Is Singapore an opportunity?

May 20, 2014

Clients have been asking us for benchmarks in other insurance hubs around the world.  At first glance this seemed to be a straightforward proposition however the clear message from our international clients was that ‘everywhere is different’ and each market needs to be considered on its own merits.  The other striking aspect of our discussions was the dominant discourse around the London trading model and a recognition by some that while this model works very well here, it is not likely to be transferable.  With all this variation clients still stressed the importance of having like-for-like performance comparisons. 

So quite a challenge.

The first market on our list was Singapore. We chose Singapore because it has set itself up as being the insurance hub for (South east) Asia and therefore represents competition for London. Singapore was also interesting because (like London) it is a relatively known quantity: open and competitive, well regulated and offering a favourable business environment for insurers setting up in Asia.  Also, through the London lens the Singapore ‘opportunity’ wasn’t at all clear:  some players like Catlin, had established significant operations on the ground while others were operating through coverholder arrangements. And some underwriters were dismissive of the market’s capability to grow successfully (although perhaps they meant ‘I can make more money in London’).  Against this was the notion that Asia represents a great growth opportunity. 

In the end we concluded that no amount of London based viewpoints was going to help; we needed to get down and dirty with Singapore itself.

To get an initial viewpoint we set up a market assessment programme:  this involved desk research, interviews with clients and market intelligence experts plus, critically, a reconnaissance visit to Singapore itself.  The visit in April involved interviews with a number of the key players (brokers, non Lloyd’s and Lloyd’s insurers and market institutions, including Lloyd’s Asia). 

On the ground we found that the Singapore Market is indeed very different to London, with its own personality and ways of doing business. Everyone accepts it is still relatively small, described by several as ‘fragmented’, but also constantly evolving, growing and with a palpable sense of opportunity. There was also a sense that with the pace of change that managing from London is increasingly not an option and the real competition is going to be between the businesses who have set up substantial operations in Singapore.  Global players (brokers and insurers) were all majorly committed to Singapore, Aon for example has established its Singapore Analytics and Innovation Center. By contrast, someLloyd’s players were still acting more like ‘traders’ just sticking a toe in the water rather than embracing the long-term opportunity. It was also recognised that backed by the efforts of the Monetary Authority of Singapore, Singapore is clearly defining itself and shaping its own unique identity as a powerful insurance hub for the region.

A point stressed by all is that this is still a young and developing market and that it is not enough just to focus on Singapore; the real opportunities lie in the region and adjoining countries.  Unlike London, the ‘passing-trade model’ doesn’t work and to be successful underwriters have to travel and spread the word to build commercially valuable relationships. So, understanding the geographical span and differences adds complexity and implies that success will require investing in local operations and high calibre client-focused talent.  It also suggests that as the market matures it will become increasingly less interested in the ‘flying visit’ from the London underwriter and more focused on what can be delivered locally.  There is also a view that claims operations will increasingly need to have local presence rather than being operated out of London, for example.

All agreed there is a crying need for more information in Singapore; “Most players are scrambling around looking for reliable data.” There is virtually no information on who does what, which commercial lines are growing and which players best regarded for what. This makes business planning and development challenging and often the businesses are basing planning on general country reports, not specific to insurance even. The few specialist studies that do exist have been used well beyond their sell-by date. Some insurers are conducting their own research projects but all were keen to see more development of independent information to back up their own research and help with business planning and strategy.

This first market review has been immensely revealing and highlights for us that the successful exploitation of these new markets will be hampered without high quality market intelligence; some are building their own capabilities and this gives these players distinct advantages over the competition.  From a Gracechurch perspective we have recognised and at least begun to understand some of the differences about the market and the implications for insurers developing successfully in the region. 

After being focused on London for 14 years this is the start of another exciting journey for Gracechurch and we have clear direction and strong starting-point for our development in the Singapore hub and South East Asia.

Finally, thank you to all who gave up their valuable time to help us with this work, especially QBE, Catlin, Lloyd’s, Kiln, Amlin, XL London, Aon Benfield, Lloyd’s Asia and Lloyd’s London among others.  As we develop this work we will report back both through our blog but also directly to the markets involved.