Insurance firms in Asia are becoming increasingly attractive prospective customers for asset managers, due to their swift asset growth (see box below), increasing desire for international and private markets exposure, and need of investment solutions to address new accounting and risk-based capital (RBC) rules.
Accordingly, the likes of BlackRock and HSBC Global Asset Management have recently strengthened their insurance teams in Hong Kong, reflecting a regional trend.
The bigger fund houses have been beefing up their coverage of insurers in Asia in the past year or so, said Stanley Teo, Singapore-based director at Profie Search & Selection.
"The smaller firms either rely on their insurance solutions specialist from Europe or have the institutional salespeople cover the insurance segment," he told AsianInvestor. "Thus far the [Asian] market is still thin for such talent, hence you would have seen them being transferred from either the US or European offices."
For instance, BlackRock's Henry Ashworth moved in March from London to Hong Kong as head of Asia-Pacific insurance on the client portfolio solutions (CPS) team, reporting to Stephen Hull, co-head of CPS for Asia Pacific.
The US firm's CPS insurance team provides expertise in investment strategy, asset-liability management (ALM), regulation, accounting and designing solutions for insurers.
Ashworth’s role was created "in line with a growing shift in emphasis from individual investment products to a more client-focused, whole-portfolio approach", a BlackRock spokeswoman told AsianInvestor by email.
Ashworth was previously responsible for designing and implementing investment strategy and risk management solutions for insurance clients in the UK and Ireland.
Kimberly joined from Deutsche Asset Management, where she was head of global client group for Hong Kong and Asia-Pacific ex-Japan head of insurance coverage.
The CPS insurance team works closely with the financial institutions group to provide investment solutions for insurers in the region, noted the spokeswoman.
Globally BlackRock's insurance practice managed $423 billion including general account and sub-advised assets, as of June 30, 2017. The firm has AUM of $6.3 trillion globally.
The UK firm has long had a global head of insurance – currently Andries Hoekema in London and previously Hong Kong-based Patrice Conxicoeur. But an HSBC spokeswoman said Lin was its first dedicated lead salesperson for the segment for Asia, as a director on the financial institutions team.
HSBC Global AM oversaw $144 billion for insurers globally as of the end of March 2018, $52 billion of which was in Asia.
Meanwhile, JP Morgan Asset Management, with $1.68 trillion in AUM, also has a regional insurance team, led by Alan Yip, head of Asia insurance strategy. He has been with the firm in Hong Kong since May 2013.
JP Morgan AM’s global insurance AUM totalled $152 billion as of June 30 (including GA and sub-advised assets), of which $9.4 billion is run for insurers in Asia Pacific. That figure has grown from $8.2 billion in December 2017.
ASIA'S STELLAR INSURANCE ASSET GROWTH
The current and expected growth of Asia's insurance industry shows just why asset managers are so keen to strengthen their foothold in the segment: the potential looks to be huge.
The five biggest Chinese insurers – China Life, Ping An, China Pacific Life, New China Life and CPIC – saw their combined assets under management swell 17.15% to around $1 trillion last year, according to AsianInvestor's AI300 list* of the biggest asset owners in Asia Pacific. In Taiwan the growth was even faster, with the five biggest firms recording a 22.62% rise in AUM to $388.1 billion.
And this trajectory is set to continue. Emerging markets contributed 80% of last year's growth in global insurance premiums (for life and property-and-casualty business), with China accounting for two-thirds of this, according to data published in April by Allianz Research.
The global premium volume last year rose 3.7% to a new record of €3.66 trillion ($4.24 trillion, excluding health insurance). The total is forecast to grow 6% annually from 2018 to 2028.
Meanwhile, China insurance premiums grew by a whopping 19.6% to €422 billon in 2017 and are forecast to rise 12.9% annually for the next decade. Asia premiums (excluding China and Japan) also posted a rise of 7% to €451 billion last year, with 8.8% predicted annually for the next 10 years.
*Note: The AUM growth for some of these insurers is measured from March 2017 to March 2018 and for others from December 2016 to December 2017.
LESS BENEFIT FOR BIG INSURERS?
A Hong Kong-based chief investment officer at a large international insurer agreed that fund houses have been expanding their coverage of his segment in the region.
However, he is sceptical about the value-add such specialists can provide larger players such as his own firm, which can draw on expertise from elsewhere in the global group. “We’re never going to buy an ALM solution [from an external provider]; these services are probably more useful for smaller insurers."
That said, even the largest insurance companies in China, for instance, are not able to call on established in-house ALM expertise in a head office in Europe or the US.
And insurers in Asia recognise they face rising challenges including the ongoing low-yield environment, rising cost pressures, incoming risk-based capital regimes and looming new accounting standards IFRS 9 and 17. All of these areas have implications for how they run their investment portfolios and are forcing them to have a better handle on asset-liability management.
Indeed, many enquiries now are prompted by changes in regulation such as the China Risk-Oriented Solvency System and the Chinese ALM rules, noted Garry Hawker, director of strategic research for growth markets at consultancy Mercer, which provides ALM services to insurers in Asia.
Moreover, insurers have been moving into new asset classes, particularly alternatives such as private market assets, with a view to boosting diversification and investment returns. This has also led them to seek the expertise of fund managers, as well as strengthen their in-house resources.
Story updated to include the amount of assets HSBC Global Asset Management oversees for insurers globally and in Asia.