Increasing pressure from regulators and shifting trends among savers is likely to accelerate the changes sweeping the international life industry in 2016, according to leading executives.
Bob Pain, the chairman of the Association of International Life Offices (Ailo), believes the current market is undergoing a major polarisation. Reputational risk is causing the major life companies, such as Zurich, Generali and Aviva, to move away from unregulated or poorly regulated markets and focus more on the key centres of Dubai, Singapore and Hong Kong.
In turn, this is creating room for new players to come through in the likes of Northstar, Premier Trust and Beachwood. Hansard and Custodian Life are among those who have recently reported a sharp upsurge in business after the bigger life companies restructured their international operations. “Where the big companies are pulling out of the market, we are taking a lot of business,” says Tom Olander, a director of Custodian Life.
Philip Story, head of distribution for Investors Trust Assurance (ITA), a Cayman Islands-regulated insurer, says: “You hear of someone disappearing from the market place and overnight we get half a dozen phone calls asking us to come and provide solutions for their clients.
“The basics have not changed. Customers still need protection, they still need to save for their retirement and they still need to carry on protecting their loved ones."
“Our systems and the way we work means we are happy to be dealing all around the Middle East, Africa, India and eastern Europe. We are developing relationships with the brokerages and IFAs in those markets to provide them with solutions that some of the other guys are pulling back.”
Rule of thumb
At the heart of this pullback by the big insurers is the regulator, whether that is in the financial centre of the life company, which for many is the Isle of Man, or in the individual countries where they operate.
Across the world, the core principles, as promulgated by the International Association of Insurance Supervisors, are making it clear that insures must act within the existing regulations of individual countries, distribute via properly licensed intermediaries, be transparent as to fees and charges and treat customers fairly.
“Many insurers who have not done so before will seek licences in places that have not been traditional offshore sales strongholds, such as Japan,” says Andy Robinson, industry consultant and former Life Insurance Council chairman in Hong Kong.
“In countries where it is not possible or economically viable to get a licence, expatriates will be underserved by offshore companies,” he says. “However, there are still many choices. In Asia, the likes of AIA, Prudential and Manulife serve nearly all the markets well, especially if one is looking for true protection products in US dollars.
“They also tend to have agency force driven distributors, so IFAs will need to start building relationships with these providers.”
In terms of products and services, the changes sweeping the industry are no less significant, though the drivers are coming more from technology and the changing lifestyles of consumers.
“The pace of change has never been faster,” says Brendan Dolan, regional director, Middle East and Africa, for Old Mutual International. “We are now reaching a tipping point with many providers, which will see more flexibility in savings products, more direct sales through the use of technology and a greater link between client investment strategies and risk profiles.”
Dolan says the whole discipline of saving is changing. “Clients want to save when they have some surplus income; they want flexible plans and good value for money.”