Asia takes more of the reinsurance value chain, but capital stays global

From India’s rapidly expanding GIFT City reinsurance hub to China’s latest efforts to establish Shanghai as an international reinsurance centre, Asian governments are stepping up efforts to bring more underwriting, capital and expertise onshore.

But are they succeeding, and which parts of the reinsurance value chain are actually moving into Asia?

Abdallah Balbeisi, executive director, Europe & Growth Markets at QBE Re, said that “meaningful localisation goes well beyond moving an underwriting desk closer to clients”.

Underwriting, broking, client management, analytics and programme structuring are increasingly being performed within Asia, he added.

“What is particularly interesting is that the evolution is extending beyond traditional underwriting,” said Balbeisi. “Regional teams are increasingly influencing portfolio strategy, structuring solutions, providing analytical insight and taking greater responsibility for client outcomes.”

Even claims, traditionally a less prominent part of the localisation debate, is becoming increasingly important locally, said Balbeisi. “Claims expertise is also becoming more important, particularly for catastrophe and specialty business, where local engagement can support better post-loss outcomes and stronger long-term partnerships.”

Rupert Moore, CEO, Asia Pacific for Aon’s Reinsurance Solutions, also sees more activity shifting into the region, although the picture varies depending on the function and scale of the company involved.

Smaller and mid-sized brokers are establishing hub offices in Asia, he said, but often lack the scale to build full operations in individual countries. These offices may perform the broking locally, while relying on regional or global operations for much of their supporting infrastructure.

Moore is a believer that “deep relationships with expertise close to clients is differentiating”.

“What is particularly interesting is that the evolution is extending beyond traditional underwriting.”

Abdallah Balbeisi

Executive director, Europe & Growth Markets at QBE Re

Capacity

More underwriting capacity is also being deployed locally within Asia.

(Re)insurers are establishing operations with capacity to write business locally, particularly where regulation requires it or policy incentives provide preferred access to business. Moore pointed to new and renewed efforts in India and China.

But some capacity is also genuinely originating from Asia-Pacific insurers and reinsurers, rather than simply being deployed locally by global groups.

“We do see more supply of capacity from Asia Pacific, with (re)insurers in the region looking to diversify their portfolios,” Moore said.

He added that this “increases the risk-bearing capacity of these entities for their home markets by strengthening their diversification and resilience”.

“We do see more supply of capacity from Asia Pacific, with (re)insurers in the region looking to diversify their portfolios.”

Rupert Moore

CEO, Asia Pacific for Aon’s Reinsurance Solutions

Is capital following?

Some governments are pushing to keep more (re)insurance risk and premiums at home.

In India, reinsurers operating in GIFT City cannot retrocede more than half their business. Those seeking preferential access to business from Indian insurers must also invest all the premiums retained from that business in mainland India.

China is also seeking to build domestic (re)insurance capacity, with new measures to help reinsurers raise capital as part of its efforts to establish Shanghai as an international reinsurance centre.

But retaining more risk and premiums locally does not necessarily mean that the underlying capital has become local.

(Re)insurance remains a global business, with international groups using their worldwide balance sheets to spread risks across different markets and regions.

“Global capital, global expertise and local knowledge are complementary rather than competing forces,” Balbeisi said.

Moore made a similar point. While local regulation can require reinsurers to hold capital within a market, he said Aon remained agnostic about where the ultimate capital was located, adding its role was to match risks with the most appropriate capital available globally.

Chris Sandilands, partner at Oxbow Partners, also sees limited evidence of Asian reinsurers challenging the dominance of established global players.

He said Munich Re and Swiss Re had lost market share over the past decade, but “they are not being squeezed by local capacity in Asia, but by the Bermudian challengers building share more broadly”.

So while Asia is attracting more underwriting, broking and expertise, much of the financial firepower behind that activity remains international.

For now, the people and activity are moving east faster than the capital.

“I think London and Bermuda—as well as Munich, Zurich and to an extent Paris—will remain global centres for complex risk and for global classes like nat cat.”

Chris Sandilands

Partner at Oxbow Partners

London and Bermuda impact

With so much activity moving to Asia, and the trend only strengthening, where does this leave Bermuda and London?

For now, both remain firmly embedded in the global reinsurance system.

“I think London and Bermuda—as well as Munich, Zurich and to an extent Paris—will remain global centres for complex risk and for global classes like nat cat,” Sandilands said.

Balbeisi agreed that some parts of the value chain are inherently more difficult to localise.

He expects London and Bermuda to remain important for global capital, retrocession, alternative capital and sidecars, as well as complex specialty and property catastrophe risks.

These activities benefit from the scale, specialist expertise and concentration of capital already established in the major global hubs.

Moore said the balance would ultimately be determined by the availability of underwriting talent, the economics of operating locally and whether there was sufficient scale to support it.

“Aon believes in global expertise, delivered locally, and our global footprint and scale is a differentiator. We continue to build local teams and connect them regionally and globally to ensure that the full capabilities of the firm are available to all clients,” he said. 

Rather than Asia replacing London or Bermuda, Balbeisi expects a more interconnected global market to emerge.

“The industry is evolving towards a network of interconnected hubs, with Asia playing a greater role in underwriting, client engagement and portfolio decisions—while London and Bermuda remain critical centres for capital formation, distribution, retrocession, alternative capital and global risk expertise,” Balbeisi said.

The overall picture is clear: Asia is capturing more of the reinsurance value chain, but capital remains global. Rather than replacing London and Bermuda, Asia is joining them as another major reinsurance centre.