Asian insurance groups have feverishly bought their way through the global insurance markets in 2015. But there’s more to come. China’s most influential buyers are yet to enter the market, and London companies remain among their most likely targets, Antony Ireland fids
The new world order of insurance is beginning to take shape – with Asian companies fimly in the driving seat following a spate of landmark acquisitions.
“Chinese companies faced constraints in making overseas investment in the past, but these are now being lifted”
“We’re all going to have to get used to some unfamiliar names,” Mike Van Slooten, head of international market analysis for Aon Benfild, says. “People need to accept it’s a global insurance market and this trend illustrates how the global economy has shifted.”

It has been happening for some time: Tokio Marine, Japan’s largest non-life insurer, bought Lloyd’s insurer Kiln, for example, as long ago as 2008. But the frequency and scale of transactions, from Mitsui Sumitomo’s $5.3bn purchase of Amlin to Chinese conglomerate Fosun’s $5.7bn spending spree on insurance assets in the past two years, has piqued industry’s attention.
Transactions so far have focused on the acquisition of well established businesses in the major markets of the US, Bermuda, London and Europe – often, as Van Slooten puts it, “at prices considered quite eye-watering in the developed markets”. New kid on the block Oceanwide Holdings, a Chinese property company, has notably bucked the trend by announcing plans to launch a $310m start-up reinsurer called Asia Pacifi Re.
In the year to September 2015, Asian acquirers made outbound deals worth a reported $20bn compared to inbound deals of just $849m. And with overseas investment restrictions lifted in China and Japanese companies seeking diversification away from a mature home market and sovereign rating pressures, industry insiders se plenty more activity ahead.
“Nine of the last year’s 10 largest deals in the Asia region have involved overseas targets – a trend we expect to continue,” Ian Stewart, a partner of law fim Clyde & Co Singapore, says. “Japanese companies have been leading the way as they look overseas, notably in the US and elsewhere in Asia, for growth and to diversify their risk portfolios.”
Japanese companies have both the capacity and appetite to make further acquisitions, MoungoMo Lee, managing director of analytics for AM Best Asia-Pacifi, says. “According to their mid-term strategies, around $20bn of transactions were forecasted in 2015 to 2016, but the value of deals announced in the first 10 months last year has already exceeded this figure,” he says.
Korean insurers also stand to benefit from international diversification and would have one eye on global acquisitions, he adds, if negative margins in the life sector were not limiting their ability to expand overseas. “On the non-life side, one or two large companies have the capacity and willingness to expand through acquisitions, but the timing is unclear,” he says.
Seoul-based Samsung Fire & Marine could be one such company. Writing around $16bn in premium annually across numerous global offis, the insurer has stated publicly its intentions to “grow into a global fiancial services company”.
“It’s only a matter of time before Samsung is a global player – it’s just a case of which vehicle it picks,” Van Slooten says. “If it can’t do it organically it will have to buy somebody. There are a number of other big groups out there in the same position.”

Chinese powerhouses
But it is China that appears to be holding the most cards when it comes to the next wave of prospective suitors. Chinese firms have already made a huge splash in the past couple of years, led by Fosun, Anbang and China Minsheng Investment (CMI), which have between them made acquisitions in the London, European, US and Bermudian insurance markets last year alone.
“Chinese companies faced constraints in making overseas investment in the past, but these are now being lifted. Considering the fact that assets grew more than 20% annually for the Chinese non-life industry in the past fie years and insurers need to make up for a previous lack of overseas investment, activity will be very high,” Lee says.
A Fosun spokesperson tells Insurance Day the company sees “investment and insurance” as its core strategy. “We are looking for
all kind of potential opportunities to benefit from China’s growth momentum,” the spokesperson says.
Standard & Poor’s has warned, however, against what is being described as Anbang and Fosun’s “Bufftt model” approach. “Chinese insurers with aggressive expansion strategies in less familiar businesses could be exposed to higher risks”, the rating agency said, while Moody’s implied Fosun was on the cusp of a ratings downgrade if it continued to spend so much of its war chest on acquisitions.
The speed with which the Chinese newcomers have appeared on the global radar may cause some concern for insureds. “A few Chinese companies have appeared with significant amounts of capital. The insurance market doesn’t know who they are or who’s behind them, so there is a credibility issue that needs to be overcome in some cases,” Van Slooten says.
However, Sam Radwan, co-founder of Enhance International, a consultancy that advises some of China’s largest insurers, believes there are much larger organizations waiting in the wings that have the balance sheets to match or even exceed the kind of aggressive spending sprees seen by Fosun and Anbang but with far less risk – most notably state-owned giants China Life and People’s Insurance Company of China (PICC). “Companies like Anbang can move so quickly because they are relatively small
and nimble. It takes the giants time to make decisions, but this doesn’t mean global acquisitions aren’t at the top of their radar screen. They will go down the same path – it’s just a matter of time,” he says.
“China Life has the largest balance sheet of any insurance company in China. Once it starts moving it will move in a big way.
PICC will be looking very closely as well,” Radwan adds.

