THE onslaught of the global financial crisis is bound to have an impact on the reinsurance sector, but it is expected to be modest, if not insignificant, according to an industry player.
'We cannot deny that certain businesses may slow down, because certain projects that are insured may be delayed,' said Asia Capital Reinsurance Group (ACR) chief marketing officer Peter Hugger. 'So, there could be some small reduction in some business segments.
'But, on the other hand, the financial crisis has certainly led to the development that, for many direct insurers, which are our clients, their capital base has shrunk.
'When their capital base shrinks, they will tend to buy more reinsurance in order to maintain their capital adequacy ratio, which is required by supervising agencies in order to obtain their rating.
'So, most likely, direct insurers are going to purchase more reinsurance, and that is a positive development for reinsurers.'
Whatever the outcome, ACR is not going to wait out the crisis before carrying out its expansion plans. The homegrown reinsurance company has just set up a branch office in Hong Kong, where it has obtained a licence to operate.
Having a direct presence there will allow the company to better extend its reinsurance products and services to the Hong Kong and north-east Asian market, particularly China.
'In China, in view of the future economic development, with growing needs for more power, there are projects with big capacity needs and insurance and reinsurance opportunities in the fields of energy, power, and aviation sectors,' said Dr Hugger.
'We know that many new airports will be built in China in the next 10-20 years, so that gives us opportunities in the aviation field.
'And then, after this current recession, Asia and China will again gain strength and be a locomotive for world growth. So there will be again business picking up, so there will be more international trade with China. The infrastructure development in China will give us also a lot of opportunities.'
Headquartered in Singapore, ACR specialises in reinsurance in aviation, casualty, engineering, energy, marine and property sectors. The choice of Hong Kong as its north-east Asia base is largely due to the presence of about 180 insurance firms there, including 12 of the world's top 20 insurers and 11 of the world's top 25 reinsurers.
ACR plans to have about 10 staff in Hong Kong by early next year. Apart from Singapore and Hong Kong, the company has representative offices in Taiwan, India, and Bahrain and a joint venture in Malaysia.
Earlier this year, the firm, together with Malaysia's Khazanah Nasional Berhad and Dubai Banking Group, set up the world's largest retakaful (Islamic reinsurance) operator.
This article was first published in The Business Times on December 27, 2008.
