Asia’s P&C brokers see resilience in pandemic

July 29 2020 by Andrew Tjaardstra

There is a joke in the UK market that after a nuclear holocaust the two remaining things left on the planet will be insurance brokers and cockroaches.

The pandemic has once again highlighted the resilience of brokers looking after businesses – both small and large. As the market’s middlemen they can be their clients’ champions as the wider market picks up the majority of the tab, but perhaps at the sacrifice of some bonuses along the way.

Both Marsh and Aon are expected to report solid global operational performances for the first half of the year after decent first quarters.

Aon’s reversal of its pay cut and its continued pursuit of Willis Towers Watson show the confidence in the market. Aon’s global chief executive Greg Case said the company “took action again when it became clear that the most challenging scenarios began to look less probable.”

Australia’s Steadfast Group is on course to achieve its 2019 / 2020 earnings targets it had set until the Covid-19 pandemic broke out in March, forcing the broker to discard the guidance.

Trading conditions remained strong in June, continuing a period of solid business growth since the introduction of lockdown measures to contain the virus grounded the economy to a virtual halt.

Hardening market
While most countries are heading towards recessionary territory, a positive sign for brokers is the hardening market in the region.

In Q1 2020 property insurance pricing rose 8% in Asia, according to Marsh’s Global Insurance Market Index Report. It was the fifth consecutive quarter property rates have risen.

“We are now living in an unprecedented VUCA (volatility, uncertainty, complexity and ambiguity) world with lots of uncertainty ahead of us. The role of broker  . . . is becoming more important than ever.”  Jacky Chan, Liberty International Insurance HK

The report showed there were double-digit increases in both Hong Kong and Singapore for cat and non-cat exposures, while lack of competition in the region continued to be a factor for large and complex property placements.

With the recent rate movement, if brokers can keep hold of their clients or win new ones in this environment then the next few years should see solid revenues.

Changing brokers is more tricky during a pandemic which takes up a lot of time and effort while there are other priorities.

One senior market source based in Hong Kong told InsuranceAsia News (IAN): “The market is hardening and renewals are generally just going through on the nod because clients don’t have the bandwidth to think about re-marketing, so those things go a long way towards counter-balancing the recessionary side of the equation.”

Uncertain world
The uncertainty created by Covid-19 has created a unique opportunity for brokers to help provide support to their clients through the pandemic.

Last summer, speaking at the S&P Global Ratings 35th Annual Insurance Conference in New York, Marsh global chief executive Dan Glaser said: “The age of risk has really just begun. There is a risk wave coming our way that includes climate change and adaptation, water scarcity, the impact of [artificial intelligence] and robotics.”

And that was prior before anyone had even heard of the phrase Covid-19 or governments and large companies were dusting off their pandemic handbooks.

“Whilst we have had to adapt our working practices, our agility and creativeness ensure that we have and will continue to deliver ‘business as normal in abnormal times.’” David Howden, Hyperion Insurance Group

The large brokers understand that independent, trusted advice is going to become more critical.

Jacky Chan, senior vice president – head of P&C distribution, Liberty International Insurance (Hong Kong), told IAN: “We are now living in an unprecedented VUCA (volatility, uncertainty, complexity and ambiguity) world with lots of uncertainty ahead of us. The role of broker, being a trusted adviser of insured, is becoming more important than ever in bringing professionalism and driving resilience to society.”

Expertise and experience is particularly valued in difficult time meaning that more than ever brokers with decades of knowledge of their markets are likely to be in pole position.

M&A / hires
Alongside the Aon and WTW merger there has been a continuing flurry of activity in Asia Pacific.

Gallagher, PSC and Steadfast are all growing while Howden has strong Asia ambitions with a war chest to match, while Mumbai-headquartered JB Boda has global ambitions.

PSC’s chairman Brian Austin recently commented: “PSC believes the Asian market presents an outstanding long-term opportunity for the company. These acquisitions provide an opportunity to enter the market via Hong Kong through existing known businesses.”

Specialist broker BMS also sees opportunities for Asia growth.

Sandra Lee has been appointed as specialist (re)insurance broker BMS’ head of Asia operations. Lee is based in Hong Kong and will join the broker when her current contractual obligations with Aon conclude. Lee has been tasked to help develop the group’s global M&A broking business — working closely with the firm’s new and growing private equity, M&A and tax teams in London.

Business as usual?
Despite the uncertainty, keeping a cool head is going to be key.

David Howden, chief executive of Hyperion Insurance Group, writes in a public statement on the firm’s website: “Whilst we have had to adapt our working practices, our agility and creativeness ensure that we have and will continue to deliver ‘business as normal in abnormal times.’”

Brokers will need to be on their toes more than ever as competition heats up in the region but there are plenty of opportunities for them to show their worth.