Insurance-Linked Wealth Market In Asia-Pacific Seen On Strong Growth Flightpath

Tom Burroughes

17 July 2013

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 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.