Tough climate sees insurers facing further consolidation
The domestic insurance industry faces continued consolidation as a result of terrorist attacks, bad weather and the poor performance of the investment markets.
Andrew Duxbury, chief executive of the Hong Kong branch of Munich Reinsurance - the world's largest reinsurance company - said the environment for insurance firms was the toughest it had been in seven years.
He said insurers would need to respond to the challenges by keenly assessing risks and pricing to secure good returns, which in many cases would mean charging clients more.
'We are expecting to see prices continuing to rise in the coming years, while some insurers may decide to merge with others or cease operations due to the tough market situation,' Mr Duxbury said.
'We have about 200 insurance companies to serve a population of six million. The market is too crowded. It would not be a surprise to see more consolidation in Hong Kong [at a time] when the market situation is not good.'
He said the insurance industry had been suffering since the terrorist attacks in the United States in September last year.
The attacks have led to many insurance companies paying out huge sums in compensation. The latest global estimate for compensation pay-outs following the attacks is US$70 billion - ranking 'September 11' as the most expensive man-made catastrophe in history.