Author: World Finance

Britam: No end in sight for foreign acquisitions in Kenyan insurance

Posted on by World Finance

Kenya today is a growing economy, with a rising middle class and very low insurance penetration. So it’s no wonder that it has become an extremely attractive market for foreign capital. Ambrose Dabani, General Manager, Life and Pensions from British-American Insurance, discusses the consolidation of the insurance industry in Kenya, Britam’s approach to risk management, and its customers’ savings needs.

World Finance: Not long ago, many people in Kenya had little or no insurance coverage. Now however, comprehensive and innovative services are readily available to the masses – so much so, that it has become an extremely attractive market for foreign capital. With me now to discuss this potential is Ambrose Dabani from British American Insurance.

Well Ambrose, the Fitch ratings agency reported that investors’ appetite in acquisitions in the Kenyan insurance industry has pushed up valuations significantly. What would you say the driver is behind this?

Ambrose Dabani: You must realise that Kenya today is a growing economy, with very low insurance penetration. There is a growing middle class, and therefore increasing the capacity of people who can buy insurance.

We also have a regulator which is looking at increasing penetration, attracting foreign companies to come to the country. And it is encouraging them to come through acquisitions.

You can choose to come as a greenfield setup – but that has its own setup challenges and setup risks. So what the regulator prefers is that companies coming through should come through an acquisition. And therefore that has led to an increase in the demand-side.

World Finance: So the market is seeing a lot of consolidation: what do you make of this?

Ambrose Dabani: Currently, pre-consolidation, we have about 43 companies. And it is the feeling of the industry that that is too many. And therefore we’re looking at a period when there’s a lot of capital investment required – in terms of innovation, in terms of technology.

There’s also an increase in regulatory capital, and therefore the smaller companies are looking to be bought out. So therefore, that is also on the supply side in terms of insurance companies that are looking to be acquired, that has also increased.

World Finance: And compared to its African neighbours, why would you say the Kenyan insurance market is flourishing?

Ambrose Dabani: One: very low penetration. So that means definitely there’s an upside potential.

Two: a growing population, a growing economy. That means the middle class is also growing; that also increases the market.

And also at the moment there’s a lot of technological innovations that are giving room for increased innovation on products, on distribution.

Kenya is also seen as a hub to the rest of east Africa because of its geographical location, its developed financial markets, its educated labour force – and therefore, naturally anyone who wants to come to that part of the region will start with Kenya.

World Finance: Well as you mentioned, like most industries technology is changing the insurance landscape. So what innovations are coming to market?

Ambrose Dabani: Technology is changing. And specifically to Kenya there is what we call the mobile money phenomenon: you must have heard of M-Pesa. Now, that is where you can have all your money on your phone, never have to visit a bank – but you have all the banking services on your phone.

Now, that is really changing a lot of things. It’s changing the nature of products that we have. Now we have mobile phone products – now you can sign up for insurance on your mobile. We’re exchanging processes – now you can have all your customer care services on your phone.

It’s also changing the way we distribute. We have 20 million people – we’re talking 20 million out of a 45 million population. That’s a huge proportion that’s on a mobile phone. The penetration of smartphones means that you’re able to distribute insurance products through the mobile phone.

So yes, that’s creating a lot of innovation around distribution, around products, around processes.

World Finance: And how do you tailor your offerings to individual needs? And indeed, what are these needs?

Ambrose Dabani: As I said, we have diversified financial services. We offer products for any stage of life, right from the time you get out of school and get your first job. Of course, you have your short-term saving needs – either to go back to school, to get married, to start having a family, buy your first house… so we have lots of savings products.

Then we move on to the point where maybe someone has a family, and they’re thinking about education for their children, thinking about personal health and healthcare. We have all those products in Britam.

All the way to savings for retirement, and also even accommodating retirees, with all their needs around regular income, around meeting their medical requirements. We have very, very innovative products at Britam: to meet retirement needs, retirement expenses, regular income until death, and even to spouses and all other dependents thereafter.

World Finance: In terms of asset management and investments now, how do you manage risk?

Ambrose Dabani: At Britam we have a separate, full-fledged asset management company. It’s very, very rapidly growing in terms of assets under management, because of the investment philosophy that we have.

You’ve got to remember that we manage people’s money, and therefore first we’ve got to deliver the return we promised, and with certainty around that particular promise. And therefore we are not gambling with people’s money: we have processes, we have quality controls in place, we have risk management as a function right at the board.

Senior management and risk management function that reviews our processes. And we do our investment based on asset liability margin principles, so that we don’t take too much risk.

Remember that we’re also a regulated company, so we also have to have a look at what the regulator advises as correct investment principles. So yes, risk is very, very well managed.

World Finance: Finally, how do you see this industry evolving over the coming 12 months?

Ambrose Dabani: The coming 12 months are going to be busy! At an industrial level, at Britam’s level, it’s going to be busy.

We expect that consolidation will continue. We’re still hearing of new companies from Europe, from South Africa, looking for appropriate companies to buy. We expect that there’s going to be new legislation or regulatory environment in place. Currently the draft is being discussed by the industry – it’s causing a lot of excitement, as we move to risk-based supervision, in line with the rest of the world. So we expect that is going to continue.

We’re seeing more and more insurance companies are going to jump onto technology, coming up with innovative products, innovative distribution models, and innovative servicing, just to be more efficient and cut their costs, and deliver value to the client.

So therefore we expect lots of activities. It’s a very interesting time for insurance companies.

