Peak Re: Middle Class Growth Fuels Asia-Pacific Reinsurance Prospects

Asia-Pacific countries are seeing a sharp rise in middle-class clout, a sign of rising prospects for the global reinsurance market, according to Franz Josef Hahn, chief executive officer of Peak Re. He spoke with Best’s News Service at the 12th Singapore International Reinsurance Conference.

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Q: As an Asian-based reinsurance company, where do you want it to go?

A: Asia-Pacific is a fantastic place to grow as a reinsurance company. The entire region on the P&C front is heavily under-insured and when you look at the penetration rate and the insurance density there’s a lot of work we can do as an insurance community to make it work. Over time, we will grow in Asia-Pacific and utilize the fantastic diversification it offers to us.

Q: We are seeing more non-traditional insurance capital entering the global reinsurance market. Does this new interest in non-traditional capital create the same kind of over-capacity as in the Western part of the world?

A: Not really. Even though I appreciate the high efficiency of what it constitutes, it’s highly efficient because it’s connecting the insurance buyer to the capital market immediately and that’s something the reinsurance industry has to consider as a tool. We see it, of course, in America. We see some of it in Australia and in Japan. The two are well-organized natural catastrophe markets, where the clients in those regions have clearly identified needs, and where ILS and other capital markets can play. The rest of Asia-Pacific is not yet prepared for it and I think at the current situation, as I explained before, in respect of the low penetration rate, there is much we have to do first before we can think of ILS.

Q: For the region where do you see the greatest growth potential?

A: The greatest growth potential is certainly in the emerging markets of Asia-Pacific; and within the emerging markets of Asia-Pacific, the middle-class society. The middle-class society, the consumers, their demand is growing. The growth of the economy has not been paralleled by the growth of the insurance. That’s why we see the low penetration rate. We need to concentrate as an industry together to counterbalance this by thinking of what are the right products, and most likely we have them already, but what is the distribution we need to use to make sure that in the accumulation zones of the large cities of Asia-Pacific, people who have built up assets for themselves get the adequate protection for their assets. What is necessary to understand is that this region doesn’t have much time. We need to protect what has been built in order to stabilize it and to create sustainable further growth, so I think that’s a tall order for the insurance industry to work on.

Peak Re has been set up as a company, which wants to be in the face of the client when the client needs us. We want to understand the client, and we understand the client’s needs. We have a team of analysts trying to understand where the needs are on the financial side as well as on the product development side. We don’t underwrite the markets, we underwrite the client. We have client selection and we select the clients we want to work with and where we fit. Where our business model fits 100% with the client or we can make it fit 100% with the client. So we individualize our services to the clients and to their needs. Listen more and understand more before you act. If I may come back again to the low penetration of the Asia-Pacific insurance market, there is the need to understand how we can solve this together with clients. This is a capital intensive business because the accumulations will grow bigger and bigger and this industry has to find the solution for this. That’s why Peak Re has been set up. That’s why we are operating out of Hong Kong across the entire Asia-Pacific. So far, it has been a good year for us, however, it’s not yet over. Hopefully we can celebrate on the 31st of December.

Q: Where do you see your development plans for the coming year?

A: We will move on from where we stand today. We will further expand from what we have done today — work across Asia-Pacific, work with the clients which we have met already and assist them in building their business bigger and bigger. We will also find new friends, new clients in Asia-Pacific.

Video of the interview is available at http://www3.ambest.com/ambv/displaycontent/video.aspx?vid=hahn1113