Swiss Re supports profitable growth in China's motor market with Asia's first specialist motor team, new capacity
22 October 2007, Zurich
The world's leading reinsurer, Swiss Re, has formed Asia's first fully-dedicated motor insurance team, charged with supporting insurers to increase profitability of the rapidly growing, high volume motor insurance sector by building risk management and reducing claims, considering that the motor insurance sector in China is set to grow from about RMB110bn (USD 13.75 billion) in annual premiums today, to RMB200 billion (USD25 billion) by 2012.
The reinsurer has also earmarked additional capacity for Asia's motor sector, to encourage insurers to use enhanced risk management to effectively lower losses while growing business in higher-value categories such as expensive private cars, and specialised truck, bus and dangerous goods vehicles business.
In China today, these represent the fastest growing motor insurance categories, accounting for about RMB45bn (USD 5.6bn), or 40%, of all motor insurance premiums. But they also represent the vast majority of the industry's larger motor own damage and motor liability losses. When combined with special carrier liability claims from the insured, policy section clashes can result in even more extreme losses.
As a result, these categories face much higher insurance rates and deductibles due to significantly higher claims ratios and consequently, higher losses to insurers.
The Swiss Re specialist team, the first in Asia dedicated to addressing these issues, is led by Head of Motor - Asia, Anthony O'Brien, closely supported by Eddy Lo, VP of Client Markets for China motor insurance, with a combined experience of over 40 years of motor and specialist logistics underwriting experience from Australia, UK and the US.
This is also the first time in Asia that a reinsurer is offering highly specialised solutions, such as tailored special risk treaties and special facultative risk group protection, to help local insurers more effectively manage higher risk motor groups. The team will also support ongoing standard motor treaty business as needed, and will offer training materials and workshops to help insurers take the complexity out of the more challenging vehicle categories.
"Insurers who avoid these higher risk groups are actually wasting a huge opportunity," said Swiss Re's O'Brien.
"You can modify this type of risk by using special treaty or facultative reinsurance, combined with better risk management achieved using tools ranging from simple checklists to guide driver selection, to new technology such as on-line sleep monitors for long distance drivers, "he pointed out.
"For personal motors, the renewal book of business provides significant profitable growth potential and can be tapped into by a joint team in a relatively short period of time," added by Eddy Lo.
Notes to editors
China's higher-risk motor categories
- The largest motor loss on record is a loss of RMB 2.8 billion, or USD350 million, from a truck explosion in Europe's Mont Blanc tunnel): a similar event in China today could create losses of up to RMB 800 million (USD100 million).
- In China, it is still common for economic losses to exceed insured limits: while Swiss Re expects these policy limits to rise over time, motor liability will also become an increasingly high risk.
- For these reasons, most insurers are reluctant to take on more of this business, despite the fact that China has the largest number of trucks in the world (reaching 10 million in 2006, compared with 8.17 million in the USA the same year). The number continues to grow rapidly: in 2005 alone, China's logistics market grew 25% .
The Swiss Re specialist motor team
- The Swiss Re specialist motor team can support its motor insurance clients to take their portfolios beyond standard policy pricing and terms, conditions.
- To do so, the team can support clients in many ways, including by building in-house risk management solutions and augmenting products with value-added services, particularly in problem segments such as logging trucks, refrigerated vehicles, buses, taxis, rental cars, dangerous goods vehicles and vehicles operating in hazardous environments.
- Swiss Re will also help clients explore new opportunity areas such as tool of trade liability, commercial vehicle downtime, new for old, lease payout and specialised affinity business.
- In addition, Swiss Re can support motor insurers wanting to package other products within the motor offering to a test group of customers, or to increase the income per customer with motor truck cargo, motor personal accident, general property for special equipment and special logistics general, excess and umbrella liability solutions.
- The Swiss Re Motor Team aims to partner and grow with clients, working through an extended network of Swiss Re's expert casualty underwriters throughout the Asia Pacific region. The Team will also provide insurers with assistance in marketing, underwriting and claims management solutions, tailored risk management solutions for higher hazard individual accounts or risk groups, and access to Swiss Re's world-class training facilities at the Swiss Re Academy in Hong Kong.
Swiss Re is the world's leading and most diversified global reinsurer. The company operates through offices in more than 25 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company's traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated "AA-" by Standard, Poor's, "Aa2" by Moody's and "A+" by A.M. Best.
Swiss Re has been associated with Asia since 1913 and now has more than 900 staff in Asia Pacific. Swiss Re entered in China in 1995 and set up its Beijing Branch in 2003 with a national license for a full range of reinsurance products and services. The company's Asian headquarters are in Hong Kong.
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