The Owners’ Club: Saudi Arabia’s thriving luxury car market

Posted on by World Finance

Every year Saudi Arabia imports 600,000 cars, worth more than $20bn. Sheikh Ghassan Al Sulaiman, CEO of Al Ghassan Motors, tells World Finance that the key to the industry is creating the luxury lifestyle associated with the brands.

World Finance: Saudi Arabia’s luxury car market is booming. Every year the country imports 600,000 cars, worth more than $20bn. Luxury vehicles account for more than 18 percent of total imported cars, making it the world’s largest market in the luxury car category.

With me now is Sheikh Ghassan Al Sulaiman from Al Ghassan Motors: a leading car dealer in the country.

How does the car market differ in Saudi Arabia from the rest of the Arab world?

Ghassan Al Sulaiman: Saudi Arabia is completely different.

We have representation in the three major cities in Saudi Arabia, and the distance between each one of them and their population is equal to one of our neighbours.

We believe that Saudi Arabia has a big number of high-net-worth families; and you’ll see that some of these families will have more than one of our brands, the luxury cars.

But in general, the Saudi customer enjoys the quality and luxury that our brands offer. And that’s also in the rest of the GCC.

World Finance: So what is the key to being successful in the luxury car market in Saudi Arabia?

Ghassan Al Sulaiman: Customer care and aftersales service is the key. It’s always been the key of success: if you succeed in aftersales, you will succeed in sales.

Our customers would like to enjoy a lifestyle associated with the brands they drive. And that’s what we do. We create the owners’ club, to give them that lifestyle, and let them associate with the same people, in the same lifestyle, with the same brands.

So what we do too is, we invest a lot in aftersales, and the sales facilities and training of our people; to give our customers the best service they deserve in these luxury brands.

World Finance: Now you also deal in pre-owned cars; how much of a market is there for this? What kind of figures are we talking about?

Ghassan Al Sulaiman: For the last seven years, sales of new luxury cars has been growing. And logically there will be a lot of pre-owned cars in the market. And usually in the mature market there is a ratio of selling two used cars to one new one.

We’re not there yet, but the market is getting to that ratio. But it is logical for us to concentrate on the pre-owned market, and the pre-owned cars, for the reason that the customer will find cars being offered in a factory standard. And at the same time we can protect the resale value for these cars.

On this basis we opened in Jeddah the first pre-owned facility; and now, by the end of this year, we’re going to open one in Riyadh.

World Finance: So what other big projects are you working on this year? What’s next for the business?

Ghassan Al Sulaiman: As I mentioned before, the expansion in our facilities of sales and aftersales is ongoing. But we believe that with the expansion in the market, and the products coming from our partners and manufacturers – for example, the Bentley SUV – Bentayga – is coming. And that will increase, as we understand, and we forecast a 25 percent increase in our sales. So we need to improve on our facilities to accommodate this.

Also, as you know, Infinity is one of the largest growing brands in the Middle East today. And we forecast for Saudi Arabia a 30 percent growth year-on-year for the next five years.

So we believe we need to improve our facilities to accommodate all this. And our goal in this is to make our customer get the right help and the right facilities, and the right product at the end.

Our goal in this is to give our customer the best service possible, by being associated with our brands.

World Finance: Finally, how do you see the luxury car industry developing in 2015?

Ghassan Al Sulaiman: We see continuous growth, and we believe that the market is going to grow at a faster pace, because of the booming economy in Saudi Arabia. And also, all these models that are coming from the manufacturer.

And actually, like we mentioned before, there’s a lot of motors coming in the next few years. And that will make the business we’re in booming to very high levels.

And we really see that the manufacturers look at us as key players in the market. And they are really helping us and pushing us to get to our goals.

Handelsbanken: We are well prepared for the sovereign-debt crisis

Posted on by World Finance

With another global financial crisis on the horizon, the international banking community is bracing for greater volatility. Michael Green, CEO of Handelsbanken Sweden, discusses Handelsbanken’s approach to risk, its profound understanding of its customers, and what the future may hold from a sovereign-debt fuelled financial crisis.

World Finance: With another global financial crisis on the horizon, the international banking community is bracing for greater volatility. Here to tell us how one major player is doing so, Michael Green of Handelsbanken Sweden.

So, we know that another banking crisis is coming; this time it’s going to be sovereign-debt fuelled. So tell me: how are you bracing for the future?

Michael Green: Let me first go back to 2008-9, with the start of the latest financial crisis. We’ve had a lot of crises since then: we started with the Lehman crisis, we had the sub-prime crisis, we had the Nordic-Baltic crisis. We’ve also had liquidity crisis, we’ve had higher interest rates, and now negative interest rates!

And throughout that time Handelsbanken has proven with our business model, that we’ve been able to keep our performance pretty stable and non-volatile through these different crises. And we’ve also created a lot of shareholder value through that time.

So we have a business model that’s proven to work even through bad times.

World Finance: Very interesting; now, part of that strategy was a conservative view of risk: tell me, what is the strategy this time around?

Michael Green: We have been pretty OK with our approach to risk throughout these years. And one of the explanations that I see is that we have a very strong business model that actually takes aim on our branches, the local decisions.

We have a business model that is actually scalable, repeatable, and which works very well in our six home markets – that is, the UK, Sweden, Norway, Denmark and Holland.

World Finance: A nice cross-regional representation there; so tell me, how does your clients’ understanding of risk influence your bank’s schemes?

