government.



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In Australia, a mature and more sophisticated market, there are a relatively small number of players due to a series of acquisitions over the years.

QBE has a global reach with a growing focus on Asia-Pacific outside of Australia and New Zealand. IAG, which has recently completed the large acquisition of Wesfarmers in Australia, is expanding in Asia too, although it has recently decided to stop focusing on investment in China. Instead, incoming CEO Peter Harmer will seek other opportunities in the region.

In addition, many of the lead insurers already have a large or growing footprint in New Zealand hence there is only one insurer from New Zealand, Accident Compensation Corporation, on the list.

Allianz’s premium figures do not include its Asia entity as Allianz Australia is a separate company and is large enough in its own right to make the top 30.

Although there is only one entrant from India, it is a market with significantly low premium penetration and a huge population. Therefore, there is great potential. The Indian insurers were affected by the depreciation of the rupee (our table reports figures in US dollars).

Only New India made it into the top 30 but AM Best expects more will enter over the next five years,

Meanwhile, the beginning of the Asean economic community will be a long process and we believe countries and companies in this community will need to combine resources to compete with the rest of the world.

Rating risks
At present, AM Best does not expect the large insurers to have significant risks to their ratings as they have the capacity to cope – and overall they are very stable. However, smaller firms have more risks.

Although each country faces individual challenges, the Asia-Pacific region on the whole remains an engine of global economic growth and the spectre of low penetration rates should ensure opportunities for growth in the region.

Nevertheless, some of the smaller companies are coming under pressure in the soft market and low interest rate environment; they are beginning to find it tougher.

Natural catastrophes in Asia-Pacific, such as the floods in Thailand in 2011, pose the largest risk to ratings. But these are more likely to impact the SME insurers in the region as larger ones are well capitalised. Rating agencies like AM Best are endeavouring to react more quickly to such events.

Even a ‘hard landing’ to China’s economy would not necessarily have too much of an impact on ratings, although it may reduce overall growth in the region and lead to some headaches for Chinese insurers. The largest insurers, with lower cost bases, are thus best placed to weather any storm.

AM Best is paying close attention to Japan’s sovereign debt. Many Japanese insurers have a large exposure here and any crisis could see a deterioration in credit ratings.

There are several European players, including Generali and Axa, already investing heavily in the region and firms like these will be the ones to watch in the next five years. Swiss Re and Munich Re have also been building up their insurance arms in the region.

AM Best sees great opportunities for general insurance growth in Asia-Pacific and looks forward to revisiting the list of top 30 non-life insurers in around a year’s time.

Moungmo Lee
Managing director, analytics, Asia-Pacific, AM Best