MSI’s Alan Wilson on the recovery, M&A and digital

May 21 2020 by Andrew Tjaardstra

Alan Wilson, deputy head of international business department at Mitsui Sumitomo Insurance (Japan), gives his verdict to InsuranceAsia News on Covid-19, government stimulus packages, M&A and digital uptake.

Singapore-based Wilson, who started at the firm in 2008, usually spends around 20% of his time traveling to meetings across the region, including to the the company headquarters in Tokyo.

He oversees approximately 5,000 staff at the P&C insurer’s Asian operations across every Asean country in addition to Australia, Hong Kong and New Zealand; outside of Japan the firm also has operations in China, India, Korea and Taiwan in Asia.

InsuranceAsia News (IAN): What do you see as the main impacts of Covid-19 on Asia’s insurance markets (ex-Japan)? 

Wilson:  With movement restrictions brought on by the pandemic, consumers have turned to online channels. Businesses, partly due to employees telecommuting for work and partly driven by consumer needs, are now relying more heavily on technology to operate. This has helped to fast forward digital adoption which is by and large a good thing for the general insurance industry where digitisation has been sluggish when compared to several other industries prior to the pandemic.

Since the beginning of the outbreak, we are seeing significantly more transactions for purchases, enquiries and claims on our digital platforms across the region.

Business wise, we are seeing a noticeable drop in top line due to overall less purchases such as travel insurance, less declarations for example in stock, wages and cargo, as well as cancellations of covers when companies struggle to continue in operation during this difficult time. On the other hand, other than Covid-19 related claims, there are fewer claims in products such as motor and health insurance due to lockdowns.

The one impact coming down the road is that reinsurers are removing infectious disease cover from treaties, and so far, international reinsurers have been consistent on this. Direct companies will not see the immediate impact until they renew their reinsurance protection come January 1 2021 for most in the South-East Asia region. This can leave companies with substantial net exposures.

IAN: Will government stimulus packages be enough to stimulate a GDP recovery and how can insurers help?

Wilson: Economic recovery will take time and is dependent on many factors — how quickly economies will reopen, the financial state of businesses, consumers’ spending propensity especially considering job losses, and the confidence to resume traveling. It remains to be seen whether there will be subsequent waves of the coronavirus infection, and how quickly an effective vaccine can be made available widely.

While it is too early to tell how effective the government stimulus packages are, we can be certain that the first priority has been in the area of health, followed closely by economic issues as they are inextricably linked. As a rough rule of thumb, the better the outcome from the health response by the local authorities, the quicker we can expect the economy’s recovery.

As insurers, we can contribute to economic recovery by ensuring that our financials are kept in good shape, whilst maintaining our workforce largely intact and our operations functional, in order to help our customers, partners and our communities in whatever way we can. The growth of an economy, as we have witnessed, is dependent on the growth of the society in which it operates. To secure a sustainable future, we must continue to support one another as we have done, individually and collectively, during this crisis.

IAN: Has the market seen an increased shift to digital channels as a result of the pandemic?

Wilson: Yes, undoubtedly. The global crisis has led to the acceleration of digital adoption in ways few could have imagined beforehand. Automation and digital engagement has become the top priority for so many businesses. Operations which used to be reliant on in-person interaction and manual processing have now gone online or are in the process of doing so.

Since the beginning of the outbreak, we are seeing significantly more transactions for purchases, enquiries and claims on our digital platforms across the region. Even internally for the company, with employees’ well-being as our main priority during this pandemic, we expressly increased online employee engagement activities with virtual town halls, lunch talks and employee events.

IAN: How do you foresee Covid-19 impacting Asia M&A this year?

Wilson: It’s too early to tell for sure.

In some markets there has been a relaxation of solvency rules which will help many companies to see this period through. On the other hand, there may be some companies that will come to a position where they need to sell all or part of their business, though I hope there will not be many. In short, some consolidation in a few markets may occur, however on the buy side – acquirer interest – will most likely be less relative to pre-pandemic. This is unless assets on offer are particularly attractive, although there will always be some companies that are acquisitive.

There may also be diversification acquisitions, especially for companies which are experiencing exceptional growth during this crisis – such as those in digital and ecommerce industries as well as certain FMCG (fast-moving consumer goods) brands.

2020 is a challenging year as much as it is an interesting one. We will be observing the economy in this region as closely as we have been monitoring the pandemic situation.

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