Michael Green: I think with our profound knowledge of our customer locally within every one of our branches, both individual and corporate customers. We work very closely with our customers to really understand their risk approach, and give them our view on that, and try to make out the best solutions for each and every client as we go.

World Finance: So we talked about some of the challenges that come along with this next crisis; let’s talk about some unexpected opportunities.

Michael Green: I don’t know where the EUR/USD is going to trade tomorrow. I don’t know how the interest rate is going to close today. But we do know how to manage risk – and that is credit risk. We like credit risk, and we are not really into the market risks.

While saying that, we still create a very strong balance sheet. We’re one of the strongest banks in Europe right now. And why do we do that? First of all, we are here for our customers in good times and in bad times. We need to be prepared for the bad times to be able to help our customers.

Secondly, we have never received any governmental support, we haven’t received any central bank funding, and we have never asked our shareholders for new equity throughout the last financial crisis. So that’s the reason why we have a very strong financial position: to be able to support our customers and take care of our own balance sheet.

World Finance: Finally, what does the future hold for Handlesbanken?

Michael Green: We’re a full-service bank. In our six home markets we bank with both private individuals and corporate clients. We’ve been able to manage to achieve our corporate goal for the last 43 consecutive years.

We have very satisfied customers, and we have a very strong branch network that we combine with our digital platforms, in terms of the internet and smartphones. And I think we have a very strong business case moving forward.

World Finance: Excellent. Michael, thank you so much for joining me today.

Michael Green: Thank you.

Tumico: Bulgaria must fix laws to create a fairer insurance landscape

Posted on by World Finance

The Bulgarian financial sector is undergoing dramatic transformations. Georgi Borisov and Venelin Georgiev from Tumico discuss the legislative and regulatory challenges that insurance companies face in Bulgaria, and the benefits that EIOPA’s Solvency II directive will bring to Bulgarian insurance.

World Finance: The Bulgarian financial sector is undergoing dramatic transformations. Here to shed light on these changes: Georgi Borisov and Venelin Georgiev.

Now first, tell me about the challenges in your local sector.

Georgi Borisov: The national legal framework allows us to do business only in the field of long term life insurance.

We’re deprived of contact with the short term life insurance contracts, which is the main sector of life insurance in Bulgaria.

For example, the company can grow significantly, even in production volume, if some unfair legal texts are just removed from the legislation. And this is one of our main goals for the future.

Some examples can be given. First, pensions that are paid from premium pension funds are not subject to taxation, whereas insurance savings are taxed.

Second, payments of premiums to pension funds is regulated and smooth, while insurance payments to insurance companies often depend on the mood of the employer of the applicant for insurance.

Third, tax authorities and the government violate regulations and directives of the European Union. There is a lack of dialogue between the government and business. The opinion of Mr Tony Thompson, who is the representative of the World Bank for Bulgaria, is that government is a partner and regulator to be avoided by business.

World Finance: We’ve just heard from Georgi some of the issues that your industry has faced; tell me about your company, and how it’s been able to transcend these problems and build a long term growth strategy.

Venelin Georgiev: Many managers advise their companies to change and rethink their goals. We at Tumico however defend the opposite idea. Because of the restrictive legal framework, we defend product simplicity and universality.

The form of simplify and repeat is received very well by the market. That is why in our practice we constantly develop more clearly defined target groups of people – also add limiting characteristics that are placed on all our papers and advertisements. Combined with altruistic product content, which says that with us it’s easy, and we hold it is so.

Georgi Borisov: I would also add that simplicity is a useful tool against the growing complexity of corporate structures. To manage with globalisation, companies are beginning to use complex metric systems of management. This is a hidden killer of the current type of business.

To avoid this, we strive for simplicity: but only simplicity is not enough. Along with it, Tumico has the following business practices: rejuvenation of staff, education of our own talent, concentration of our resources and market action, and solving complex administrative tasks by small groups of highly qualified specialists.

World Finance: Venelin, what are your clients asking for mostly? Is it corporate or private insurance?

Venelin Georgiev: We have different types of clients, but we have focused on the hardest segment: this is product at the expense of the insured.

The reason for sincere price is that through all those years, we managed to stop the turnover of our members. It should be noted that when Tumico was founded, this was a significant problem. Of all 662 people who founded the insurance company, today only three of them are still members. But in the last year, 2014, just 14 of our 30,000 members ended their membership. So you can see that fighting turnover is a very small component of our work.

World Finance: Fascinating; so tell me Georgi about how you’re preparing for Solvency II. We know that it’s coming, what’s the industry responding with?

Georgi Borisov: We understood the full meaning of Solvency II when we made our own forward-looking assessment of own risk – formally known as ORSA, Own Risk and Solvency Assessment. Solvency II looks forward in time and estimates a larger volume of factors that affect solvency, while the Solvency I directive was focused on the past and present.

But there is also a hidden effect. Questions set by EIOPA in Solvency II were a huge exchange of experience between European insurers. So this was a most pleasant surprise.

World Finance: Georgi, your company in particular, let’s talk about some of the changes that are coming.

Georgi Borisov: Corporation membership in AMICE, the Association of Mutual Insurance and Insurance Cooperatives in Europe, where Tumico was accepted and welcomed as a full member, turned out to be very useful. This is the main reason, according to us, that we are in step with EIOPA’s and the local regulator’s requirements.

World Finance: OK. So finally Venelin, what does the future hold for the Bulgarian insurance industry?

