Emerging foreign markets present huge opportunities for insurers and brokers

Insurers and brokers are increasingly looking at emerging markets to generate revenues and profits as growth in mature markets, such as the UK, stagnates. Just last week Marsh was granted a licence to broke in Saudi Arabia.

RSA, for instance, has credited the booming international and emerging market businesses with helping to cushion its 2007 results from the slow growth of its UK operations. International and emerging net premiums at RSA rose by 9% last year to £3.1bn, compared with a UK rise of 3%, to £2.7bn, the company reported in February.

And in 2006, even before the US sub-prime mortgage market began to weigh on global financial markets and energy and commodity prices began to climb, non-life insurance business in emerging markets grew a robust 11%, compared with a 0.6% rate of growth in the industrialised world, according to Swiss Re figures.

Asia, the Middle East and Eastern Europe and South America are seen as offering huge growth potential for the insurance industry.

“In developed markets, non-life insurance is not in a growth phase,” said Tim Young, insurance analyst at Collins Stewart. “However, the growth opportunity for non-life business in emerging markets is pretty fantastic. In non-life, there’s virtually no penetration anywhere outside the developed world.”

He says emerging markets like India have two key points going for them: economic growth, and increasing compulsion to buy general insurance. “How you access that growth is all about capturing distribution,” he adds.

One challenge for foreign entrants is negotiating the often weighty restrictions that are imposed by local regulators.

Lloyds, for instance, was recently part of what has been described as a rush into Brazil by foreign insurance entities after a change in that country’s legislation opened up its market.

But India’s 26% limit on ownership of insurance businesses is cited as a particular inconvenience by UK non-life insurance executives, as are similar restrictions in China and countries in the Middle East. Joint ventures with local businesses are seen as a way to negotiate these restrictions.

There is hope that the coming years will see the restrictions in a number of key emerging market countries relaxed.

For companies thinking of tapping into new markets, Young says: “Risk varies dramatically. It’s also pretty important that you have a good understanding of the local regulations, and be in bed with the local regulators.”

Andy Bragoli, Hyperion group broking director stresses the importance of tuning in to local attitudes, and not attempting to push products or ideas on a market just because they may have worked somewhere else. “You have to become attuned to the needs of the local client base, the buying culture, the claims culture, and understand how the local regulatory regime works. All these things are very different between every territory.”


China has become a popular destination for the UK insurance market with brokers Aon, HSBC, JLT, Cooper Gay, Willis and Guy Carpenter already trading. Lloyd’s entered the market last April.

A report by research company Business Monitor International predicts China’s non-life insurance premiums to grow by 16% in US$ terms by 2012, fuelled by the rising wealth of the economy,

RSA, which claims to have been the first European insurer to be granted approval for a subsidiary license in China, plans to open 11 branches in the country by 2011, giving it access to what the company estimates will be 45% of the Chinese insurance market.

“The Shanghai non-life insurance market grew by over 20% last year alone,” says a spokesman for the insurer. “With the insurance market [only] about 2% penetrated, the size of the prize in China is huge.”


India has been one of insurance group Hyperion’s overseas success stories, according to Andy Bragoli, group broking director. Among the challenges of working in India is the sheer size of the country, particularly when compared with the much more compact UK “where you can run a business very nicely from London”.

Bragoli says: “India requires that you have local representation in the regions, and therefore it’s costly, because the transport infrastructure isn’t great and you have to fly everywhere.”

The Middle East

It should surprise no one who’s bought petrol recently to hear that UK insurance executives see the Middle East as currently one of the biggest growth regions.

What insurers are focusing on is an estimated $1 trillion currently being spent on infrastructure projects across the Gulf Cooperation Council region.

Ernst & Young insurance sector director Simon Burtwell says: “There’s a massive amount of potential growth there. Within the next 10 years, you can expect to see premiums of something like $20bn coming out of the region.”

One area of interest to UK insurers looking to tap into the Middle East at the moment is private health insurance, which a number of the region’s governments are said to be considering making compulsory.

Latin/South America

South America is talked about as an emerging market, but Hyperion’s Andy Bragoli says it is in fact quite developed.

“There are some very big economies down there,” he notes. “And although there are some extremes of wealth and poverty in many of them, they also have some tremendous financial institutions.”

Bragoli also points out that when it comes to insurance in particular, making broad generalisations about Latin American countries can be difficult. “Even though there are similarities, many of these countries are very different in their approach. So you need quite specific strategies within each territory,” he says.

Eastern Europe

Ever since the implementation of the Insurance Mediation Directive at the end of 2006, UK insurance brokers have been able to trade in other EU member states, which has made such eastern European markets as Poland, Bulgaria and Romania more accessible.

Hyperion has an office in Poland, and has been handling business out of London for many years with Russia, Romania, and the Baltic states.

“As these countries’ wealth increases, their ability to buy insurance increases, so we do see it as a very important part of the world,” says Bragoli.