Tencent-backed FuSure Reinsurance is expected to bring more technological innovation to the market.
Chinese tech giant Tencent recently announced its arrival in the reinsurance space when its Hong Kong-based entity FuSure Reinsurance was granted approval to carry out reinsurance business in the territory.
Licensed as a general reinsurer by the Hong Kong Insurance Authority last month, FuSure is initially capitalised at HK$1bn ($128.9m) and is 85% owned by Tencent and 15% owned by private investment firm Grand Azure.
Tencent’s flagship WeChat app boasts more than 1bn users globally and ranks as the world’s largest standalone mobile app, having become a fabric of life for those in China who use it to shop, play games, order food and more. The company made its foray into insurance back in 2017 when it set up its own insurance platform, WeSure, which leverages the WeChat app to offer its own line of insurance products while also forming partnerships with a range of (re)insurance carriers.
FuSure Reinsurance’s entry is set to accelerate technological innovation further across Hong Kong’s insurance value chain, which has seen three digital-only insurance carriers being licensed in the territory in the last three years. FuSure aims to “help drive technological innovation in Hong Kong’s insurance industry, promote sustainable innovations for social value and work with business partners to elevate Hong Kong’s status as an international risk-management hub and centre for reinsurance,” the company said in a statement.
AM Best has assigned a financial strength rating of A- (Excellent) to the new reinsurer with a stable outlook. The rating reflects the strength of its balance sheet, as well as the backing it receives from its parent, Tencent, which includes capital, business development, risk management and operational support.
“The company is viewed as a long-term strategic investment of Tencent, which has a sizable balance sheet, strong financial flexibility and favourable credit fundamentals. AM Best expects FuSure to benefit from the parent group in terms of effective use of innovation and technology, leading to competitive advantages in product design and pricing sophistication,” said AM Best.
During its initial phase, FuSure will look to focus on short-term health reinsurance in China before gradually diversifying into other product lines and regions in the future, AM Best said.
In recent years, Tencent has been making consistent investments in health tech by leveraging cloud computing and AI. Following in the footsteps of US tech-giants Apple, Amazon and Microsoft, Chinese tech conglomerates such as Tencent and Alibaba have made an active push into health tech in recent years and taken on a prominent role in the fight against COVID-19.
Through its WeDoctor healthcare platform, which provides a closed healthcare network involving patients, physicians, doctors, pharmacies and insurers that leverages AI technology, Tencent has a track record and understanding of the healthcare ecosystem within the region. WeDoctor is valued at nearly $7bn ahead of its long-rumoured Hong Kong IPO which is expected to happen this year.
A hard market often sparks the formation of new reinsurance companies seeking to capitalise on higher rates. This was the case in 2005 when hurricanes Katrina, Rita and Wilma led to significant rate hardening that heralded the creation of a batch of new Bermudan reinsurers known as the ‘class of 2005’. They included the likes of Validus, Ariel Re, Flagstone and Harbor Point. Prior to that, the ‘class of 2001’ had emerged following a spike in reinsurance rates in the wake of the 9/11 attacks.
However, talk of a ‘class of 2020’ has yet to come to fruition despite the industry entering another hard cycle which is being sustained by the fallout from the pandemic. Rather than form new reinsurance companies, market observers predict what is more likely to happen is existing companies attracting more capital and moving into niche market segments. The fact that carriers have withdrawn capacity in certain lines of business in recent times presents an opportunity for new entrants to enter that space.
Close to $20bn of new capital was raised by the global reinsurance market and new start-up entrants in 2020, and more of the same is expected in 2021. This is underpinned by a resurgent interest in the sector among the investor community amid a shift in global risk awareness and an increase in risk aversion driven by the global pandemic. A