Life reinsurers are needed for their technical expertise in many areas. In Asia, these include longevity insurance, long-term care insurance, capital management solutions amongst others, says Mr Paolo De Martin from SCOR Global Life.
I am honoured by the invitation from Asia Insurance Review to share my thoughts on recent developments regarding the demand for life reinsurance.
I became CEO of SCOR Global Life in January this year. Prior to this, I was the Group’s CFO.
The SCOR group has grown to become the fifth largest reinsurer in the world and is firmly established in the small group of Tier 1 global reinsurers, offering a high level of security and generating strong customer franchise. Within the Group, SCOR Global Life has expanded rapidly over the past few years through strong organic growth and successful business acquisitions. SCOR Global Life has developed a strong franchise in its key markets and is now the leading reinsurer in the US, after successfully integrating the operations of Transamerica Re (2011) and the reinsurance operations of Generali US (2013).
While traditional uses of reinsurance continue, eg protecting against volatility in a life insurer’s underwriting results and providing training to new generations of life insurance staff, such as underwriters and claims personnel, new uses of reinsurance have also developed; and I am pleased that SCOR Global Life has been an active participant in this development.
There is a growing demand for the services provided by life reinsurers, and we are continuously developing our offering to clients in order to help them meet their emerging needs. These include managing longevity risk, developing relevant protection products that respect the need for balance between risk and reward, and providing financial management support in a complex and volatile market environment.
Longevity reinsurance
The longevity reinsurance market has seen dramatic growth in recent years, especially in the UK. Since 2002, a total of around GBP50 billion (US$84 billion) of transactions have been completed in the UK alone. However, this is only a small fraction of the potential longevity exposure worldwide, which was estimated by the OECD to be at least US$22 trillion in 2012.
SCOR Global Life has been an active participant by taking shares in longevity reinsurance transactions worth at least GBP12 billion ($20 billion) and is committed to the development of this important risk market through its ongoing participation in the UK market, through its support for innovations in risk transfer structures and through its expansion of the market into continental Europe and the Americas.
While the longevity reinsurance market in Asia is still at a nascent stage compared to the situation in the UK and the rest of Europe, the opportunity for life insurers to bridge an increasing longevity protection gap through the provision of new products will arise with the support of thoughtful regulatory and social policy.
Products catering to old age
Like most western countries, many markets in Asia are suffering the effects of an ageing population due to a reduction in the fertility rate and an ever increasing lifespan. Japan is already an aged country, while Taiwan, Singapore and China are widely recognised to be facing significant threats from an ever-expanding ageing population.
Besides longevity reinsurance, SCOR is a leading reinsurer of long-term care (LTC) needs around the world. SCOR’s strong research and development expertise has made SCOR the number 1 reinsurer of LTC insurance in France, which is the second largest private LTC market in the world. Access to a huge database of experience data, especially in the older age brackets, has enabled SCOR to expand its success in France to other significant markets such as Israel.
In Asia, we were the first reinsurer to support the development of LTC products in Korea back in early 2000, and we have been an active promoter of the product throughout Asia-Pacific ever since then. We are particularly pleased by the growing awareness of the need for LTC products shown by governments and the public alike. SCOR is well positioned to support the development of the markets here given our expertise and experience. We see the potential for public and private sector partnerships to support the development of LTC cover, by raising awareness of the benefits of making care provisions in good time.
Capital management
With the credit crunch and volatile capital markets in recent years, direct insurers have turned to reinsurers for support when they need capital to finance growth or to manage their capital position.
Over the last two years, SCOR Global Life has been well recognised for its innovative financing support, assisting some European Banks to recognise the value of future profit streams arising from their insurance operations at the holding company level.
Through a VIF (Value of In-Force) monetisation transaction, where we reinsure a portfolio of life policies and in return deliver a sizeable upfront commission, we provide funding at cost effective levels without affecting the strategic positioning of our clients’ insurance operations.
In Asia, the challenge is rather to fund capital strains arising from growth, and SCOR Global Life is proud to support its clients through the use of bespoke reinsurance solutions as part of their capital management. We see the market demand for capital management solutions is set to remain vibrant due to ongoing strains arising from solvency regime changes as well as supporting the business growth expected in many expanding Asia markets.
Market focus
In terms of market developments, the SCOR group’s recently announced three-year strategic plan – “Optimal Dynamics” – anticipates and commits to an increasing involvement in Asia-Pacific markets for both the life and P&C business divisions.
SCOR’s strategy in the region has been deliberately conservative from the start, focusing on long-term partnerships with clients and a sustainable market position. I am extremely pleased that the strategy has worked very well for SCOR Global Life in Asia-Pacific especially in ANZ where we exceeded expectations despite only being in the market for just three years.
We recognised that know-how, expertise and diversity of SCOR Global Life’s offering as well as a broader range of added value products and services are crucial assets for our clients. To this, we have strengthened the resources in both the local and regional operations in the Asia-Pacific region, for eg we have set up dedicated teams in the areas of Innovative Product & Development; Health Insurance management; Direct Marketing Solutions support and Capital Management Solutions. These centres of excellence are further supported by international Research & Development centres set up within SCOR.
Throughout the Asia-Pacific region, we will continue to invest heavily, in terms of both capital support and further expanding our team of seasoned reinsurance professionals, in order to support our clients through challenging market conditions. We strive to be a preferred partner for our clients and we stand ready to invest and grow with our clients.
Mr Paolo De Martin is CEO at SCOR Global Life.