Major barriers set up in emerging global markets present challenges to UK insurers says research body
UK insurers should lobby their government to call for better regulation in emerging markets, a global insurance body has said.
The Geneva Association, a global research body with members from the world’s largest insurance companies, said major barriers set up in popular emerging markets such as Brazil, China, India, Mexico and Russia could present significant challenges and hit the profits of UK insurers looking to set up shop.
These markets accounted for 5.1% of global non-life insurance premiums in 2006 – an amount which has more than doubled over the last 10 years.
Julian Arkell, international trade and services policy adviser, said the barriers could in some cases prevent entry to certain segments of the markets or put EU insurers at a disadvantage with local competitors by keeping the costs of their products high.
Arkell said: “Against this backdrop the Brazil, China, India, Mexico and Russia markets are on the radar screen of virtually all major international insurance companies.”
Barriers to accessing these markets include caps on foreign ownership, bans on direct branching and restrictions on cross-border reinsurance.
Arkell added: “Insurers can certainly play a role, mainly through their trade associations, in moving regulation forward in markets abroad, either by advocacy with their own governments and the European Commission, or directly with the governments of those markets and their counterpart associations.”
China has become a popular destination for the UK insurance market with brokers Aon, HSBC, JLT, Cooper Gay, Willis and Guy Carpenter already present.
Lloyd’s also launched its Chinese operation in April.
Arkell said some companies in the UK insurance industry have made the decision to enter these markets despite the barriers, because they see the move as a long-term plan.
“It appears that major insurers wish to get involved in these potentially large markets, because the current penetration levels and density of insurance are low,” said Arkell.
“They have begun entry, despite the barriers to entry and operation, where this is possible, because they take a long-term view. Profitability may well be adversely affected if the market is not a level playing field.”
