The insurance-linked wealth management industry in Asia is in bullish mood as demand for its services is seen growing further via a network of private banks and other intermediaries.

The market for insurance-linked wealth management
services and products in the Asia-Pacific region is strong and likely to
continue expanding, driven by domestic clients and expats, life insurers say.

Products and services offered by firms such as Swiss
Life and Friends Provident International are already a recognised part of the
wealth management toolkit. As some wealth planning structures are pressured by
a more onerous regulatory environment, the tried and tested insurance model
carries a lot of appeal in jurisdictions such as Hong Kong.

For example, the APE – annual premium equivalent - of Hong Kong’s investment-linked market in 2012 stood at
HK$17.15 billion ($2.2 billion), compared to HK$15.097 billion in 2009, a significant
increase. (APE is a measure of earnings common to the insurance world.)

Over a year ago, the consultancy, Scorpio Partnership, said the
insurance-based wealth management market was missing untapped potential in emerging markets.
It estimated that less than 5 per cent of all wealth management
portfolios in emerging markets included an insurance component. If that
share rose to 15 per cent in five years, this would create a market of
almost $1.2 trillion. 

The potential for rapid growth rate excites James Tan, who is general,
manager, Asia, Middle East & Africa, of
Friends Life and he has held this position since June 2012. Based in Hong Kong,
he is responsible for overseeing Friends Provident International’s businesses
throughout Asia, Middle East and the Africa.
(FPI is part of Friends Life, in turn part of Resolution Group, a UK-based company.)

FPI provides life assurance and investment-linked products
in Asia, Middle East and UK
and other markets. Another business relevant here is Lombard International Assurance, the
Luxembourg-headquartered firm that is also part of the Friends Life Group.  

FPI, in Asia, caters to the
local, mass affluent and high net worth market and also provides services to
expats, primarily UK
expats and extends to expats within Asian region. The Lombard
business, meanwhile, is a wealth structuring business focused primarily on ultra
high net worth clients.

“The key motivation [for developing these businesses in
Asia] is the tremendous growth opportunities in Asia,”
Tan told this publication recently.

“The basic fundamentals in Asia
are very strong and we see it as a region of growth for the foreseeable future.
That is why our proposition and products are well positioned to capture
opportunities in Asia,” he said.

At
Swiss Life, meanwhile, the business has already established a broad footprint
for its services to high net worth clients in Indonesia, India, Malaysia
and Taiwan.
In Singapore,
for example, Swiss Life employs 30 people.

Swiss Life told this publication that the market for
what is called private placement life insurance – a bespoke product with a
strong wealth structuring focus - was introduced into Asia when Swiss
Life Singapore
was established five years ago. Swiss Life said that the PPLI “market is in a growth
phase and looks set to gain greater ground and significance as a wealth
planning tool going forward”.

Expats and domestics

At FPI, it caters to two client
segments: expats (mostly UK
nationals) and domestic affluent individuals in Singapore
and Hong Kong. The ratios of expats to
domestic clients will vary a lot from region to region. For instance, in the nine
months ended September 2012, the ratio of expatriate vs domestic affluent at FPI's business was 45 per cent to 55 per cent in Asia, and 92
per cent vs 8 per cent in the Middle East.
(This suggests the huge preponderance of non-domestic client business in the Middle East region.) 

“We
see a lot of clients interested in what we are offering, such investment-linked
funds and those offering protection. They like products to be portable, with
different options and available in different currencies,” said Tan.

Besides being registered in Hong Kong and Singapore, products that are registered there
for sale are also registered in the Isle of Man,
giving an added layer of protection.

The
global expat business has expanded by a compound annual growth rate of around
13 per cent between 2008 and 2012; domestic-related business growth has been flatter. 

Most
of the expat clients at FPI are UK nationals
but there are also Asian clients, such as from the Philippines or Malaysia who are interested. There
are some American clients, Tan he said. At present,
FPI is talking to regulators, such as the Monetary
Authority of Singapore,
about the implications
of handling Americans in light of the FATCA Act.

As far as the Lombard International Assurance business is concerned,
the firm is exploring the potential of expanding into Asia;
its wealth structuring business is well suited to a region of fast economic
growth. This firm works through a distribution
network of private banks and independent financial advisors to HNW individuals
across Europe and selected markets in Latin America and Asia.
The solutions on offer are typically based on single premium, whole of life,
unit-linked life assurance structures with limited levels of reinsured life
cover.

“We see potential to really support this business,” he
said.

“Regulators in Hong Kong and Singapore
are looking at how products are being sold from the customer protection
perspective, which we think is good news. Economic and market volatility can
hit an investment-linked marketplace and we think we are doing okay,” Tan said.

FPI operates as a
business-to-business model, working with brokers and advisors. With Lombard International Assurance, the main distribution channel is via private
banks.

The firm is marking 25 years of operating in Asia this year. “We are probably the oldest offshore
company in Asia. It is a business we try to
operate to the best of our ability. We are very much committed to Asia,” added Tan.