Venelin Georgiev: Gear and depth of insurance penetration will grow with the increase of peoples’ wellbeing and care. In social insurance, the obligations and rights of the business should be aligned with those of the state to its citizens, at least.

In Bulgaria there’s a difficult process of the separation of the state from its social activities, because of the structure of our country’s debt. It is still the largest employer, and its own structures provide the population with healthcare and pensions.

This must be changed so that the market advantages can become available for citizens.

Johnson: British Virgin Islands must innovate to remain competitive

Posted on by World Finance

The British Virgin Islands has long been considered a leading financial centre, with its business-friendly government. But stronger competition in the incorporations space is forcing the BVI to innovate its offering. Julien Johnson, Executive Director of BVI Finance, explains how the British Virgin Islands has changed, and introduces two innovative new funds.

World Finance: The British Virgin Islands has long been considered a leading financial centre, with its business-friendly government. With me to discuss the opportunities the region represents is Julien Johnson, from BVI Finance.

Well Julien, the British Virgin Islands of course is one of the leading financial hubs, but what sort of opportunities does it represent?

Julien Johnson: Well, the BVI has been an important part of the global economy for a very long time.

The main BVI advantage really is a robust regulatory framework that meets, and in many instances, exceeds, regulatory standards.

We have an entrepreneurial business community, we have a government that is committed to coming up with new legislation that meets the needs of the industries.

We’re also a price-competitive jurisdiction, in terms of our fees: our legal fees and corporate services fees are very competitive, making the BVI a cost-effective place to do business.

We also have an independent legal and judiciary system based on English common law, with highest appeal to Privy Council in London, which is attractive to investors.

Beyond that, we have a very good cadre of professionals working in the industry, resident in the BVI, who can provide services in every sector, whether it be trust funds, the captive insurance business, incorporations business. We also have most of the leading firms with a presence in the BVI. So it’s really a one-stop shop for all of your offshore financial services needs.

World Finance: Well when people do think of offshore jurisdictions, they often think of money laundering; so how do you ensure that business is above board?

Julien Johnson: Well, the global fight against money laundering is an evolving process. The BVI has long been a part of this process; in fact, the BVI was one of the very first jurisdictions to institute anti-money-laundering laws, going as far back as 1999.

We have a very robust anti-money laundering framework; we take very seriously our role in combatting money laundering globally. And as I said before, we meet and in most cases exceed international standards.

World Finance: The BVI prides itself on setting the highest standards when it comes to regulations and transparency; so, how advanced is this?

Julien Johnson: Setting the highest standards for transparency has really been a part of the BVI’s strategy in maintaining its competitive advantage. The BVI has signed 27 tax information exchange agreements with various countries around the world. Most recently the OECD has upgraded our rating to largely compliant in its latest peer review, which is a huge endorsement of the work that we have done as it relates to transparency and international cooperation on tax matters.

It’s a fundamental part of our business model, and one that we’re very proud of our achievements in this area of cooperation and transparency.

World Finance: You do face growing competition in the low-cost, high-volume offshore incorporations business; how do you approach this?

Julien Johnson: Well, there certainly is growing competition. The BVI’s approach now is really to look beyond incorporations. Obviously incorporations is our core business, and a very fundamental part of what we do. And really what provided the growth in the industry, and where we started from. But we’re looking beyond that.

We’re a one-stop jurisdiction that offers many other products and services. As an example, the BVI recently launched two new funds products: the approved fund, and the incubator fund, which are geared towards start-up managers, and also managers who are focusing on a very small group of connected people. So these are examples of very new and innovative products that we have launched in response to growing competition in the market, and a need to diversify ourselves.

Beyond that, the BVI has recently launched a campaign called BVI forward, which is the result of a report done by the global consultancy firm McKinsey and Company, which is really an overview of the financial services industry in the BVI, and to develop a plan to move it to the next level.

So, parts of that report are actually a key focus on value-added services, and developing additional value in the industry for its growth. So we’re very excited about that, and certainly there will be a lot more coming out of that very soon as we move financial services to the next level in the BVI.

World Finance: Finally, how does a company go about setting up in the BVI, and what do they need to be aware of?

Julien Johnson: As the world’s leading domicile for offshore companies, the BVI has established a BVI Business Company that is the core of many businesses globally.

The success of the BVI Business Company has really been the foundation of the financial services industry in the BVI. Over a million companies incorporated to date – half of which are active.

The BVI has developed a very efficient company registry. So the process of establishing a business company in the BVI is fairly easy, once the proper due diligence is performed, and customs and things have been satisfied.

The actual set-up of a business company is done through a local registered agent; a list of those are available at bvifs.vg. And the agent is responsible for setting up the company and administering it, as well as ensuring that the business behind the company is one that is legitimate, and will not bring disrepute to the industry.

Royal Forex: You have to be totally transparent with your clients

Posted on by World Finance

The current volatility and fluctuation in global currencies have boosted the popularity of investing in the foreign exchange market. Ghassan Elias Kteily, AGM/Chief Growth Officer for Royal Forex Trading, discusses the opportunities for traders, and the challenges for brokers – as well as the likely trends that will emerge as Chinese growth slows.

World Finance: The current volatility and fluctuation in global currencies have boosted the popularity of investing in the foreign exchange market. 

With me to speak about how best to navigate this industry is Ghassan Elias Kteily, AGM/Chief Growth Officer for ROYAL Forex Trading.

Well Ghassan, the forex market. Tell me about the opportunities and indeed the challenges that represents?