Statements of intent
Specialty commercial insurers are the most likely targets, according to Radwan. “[This year] has been earmarked by a lot of companies including Sunshine Life and China Life as the year they want to move aggressively into the small commercial insurance market,” he says. “The next step would be larger commercial business.”
When it comes to target markets, he says, New York is the top of these organizations' shopping lists, with London second. China Life has already made a clear statement of intent in London by buying a majority stake in the Canary Wharf tower and 40% of 99 Bishopsgate.
The Lloyd’s market is attractive as it provides global market access, while the US offrs enough size to create a balanced portfolio
and immediate diversification.
“We expect more US deals involving Japanese buyers – Dai-ichi Life has said it will look for further opportunities in the US following its $5.7bn acquisition of Protective Life Corp. Chinese firms have been and will also continue to look to the US, but we don’t expect it to stop there,” Stewart says.
Fosun and Anbang’s geographically diverse acquisitions are a sign of things to come, he predicts. “Meanwhile, despite spending more than $7bn to buy insurance companies in the US in the past six years, Tokio Marine still sees M&A opportunities and has ample access to funds for deals,” Stewarts says. “No jurisdiction is of limits when it comes to Asian interest.”
Indeed, having established itself in London through Kiln, Tokio Marine has developed a significant presence in the US through the acquisition of specialist firms Philadelphia, Delphi and most recently HCC – a $7.5bn transaction that completed in October. According to a spokesperson from Tokio Marine’s investor relations group, international business now represents around 40% of the company’s total premium income following the HCC deal, with developed markets accounting for 70% of that business. But the company is also keen to grow in emerging markets such as Brazil, Mexico, Thailand, Indonesia and Malaysia, among others.
“Our strategy is to pursue growth opportunities globally and to build a geographically diversified portfolio,” the spokesperson tells Insurance Day. “The key word is balance. We’re not targeting one specific region or business line – we focus on developed and emerging markets, insurance and reinsurance.”
The company completed a Brazilian acquisition back in 2005 and has established offis in numerous emerging and frontier markets in Asia and Latin America. While Tokio Marine sees these markets as worthwhile long-term bets, the relative immaturity of some of them as well as protectionist regulatory constraints means acquisition activity in the short term is more likely to continue in the US.
“North America is still the largest insurance market in the world and we do see further growth potential – it’s a very important market for us,” the spokesperson says, adding the company is “always considering candidates” in Europe too.

London’s lure
As far as London is concerned, Tokio Marine is for now content with nurturing its Kiln business, but Van Slooten says Lloyd’s is “a natural stepping stone to the global market” and will be the “fist port of call” for many future acquisitions.
“Companies like China Re, GIC and Korean Re all now have a toe-hold in the Lloyd’s market. They’ve been operating under the radar and are small scale at moment, but they’re learning how the market works and it’s a statement of intent. It’s clearly not going to stop here,” he says. “Other companies have stated their ambitions to enter the London market but haven’t done so yet.”
However, Andrew Holderness, head of Clyde & Co’s corporate insurance group, adds that while interest in Lloyd’s as an entry point remains strong, the choice of acquirable Lloyd’s businesses is diminishing. “Anyone looking for opportunities therefore needs to consider a signifiant investment to buy one of the larger players, persuade private equity investors to exit at an acceptable price or acquire operations that might be considered sub-optimal,” he says.
He adds, though, that other routes exist that can provide a gradual introduction to the Lloyd’s market, such as the special purpose syndicate (SPS) route opted by Korean Re in partnership with Beazley, GIC Re with Catlin and Labuan Re with Barbican.
Stewart adds London deals may increase once Solvency II kicks in early this year if some businesses look to put certain parts of their operations into run-off Many Lloyd’s syndicates will hope this will be the case. Not only does Asian investment help the Lloyd’s market as a whole move towards its Vision 2025 goal of internationalisation, but being acquired may come as a welcome relief to individual boards after a prolonged period of declining returns.
“It’s a difficult time to be a listed business. There are probably a number of smaller Lloyd’s operations that are feeling the pressure and would like nothing more than a big company to come in with big balance sheet, put that money behind them and let them get on with the job,” Van Slooten says.
“If you’re a company operating at Lloyd’s or in Bermuda and somebody comes knocking on your door with a really high multiple offering to buy your business, you have an obligation to shareholders to do the best thing by them, so the likelihood is these deals will go through.”
A London Market Group spokesperson tells Insurance Day there is no doubt Asian insurers – particularly from mature markets like Japan – are looking to London. “Certainly our share in Asian markets is declining as more business stays locally. However, having those local insurers as part of our market can only be a good thing – this is a unique ecosystem and building closer ties that deliver greater diversity and the opportunity to share skills and experience must be a great opportunity.”