Domestic lull pushes up offshore expansion

Risk managers looking for global transfer options may be concerned by a survey in which insurers admit that international expansion and building a global platform is a challenge. But insurance buyers at multinational companies will be encouraged by news that insurers worldwide are targeting such moves to compensate for sluggish demand in domestic markets.

According to the survey conducted by The Economist Intelligence Unit on behalf of financial investment firm State Street Corp, 82 percent of insurance executives worldwide concede that driving expansion into new geographical markets is a challenge for their companies. Some 27 percent say it is a major challenge.

31 percent said the creation of global platforms is a major difficulty, as opposed to just 11 percent who don’t see this as a major problem.

Insurers are expanding to negate slow growth at home, the survey finds. Just over 70 percent say that growing market share in domestic markets is challenging, with 27 percent stating it is a major issue currently.

Insurance executives from the Asia Pacific region (30 percent) regard overseas expansion as most challenging. This compares with 27 percent from Europe, Middle East and Africa (EMEA) and 25% from the Americas.

The research also reveals that 82 percent of insurance executives surveyed believe effective capital allocation is the biggest challenge they face when expanding into foreign markets.

David Howie, senior vice president and head of state, Street Global Services’ insurance business in the UK, said: “Many insurance firms are eyeing global expansion as a response to more muted growth prospects in domestic markets. As insurers ramp up their expansion efforts, they are looking to gain greater coordination and consistency across their multiple local businesses that may typically have been more independent.”

The survey of insurance executives was conducted during April 2013. Half of respondents were C-suite level, while the remainders were in senior management positions. Around 38 percent of respondents were from EMEA, 36 percent from the Asia Pacific region and 26 percent from the Americas.