Ghassan Elias Kteily:  The abundance, if you like, or the approachability of the foreign exchange market makes it easy to trade. And a factor that really adds to that and enhances trading, is the low margin – that’s the leverage. The low margin, which is as low as one percent, and sometimes a quarter of a percent or half of a percent, enables you to trade 200 times your money.

It gives the opportunity to speculators to trade with very little money, big amounts and volume of foreign exchange. However, it increases the risks and rewards – so this is an opportunity and it is a challenge at the same time.

Well ROYAL is a global financial trading brand and you offer your services through headquarters in both Beirut and Sydney but when it comes to trading and data security, how do you deal with different jurisdictions?

Ghassan Elias Kteily:  We chose to be fully regulated in both jurisdictions in Lebanon by the CMA, which is the Capital Markets Authority; and in Australia by ASIC, which is the Australian Securities and Investment Commission.

So when we talk about data security, we are talking about protection against cyber attacks. Companies like ROYAL through adhering to the requirements of the regulators – that is segregating the clients funds, putting in place proper risk management strategies, meeting with all the liquidity ratios – do guarantee that funds are secure, and that clients can worry about trading in the markets, not about their funds being secure or not with ROYAL and other companies.

World Finance: And those trading in the Middle Eastern markets differ from that of the west?

Ghassan Elias Kteily:  The Middle East’s investors are as sophisticated as they are in the rest of the world. However, eight countries in the GCC and in the Middle East have their currencies pegged to the dollar.

So for them, currencies are pegged, and there isn’t much uncertainty over there. People tend to trade commodities instead: oil, gold, silver and so on and so forth.

Trading commodities is more risky than trading currencies. And Middle Eastern investors work on a tactical, not a strategic basis. And that’s what makes their trading more short-term and abrupt: so, quick trade will come out. While with the European investor, you’ll find that they will take a strategic position, like with equities, and leave it for a longer-term.

World Finance: And when it comes to regulation, how stringent is your industry?

Ghassan Elias Kteily:  Very stringent. Regulators have opted for stipulating and dictating more rigid parameters and benchmarks that will regulate the industry. And accordingly, they have imposed higher margins, more capital requirements, higher ratio requirements, to ensure that companies stay on the safe side. Consequently, the investors, the clients, and their moneys are safer.

World Finance: Transparency is of course a huge issue, how do you approach this?

Ghassan Elias Kteily: Transparency relates to many aspects. There is trading transparency: that is, what you demonstrate on your website. You have to advertise and promote what you really do offer – you have to be totally transparent with clients regarding spreads, fees, commissions, the depth of the liquidity you have. And in volatile markets clients will be concerned very much about having their orders executed.

And this what you should be transparent about. Basically, advertising honestly and transparently how much you can help the client transact his transaction and his business through you as a company.

World Finance: Now finally, we have seen the Chinese stock market having quite an impact on markets worldwide, so what other trends do you foresee impacting your industry over the coming months?

Ghassan Elias Kteily: What I foresee is that moving forward for the next 18-24 months, emerging markets and developing countries that are the major partners to China, like Brazil and other Latin American countries and some east European countries, which basically export steel and copper and wood to China; as the Chinese economy slows down, they are bound to be affected.

Their currencies are going to be affected because if you export less, to the second largest economy in the world, that means you are earning less foreign currency.

Likewise, it will affect their capital markets because their borrowing power will be less, you have to borrow at a higher rate and that means spending more, and that means, your capital market locally will be affected adversely as well.

Hong Kong insurance finds growth in China’s developing middle class

Posted on by World Finance

The Hong Kong insurance industry is operating in one of the world’s most challenging yet promising environments. Candy Yuen, CEO of HSBC’s insurance and pensions business in Hong Kong explains where the company is investing, how HSBC is growing its market share, and the four big themes that will affect the Hong Kong insurance sector over the next year.

World Finance: The Hong Kong insurance industry is operating one of the most challenging yet promising environments: with regulatory change, rapidly changing customer expectations, and subdued investment markets all influencing strategy. 

With me know is Candy Yuen from HSBC insurance Hong Kong to discuss. 

World Finance: Well Candy maybe you can start by telling me how has the insurance industry in Hong Kong developed over the past years?

Candy Yuen: Well, the insurance industry in Hong Kong has enjoyed good growth momentum over the past few years; we have been having double digit growth consistently for the past decade or so, especially on the life side.

For example, we just published the first half results and the new business premium grew by 25 percent and the long-term inflow premium grew by 15 percent, so it’s a growing industry.

As for HSBC, we are also enjoying the growth: we’ve been on the top of the market consistently. For example ever since the mandatory provident fund has been launched in 2000, we’ve been the number one in market share and we are also consistently in the top three on the life-side.

World Finance: And with changing customer expectations, how has this impacted products and services?

Candy Yuen: Before I answer your question maybe I’ll share with you the purpose of the HSBC, because I think that will help you to better understand how customer expectations impact our products and services.

The purpose of HSBC is to connect people to opportunities, enable businesses to thrive, economies to prosper, and help our people to achieve their ambitions and goals.

So we place everything about the customers’ needs in the centre of what we do. For example, we spend a lot of investment on doing customer research, understanding the customers’ priorities and preferences.

These kinds of studies give us great insight into what customers care about most, to create the products that actually meet the needs of the customers very well. And they’re very well received and have become our flagship products.

World Finance: How do you adapt your services to clients’ needs?

