December 6, 2018

Investors looking to Asia will consider a range of market entry strategies

M&A just one option for those eyeing insurance opportunities in the region.

Non-traditional players continue to have high levels of interest in the Asian insurance industry, with its attractive growth prospects. However, market entry is hindered by a number of factors. For those looking to establish or strengthen a presence in the region via a merger or acquisition there is a scarcity of quality assets for sale, while those potential targets that are available tend to remain expensive and run through competitive bid processes. A further obstacle is that in many Asian jurisdictions foreign ownership restrictions remain and with the markets and regulations across the region differing significantly it is a challenge to implement a consistent strategy. For those interested parties based in mainland China there are restrictions on capital outflows and leverage to contend with.

As a result, we expect that some of the more savvy investors will start to consider alternative market entry options. These will include looking at greenfield licensing options in more developed markets – provided that they can hire a quality management team (perhaps picking one off after a global merger). Another way in is through a joint venture or other commercial partnership with an existing insurance industry player, where the new market entrant can bring new benefits such as in the areas of technology, distribution, data or brand. An MGA structure in certain South East Asian jurisdictions is a further option, where a market entrant can establish the viability of its proposal at a relatively low cost and more readily handle foreign ownership issues. Finally, as the industry adapts to the disruptive forces of insurtech, there are opportunities to become a technology and/or outsource service provider in key elements of the value chain.

You can read the rest of our insurance predictions here.