Emerging market countries represent huge, untapped opportunities for insurers. But carriers that are not properly staffed with people who understand the cultures, histories and markets of these nations will not succeed in their efforts to expand.
So said former AIG CEO Maurice "Hank" Greenberg during the keynote presentation of the 23rd annual Executive Conference, an event hosted by Ernst & Young and Summit Business Media at the Crowne Plaza Times Square hotel in New York City on Dec. 6. Now Chairman and CEO of Starr Insurance Holdings, Greenberg explored ways in which life and P&C insurers can capitalize on emerging insurance markets.
"To succeed, insurers have to have people on staff who understand these emerging markets and capital to spare to fund a potentially long adjustment time," Greenberg said. "And you have to understand the risks involved. It takes more courage to enter an emerging market than a fully developed and regulated one."
One issue, he noted, is variability of the risks to be insured. Example: the risk of insuring business executives or commercial property in politically unstable countries, where the pricing of such risks will be different than in mature and less volatile countries.
Another issue is differences in regulations. Growing countries in Latin America, he said, offer insurers significant opportunities for overseas expansion. But adapting to the wide differences in rules and legislation governing carriers and producers can be a big challenge.
Greenberg noted, too, that globalization offers not only market opportunities for U.S.-based insurers, but also those based overseas. Case-in-point: Chinese-based carriers, which now are among the companies (in terms of market capitalization) in Asia.
"[Chinese insurers] entering the U.S. market may not do so under their own name, but rather by acquiring a domestic insurer, making it a U.S. subsidiary. I would not find it unusual to see a large Chinese company buy a U.S. insurer."
Turning to prospects for greater federal regulation of the insurance industry, Greenberg said he doesn't expect this to happen in the near-term. He said attempts to do so would meet with "howls" of protest by state regulators, so greater federal oversight is not an immediate threat.
As to prospects for resolving the fiscal cliff—the combination of automatic tax increases and spending cuts that are due to go into effect at year-end—Greenberg said he was confident the crisis will be averted.
"There's a real desire on both sides of the aisle to finding a solution to our fiscal problems," Greenberg said. "I'm confident the administration and Congress can come to an agreement."
When asked during the question-and-answer session the secret to his continuing good health Greenberg, who turned 87 last May, credited his discipline and healthy lifestyle.
"I have a healthy diet and work out regularly, Greenberg said. "And I'm a disciplined person—a character trait that dates from time in the military. I'm also very focused on, and enjoy, what I do."