Global brokers making headways in Japan’s tough insurance market
December 7 2023 by Martin Friel![](https://insuranceasianews.com/wp-content/uploads/2023/12/JAPAN-1-768x472.jpg)
Japanese culture may have a reputation for being reluctant to stray too far from home but if there ever was any truth in that, the country’s leading insurance companies have been doing everything to dispel that image.
The big three non-life insurers – Sompo, Tokio Marine and MS&AD – have all been on an acquisition spree in the last decade.
Tokio Marine started with its 2015 purchase of Houston-based HCC Insurance for US$7.5 billion. Not to be outdone, local rival MS&AD reached beyond Japan’s shores with the 2016 purchase of Amlin at Lloyd’s and Sompo got in on the action in the same year with a US$6 billion outlay on the Bermuda-based insurer Endurance Specialty.
The motivation for this huge financial outlay? Growth beyond their own maturing market.
But as Japanese insurers reach out into the world in search of growth, so too do the world’s brokers. While the presence of large, international brokers in Japan is nothing new (Marsh and Aon have been there for decades), there has been a recent surge of activity with several either establishing themselves in the country or reinforcing existing operations.
“The existence of in-house agents has always limited the opportunity for the big, international brokers.” Ken Reilly, Sompo International
In 2022, Miller acquired Tokyo-based Lead Insurance Services and this year, Gallagher set up a new practice in Tokyo while Marsh entered into a joint venture with MST Insurance Service and BMS Group expanded its presence in the country with appointment of Tim Hewitt as head of its Japan operation.
The race, it seems, is on but what exactly are they racing towards? Like the big three carriers, it’s all about growth.
It’s the rich seam of corporate risks in Japan that these brokers are targeting but as Ken Reilly, executive vice president and head of the Tokyo office for Sompo International pointed out, these risks have historically been managed by in-house insurance buyers.
“The existence of in-house agents has always limited the opportunity for the big, international brokers,” he said.
But that’s changing. According to Reilly, as the risk landscape evolves and as corporates attempt to keep pace, there is a growing realisation that professional intermediaries with specialist skills have raised overall risk management awareness, skills that are necessary to be effective in today’s global corporate landscape.
“As companies expand domestically and overseas, and as the risk landscape continues to change, professional intermediation needs to keep pace and help the overall industry to adapt, evolve and continue to innovate,” explained Reilly.
“To fill that need, the international brokers have made some significant headway into that space.”
“We want to grow in Asia and Japan is the second biggest economy regionally , so it makes sense to invest. We have worked with Lead Insurance Services for over 20 years and we were delighted to complete the acquisition, which provides a platform for growth in Japan.”
Chihiro Maekawa, Miller Insurance
Making inroads
Chihiro Maekawa, head of property and casualty at Miller: “We want to grow in Asia and Japan is the second biggest economy regionally , so it makes sense to invest. We have worked with Lead Insurance Services for over 20 years and we were delighted to complete the acquisition, which provides a platform for growth in Japan.”
She explained that while Miller currently only trades Marine business in Japan, Lead’s integration with local markets offers the future potential for Miller to explore branching out into other lines of business.
For Sompo, brokers are one of the fastest-growing distribution channels, Reilly added, as they can advise clients on global trends and changing risks allowing the insurer to tailor products and services more specifically.
And those needs may be changing in the wake of recent price-fixing scandals in the Japanese market with at least one broker hinting that they expect to grow on the back of increasing demand for independent advice that isn’t vulnerable to backroom deals.
Reilly agreed that the involvement of an independent third party could only improve the governance around how insurance is placed .
There is a surge of interest in Japan – that is not in doubt – and while there are different approaches supporting different strategies, it seems that from a cultural perspective, the timing is perfect.
But if any of these brokers expect to turn their presence into an overnight success, they need to reckon with the pace of change in the Japanese market.
“This growing interest could be a turning point for real advancements in risk management and how we respond to evolving risk,” said Reilly.
“But Japan is a commitment – the runway is a little longer. There will be pressures being a listed or private equity-backed broker but in this market, patience will be a virtue.”
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