2013-10-07 10:04:02 -
The largest European insurers are under increasing pressure to expand internationally as they encounter a difficult operating environment in their domestic markets, although growth outside core territories comes with challenges, according to a new report from A.M. Best.
For the majority of European insurers, the maturity of their local insurance markets and instability within the Eurozone are resulting in stagnant development. Low investment returns, anticipated higher solvency standards as a result of Solvency II, and shareholders’ demands for improved capital efficiencies are resulting in a need to focus on interests outside of traditional insurance centres.
A new report by A.M. Best, “European Insurers Seek Growth and Efficiency Gains in Emerging Markets”, analyses the 12 largest European insurers’ approaches to developing global operations
in emerging markets. It also examines the drivers for international expansion and the key territories identified as “high-growth” that offer the greatest potential.
In particular, emerging markets in Asia, Eastern Europe and Latin America are considered to offer potential for growth. European insurers are also aware of the fast-paced economic growth and opportunities of the “BRIC” countries of Brazil, Russia, India and China, given their increasing wealth and high populations. Carlos Wong-Fupuy, senior director, analytics, said: “In addition to constrained domestic insurance markets offering limited prospects for further growth, European insurers are under pressure to focus on improving underwriting margins as their investment portfolios remain under strain. In general, A.M. Best regards the realignment of most major insurance groups’ international strategies as a positive development. This demonstrates focus on potentially higher profit margins and capital efficiency.
Overseas expansion not only offers higher potential growth, but also increases diversification”.
The report also notes that while European insurers generally consider international growth strategies fundamental to future success, a minority have been exiting particular markets due to poor profitability or other underlying pressures to divest and concentrate on core markets.
Yvette Essen, director, industry research - Europe and emerging markets, and author of the report, also commented: “Despite their attractions, A.M. Best has identified some notable challenges in building a presence in these markets, which include suppressed appetite for insurance offerings; limited control of joint-venture agreements; difficulties with integration; competition; and different standards of governance from those of mature insurance markets”.
To access a complimentary copy of this report, please visit www3.ambest.com/bestweek/bestweekreports.asp?rt=ir
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A.M. Best Co.Carlos Wong-Fupuy, +(44) 207-397-0287Senior
Director, Analytics firstname.lastname@example.org
: mailto:email@example.com orYvette
Essen, +(44) 20-7397-0322Director, Industry ResearchEurope &
Emerging Markets firstname.lastname@example.org
: mailto:email@example.com orRachelle
Morrow, +(1) 908-439-2200, ext. 5378Senior Manager, Public
: mailto:firstname.lastname@example.org orJim
Peavy, +(1) 908-439-2200, ext. 5644Assistant Vice President,
Public Relations email@example.com