Candy Yuen: Well, we put the clients’ needs at the centre of everything we do. By asking questions, understanding the individuals’ financial circumstances, before we actually recommend the products for them and what is the required coverage for them. So this is all need-based.

And secondly, we provide our customers a lot of choices. So in this way, the customers can help to choose the way they prefer to interact and do business with us.

We invest a lot in our digital technology and infrastructure, again making it easier, better, and faster to do business with us.

World Finance: What strategies will HSBC adopt to capture the growing trend of digital engagement with regard to insurance sales?

Candy Yuen: Same as in any other medium, customer experience is of utmost importance to the success of any products or services that we offer. So we want to understand our customers and their online behaviour, so that we can deliver the best products, and the most appropriate services and offerings through them.

And we also understand a growing proportion of our customers are appreciating the convenience of buying products online, so we also keep adding new products that could be made available online. We also constantly update the look and feel of our website and mobile apps, so that it keeps improving, and the customers find it easier to navigate, and use our website and mobile apps.

World Finance: It is expected that there will be even closer economic collaboration and co-operation between Hong Kong and Mainland China, so how will this impact the life insurance market in Hong Kong?

Candy Yuen: Since CEPA became effective in 2004, more than 10 years ago now, there have been a number of liberalisation measures that have been introduced which benefit the insurance industry and provide good opportunities.

Earlier this year, our group has already announced that we have a lot of focus on Asia, China and the Pearl River Delta areas: heavily investing to help to capture the growth markets there, and also, to help the emerging affluence of the middle-class – to help them achieve their financial goals. And insurance definitely plays a critical role there.

World Finance: Finally, what trends do you foresee impacting the insurance industry in the coming 12 months?

Candy Yuen: Nowadays, you know, with the fluctuation and high volatility in the equity market, I believe insurance will become increasingly important, as a long-term investment vehicle option. Because I think customers are looking for longer term, more stable returns, and possibly even with some level of guarantee.

And secondly, I think well – even though there is recently a fluctuation in the renminbi currency – I believe, you know, over the medium long-term, I thing renminbi is still increasing demand, so I think policies with renminbi denomination will also be gaining popularity.

Third is regulatory changes. You know, especially in Hong Kong, we will be having an independent insurance authority. Worldwide, the trend on the financial side is, we are moving towards market consistence, economic capital framework, we are also having increasing regulatory requirements on managing counter-risk.

Fourthly, and you know, digital, technological, breakthrough, I think that can be easily be a game changer. And in fact the competition, you know, is becoming very blurred. So I believe it would not be surprising if there will be new players, you know, joining us; with some interesting innovations.

In general, we are take it as positively because, you know, even though that could pose potential challenges but that definitely pose new opportunities for us to better serve our clients.

World Finance: Candy, thank you.

Candy Yuen: My pleasure, thank you Jenny.

Viriyah: Technology is changing the face of Thai insurance

Posted on by World Finance

The Thai insurance sector is growing from strength to strength, especially in the non-life sector. But a 33 percent drop in car sales in 2014 dramatically affected the motor insurance industry. Natdhanai Mankosol and Arthapas Cheuasangpun from Viriyah Insurance discuss the technological innovations that are helping Viriyah offer better services to their insurance customers.

World Finance: The Thai insurance sector is growing from strength to strength: especially in the non-life sector.

With me now is Natdhanai Mankosol and Arthapas Cheuasangpun from Viriyah Insurance one of the leading providers in the area to talk about how the sector is evolving.

Well Natdhanai if I might start with you let’s look at the economic and indeed the political situation at present in the country – how is that faring?

Natdhanai Mankosol: The political and economic situation in the past was not really that good. We got a new government, and the new government is trying to build a new system and economy; it’s trying to get rid of a lot of corruption and a lot of other problems.

The government is trying to create more new giant projects and invest money to help the economy grow more. There are a lot of projects going on. We are all – in Thailand – happy with our new government; we are getting better and we can see the light at the end of the tunnel.

World Finance: And Arthapas does this translate into a favourable environment for the non-life insurance sector?

Arthapas Cheuasangpun: Well, as predicted it will take a couple of years for the economy to fully recover. During that time the consumer market will decrease as households are spending less and saving more.

The automobile industry has also been affected by this – as you can see from the 33 percent drop in car sales last year. With 50 percent of non-life insurance premiums coming from this sector, it has caused a dramatic effect for the industry.

World Finance: This is a heavily competitive sector, how do you approach this?

Arthapas Cheuasangpun: We have 140 branches and claim service centres nationwide, operating 24/7, providing impeccable services for our customers.

We have the largest customer-base in Thailand, making us the leading Thai non-life insurer for the past few decades.

We are recognised as a trusted household name, and we pride ourselves in the satisfaction of our customers, especially now for our claim services.

Fairness is our policy, so we treat our customers fairly and honestly. We have further plans to enhance our services by incorporating new technology and innovation to maintain existing policyholders and to reach out for potential customers.

World Finance: Of course technology and innovation are changing the face of the insurance sector – so how do you see this developing? And how are you adapting alongside it?

Arthapas Cheuasangpun: Because we are embracing new technologies and innovation to increase the function and speed of our services, we’ve introduced three different projects this year.

The first – Viriyah Smart Claim, we call it VSC – which targets the convenient use of our customer. It provides a precise location of an accident for our nearest claim inspector to reach the scene within 20 minutes. This also provides us with valuable statistical information of frequent accidents, so we can have our staff stationed nearby for an even faster service.

