The enduring and growing tension between China and the USA has caused some to wonder whether the ultimate outcome of the rivalry could be war.
In no small part, the current tension looks rather like cold war – but the concern is that the cold war could warm up and become a real fighting war between the two superpowers. If this comes to pass, then the implications for the insurance sector in APAC would be profound. War insurance in the region will be the focus of an upcoming issue of Asia Insurance Review.
The reality is that every conceivable line of insurance and reinsurance would be deeply affected despite war exclusion clauses or hostile acts exclusion clauses – and while many insurance customers might have other things to occupy their minds in the event of a war, the insurance sector itself would have to deal with the reality and the fallout.
In the most simplistic terms, the global geopolitical situation is looking distinctly rocky because of a change in a number of the dynamics involved.
At the end of the second World War, the USA grew to understand that alliances with other countries offered its best chance of ensuring peace. But this vision only holds good if superpowers achieve influence through making friends, wield power by securing trust and hold high the ideal of universal human rights. If superpowers do not hold to these tenets – then all bets are off and a new geopolitical reality emerges.
Fortunately, few people want a fighting war. Nevertheless, insurance businesses in Asia still have to deal with the vagaries of increased political risk, even if it falls short of outright war.
One of the most acute manifestations of this could be the ongoing simmering dispute between Chinese insurance giant Ping An and HSBC.
The insurer owns around 8% of the lender and has been lobbying for the banking group to be broken up on the grounds that the bank cannot continue to cope with the stresses of US-China geopolitics – and also on the grounds that a break-up would unlock more value.
The fact that the insurer was forced to miss out on its dividends from the bank because HSBC is regulated in the UK and all banks in Britain were advised that they could not pay dividends during the pandemic has some bearing on the dispute.
In the latest twist in the tale, at an AGM in early May, the management of the bank defeated the Ping An proposal to break up leaving it free to continue as before – and presumably leaving Ping An to divest itself of its stake in the bank. This could allow Hong Kong life insurer HSBC Life to breathe easily for a little while longer yet.
The worry for many global insurers and reinsurers doing business in Hong Kong, Macau, Taiwan as well as in mainland China is that, sooner or later, they may have to pick a side – and that is not likely to be a comfortable decision to be forced to make.
Paul McNamara
Editorial director
Asia Insurance Review