With 20 offices and consistent double-digit growth, China is one of Willis’ fastest growing international markets, but we’ve barely scratched the surface potential for the insurance industry in the Chinese marketplace.
Estimates vary, but there are indications that only 2% of the Chinese commercial insurance market is available to foreign insurers. Equally compelling, considering the economic challenges in Europe and North America: only 4-7% of the (smaller) brokered market is accessible to foreign insurance brokers. To a new broker starting out in our business I would say this: learn Mandarin and go East, young man (or woman)…
These thoughts, long ruminating, were reinforced on Thursday evening last week at the Willis Building on Lime Street in London when we had the honor of hosting the UK launch of the European Chamber of Commerce in China’s (EUCCC) important new position paper, “European Business in China”. The conference was co-sponsored by the Confederation of British Industry (CBI) and the China-Britain Business Council (CBBC).
Insurance Playing Catch Up to Economy
In preparing my opening remarks at our session, which was held under Chatham House Rule, I had a few weeks to reflect on what closer co-operation between the UK/European and Chinese governments would mean for the insurance industry.
Today, the insurance market in China is lagging far behind the progress of its economy as a whole. The commercial insurance market in all of the provinces combined is worth around $35bn, or roughly the size of the German economy. Since 2006, it has grown annually at a staggering rate of 35%. Still, with all of this momentum, the Chinese insurance market remains at less than a third of the size it would be if it matched the same levels of insurance as the countries of the European Union, defined as a percentage of GDP.
Many who predict that reality will catch up with the math say that China will have an insurance market of $110bn by 2015. This assumes that growth will settle to a somewhat less frothy annual rate of 25%. Maybe, in that number, the pundits are just applying some typical cautious pessimism. If the rate doesn’t cool, and if current levels of growth are sustained, the size of the market in the next half decade could be as much as $150bn, or the same size as the EU commercial market.
A Land of Opportunity
Willis’ Chairman and CEO, Joe Plumeri was in Hong Kong last week to preside over the Grand Opening of a bigger Willis office in that Asian capital of commerce. It was a festive event, complete with the customary pig cutting ceremony, but it belied an important reality for Willis and, indeed, the entire insurance industry in China: our business has tripled across Asia in the past six years. In this new office, to be sure, we’ve anticipated future expansion.
While in Hong Kong, Joe Plumeri also spoke to a gathering of CEO’s at KPMG’s Captains of Industry event at the Renaissance Harbour View Hotel. In his speech, he shared with the chiefs of some of the leading companies in Asia his view that the new infrastructure required to support Asia’s burgeoning urban middle class will bring with it a commensurate burgeoning of the insurance industry. It stands to reason that more companies, more construction and more economic activity will bring more exposures, and thus the protection they need from a variety of perils that may come their way.
And might the future be happening now? The importance of safeguarding, through insurance, China and Asia’s prosperity, is a prerogative at this very moment. In a recent speech to the London insurance market, Willis’ Deputy Chairman, Martin Sullivan, pointed out that there were 355 catastrophic events worldwide in the first six months of 2011. Of this list, 49% of those catastrophes occurred in Asia.
Now is the time for Western companies to leverage their risk and insurance capabilities and capacity to ensure that the rapidly growing Chinese economy and asset base is properly protected. This presents a game-changing opportunity for both of us, but one that will be predicated on overcoming both regulatory and attitudinal impediments, which is why the work of the EUCCC, so well documented in its position paper, is so important.
Tim Wright is the Chief Executive Officer of Willis International. He joined Willis in 2008 from Bain & Company, where he led their Financial Services practice out of London. Tim holds a degree in Law from Manchester University and a PhD in International Law from Cambridge University.