The second, we call it Live Video Conference. This allows our claims staff to monitor repairs at different stages. With further development to allow our customer to monitor their vehicle personally.

Last is Fast Track Repair: this project is to ensure that all minor damages get repaired within 24 hours. With this technology and innovations that we’ve introduced, we are confident that we are adapting to the modern market.

World Finance: And finally Natdhanai, how do you see the insurance sector in the region developing in terms of needs and coverage; and how do you set to capitalise on this?

Natdhanai Mankosol: The AEC [ASEAN Economic Community] is coming really fast, it’s arriving early next year and we are going to see a lot of people travelling around the region, We’ve got to have our alliance in our neighbour countries, with their insurers.

We’re going to see many people travelling around and we can see it opens more opportunities for us to sell more travel insurance, or cargo, or what we call carrier liability insurance for both businesses and for people travelling around, especially in the future.

World Finance: Natdhanai and Arthapas, thank you.

Arthapas Cheuasangpun: Thank you.

Natdhanai Mankosol: Thank you very much.

Ivory Coast back in business with $1bn eurobond

Posted on by World Finance

Côte d’Ivoire’s latest foray into the bond market ushered in a period of stability in 2014. Nialé Kaba, Minister to the Prime Minister for the Economy and Finance, discusses the changes in the Ivory Coast since its 2011 bond default, and the infrastructure improvements the new bond will deliver.

World Finance: Côte d’Ivoire’s latest foray into the bond market ushered in a period of stability last year. Here to share insight into this year’s issuance and its contribution to macroeconomic growth, Minister Nialé Kaba.

So of course your country has made deep structural reforms since the issuance of this last bond, right? So tell me about some of those, particularly in the energy sector.

Minister Kaba: In 2015, our energy production capacity was, 2000 megawatts a year, which we aim to increase to 4,000 megawatts a year. This will allow us to move from a coverage rate of 54 percent to approximately 95 percent in 2020 and the Eurobonds have allowed us to pursue the following important investments: the supply of a capacity of 110 megawatts for the CIPREL thermal power plant, continuing investments in the hydroelectric power station of Soubré, with a capacity of 275 megawatts, and we also have plans to produce a thermal power plant in the city of Grand-Bassam, which is a few dozen kilometres from Abidjan and which will have a capacity of 220 megawatts. Construction is scheduled to start in 2016.

World Finance: So what other structural reforms were you able to get off the ground since this bond issuance?

Minister Kaba: All sectors of our economy were covered by the reforms, and I would like to talk in particular about the reforms in the public finances sector, which consisted in stabilising the macroeconomic business climate through the correct management of public finances, by promoting transparency, by the speed with which the administrative procedures are applied, by improving the conditions under which public contracts are awarded.

We also did a great deal of work on the business climate; and in 2014 and 2015 the International Finance Corporation put us among the top 10 reforming countries in the world. We are continuing to improve our ranking and hope that eventually, in the not too distant future, we will be one of the top 50 countries for Doing Business.

World Finance: The re-payment schedule, of course, was staggered for this bond and its yield was hovering around the six percent mark – tell me how were you able to attract foreign interest given that, of course, your yield was lower than comparable equivalent securities, Zambia and Nigeria for instance.

Minister Kaba: Over the last three years, Côte d’Ivoire has had an average growth rate of nine percent, which is one of the best given the current international environment. Côte d’Ivoire has carried out a great number of reforms, as we have just explained, reforms to set our house in order, reforms also to allow investments to be carried out in the various sectors which drive our economy. In particular, we are currently living in an environment which has returned to normality on the social level and in an environment which offers excellent prospects.

It’s true that we went to the market for relatively large amounts, but all of these investments were carried out in a framework which was fully under control, as we make sure, in the framework we have with the International Monetary Fund, that the sustainability of our debt in particular is respected but also monitored, and that we keep an eye on our economy’s capacity to honour its commitments.

It has to be said that when we were doing the roadshow, many fund managers and many investors told us that the President of the Republic, who used to be Vice-President of the International Monetary Fund, Deputy Managing Director of the International Monetary Fund, reassured them as to his governance. I believe that it is all of these elements together that have allowed the international financial community to have confidence in us; and we intend to work to maintain and increase that level of trust.

World Finance: Of course your country has gone through a period of political stability since the last two bonds have been issued, but that wasn’t the case in 2011. So tell me what is different about the financial market today?

Minister Kaba: You need to understand that in 2011, the year you referred to, we were coming out of a deep post-electoral crisis. Fortunately, all of that was brought under control very quickly, allowing Côte d’Ivoire to resume its process of reconstruction and of growth. And in 2012, 2013 and up to the present day in 2015, we had years when we were able to build our return to peace, our return to social cohesion. And today, we are working towards peaceful and inclusive elections.

World Finance: Now in the years to come, tell me, how are you going to keep productivity at pace with growing debt?

Minister Kaba: The question of the debt is an interesting one, not only for the financiers but also for Côte d’Ivoire itself. We have ambitions to increase the national wealth and reduce the level of poverty, and eventually eradicate it from the country altogether.

We have to bear in mind, with regards to the debt, that we are already under a programme with the International Monetary Fund and the debts we have contracted are carried out in the framework of that programme. They are the subjects of a sustainability analysis, and whenever we come out, we have the authorisation, so to speak, of our partner, which analyses and looks at the potential of our economy with us.

Lastly, in the framework of the viability analysis of our debt, we forecast the creation of national wealth, which will itself generate resources to allow us to honour our commitments, and at the moment, the sustainability of the debt is certain. The share of the private sector in national investment is growing faster than that of the state; and we feel, we hope, that that will be the case more and more with the efforts we are undertaking with regards to Doing Business.

World Finance: Minister Kaba, thank you.

Minister Kaba: Merci Madame.

 

BankServe’s top tips for navigating marine insurance policies

Posted on by World Finance

Peter Mellet, Managing Director of BankServe Insurance Services, explains how to navigate through the paperwork of mortgagee’s interest insurance and innocent owners insurance, and gives his top tips for potential buyers.

World Finance: Insurance can be complicated and getting the right one to fit your company is paramount, especially when it comes to niche industries such as marine, oil and gas.

With me now is Peter Mellet from Bankserve Insurance Services the market leader in a number of insurance markets, to explain how to navigate through the paperwork and various services.

Well Peter I want to start with mortgagee’s interest insurance and innocent owners insurance. What exactly are these?

Peter Mellet: What they are, are contingent covers to protect lenders and investors in the event that owners’ policies don’t pay. When a loan starts, during the life of that loan the owner would buy insurance for hull and war liabilities.

Now sometimes those policies don’t respond and the mortgagee’s interest covers and the innocent owners policies are a second line of defence. And they will step in when the underwriter of the owners policies say: ‘No, we are not going to pay, and we don’t think we have a liability.’ That’s what they do.

World Finance: And are there claims?

Peter Mellet: Yeah, there a lot – people don’t think they are. With any insurance it’s a piece of paper until you make a claim. Maybe it will help you sleep better at nights, but you’ve got to make sure it works. They aren’t as many claims on mortgagee’s interest insurance or innocent owners as there is another forms of cover.

Marine policies get claims all the time. But we have done 80 claims in the last 15 years. Now it doesn’t sound a lot, but that is. And we collected nearly all of the claims in the market during that period of time. Aggregate total is about $160m and we just collected the biggest one ever at just over $64m.

World Finance: What are the differences between the policy forms?

Peter Mellet: I think the differences in the policy forms you can buy are some of the most extreme in the market. Marine policies are fairly concentrated in the middle. But mortgagee’s interest insurance particularly varies. There are two ends of the spectrum: there is a market wording, which is written by underwriters for underwriters. And at the other end of the spectrum, we’ve got a very user-friendly form, which is as wide as we can get it, and also very user-friendly for the borrowers. So it helps everyone during the process.

And it is important to remember that. You are going out, you are not just buying a product from a shelf. You are not buying some hull insurance or war insurance or liability cover. You are buying a product, which has got varieties of form available. And it is important to buy the right one.

World Finance: And policy wording, how has that evolved during the years?

Peter Mellet: It has evolved through claims. I think insurance is a product which does evolve through the claims process. It’s only when you have claims and someone looking at the liability end, lawyers looking at policy wordings and asking themselves: well, does this work? What these words say? What does this do? Is this what we intended the policy to cover? And by people examining those issues you get to a position where suddenly you says: ‘Right, well maybe this is a problem now.’ And you settle and you compromise but next time you look at the wording and you change it to make sure that problem doesn’t come up again. And that is the way it evolves through the claims process.

And mortgagee’s interest insurance hasn’t evolved as quickly because there haven’t been a lot of claims. I said 80. That isn’t many compared to other types of cover. But at the same time, each claim we’ve learned from, and changed the wording to make it more user-friendly the next time.

World Finance: Why should financiers and investors use their own broker to arrange cover rather than let the owner buy it for them?

Peter Mellet: Privity, basically. If they use the owner or the owner’s broker, they will be fixed with the knowledge that the owner or the broker has. And the whole idea of these policies is to protect an innocent mortgagee or investor.

Now they go and buy their own cover, the have to disclose things to underwriters and the covers will work provided they are not aware of the problem which is invalidating the owner’s policy.

Now the owner will know what he is doing wrong – his broker will have information about the owner. Now if the bank doesn’t have that and they place their own cover – they are clean – their policy is untainted. If they use the owner, then they have problems. And I think if they use the owner or the owner’s broker the policy is devalued in its effectiveness by more than 50 percent.

World Finance: Well finally, are there things that people should look out for when they are buying mortgagee’s interest insurance or innocent owners insurance cover?

Peter Mellet: The main thing, one of the main words, is disclosure. You’ve got to tell people the right things; you’ve got to disclose to underwriters any information you have.

Now I know that sounds simple but I think in mortgagee’s interest insurance, it becomes more complicated. And, as soon as you have a claim, the first thing that happens is the underwriters will instruct a lawyer. He will ask for the loan repayment history. If underwriters haven’t been told that maybe the loan is in default; the owner’s missed payments: they will scream non-disclosure.

They’ll say we should have hard worn liability been told this, this is information we should have been provided. And non-disclosure is one of the hardest defences to overcome, to marine claims; it is a very subjective issue.

What would have influenced an underwriter’s decision-making process and that is something which immediately put you into compromise territory. So I think disclosure – and then I think; look at the policy forms. And going back to one of your previous questions, to look at who’s doing it.

Make sure the bank is buying their own cover. The owner buys his cover, the bank should buy theirs; and if you keep the two separate, then you should give yourself the best chance of making policies work when you need them.

World Finance: Peter, thank you.

Peter Mellet: A pleasure.