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REINSURANCE COMPANIES act as wholesalers within the insurance industry, dealing behind the scenes with primary insurance firms rather than directly with the general public.

Reinsurance companies will often take their job one step further by providing their clients with guidance concerning risk management  in primary insurance, and even helping in the design of new products.

Reinsurance Group of America  (RGA), a recognised leader in the global life reinsurance industry, did just that,  said Tony Cheng, chief executive officer  of RGA Reinsurance Company Hong Kong Branch.

The company, founded in 1973 and based in the United States, holds approximately US$1.8trillion in life insurance policies and has assets of US$16.6 billion. RGA has offices in 16 countries and has had a presence in Hong Kong for 11 years.

Protection-oriented products that replaced income upon death or other events had not been as popular in Asia as they were in the west, but Mr Cheng expected that to change with the maturing of the region's insurance market.

RGA accepted risks on insurance policies that were originally written by life insurance companies.

'We reinsure nearly anything that has to do with the human body, including medical, life and cancer insurance,' Mr Cheng explained.

'If a company doesn't want to take the chance that someone will die and they would have to pay out a large sum, say $10 million [in death benefits], they reinsure and sell us the risk.'

RGA does not engage in property or casualty reinsurance.

In the past, reinsurers tended to be passive players who relied on long-term business relationships, but Mr Cheng said his company  had adopted a more proactive approach, which had helped make it the second-largest life reinsurer in Asia.

'How do reinsurers compete to gain this automatic business? One way is by offering the most competitive price, or relying on the strongest history or credit rating. 'But in my mind the best way to encourage clients to give us more business is to say 'we will help you develop the products you currently do not have',' he said.

Reinsurers are remunerated for their  product development services with  reinsurance contracts, rather than consultation fees. Mr Cheng said RGA worked with its life insurance company clients by assessing both their needs and market demands  to create new insurance products. This could result in a brand-new product or the modification of an existing one.

Recent RGA-driven products  included whole-life medical policies with  a guaranteed premium rate, along with lifetime coverage and preferred life insurance products that offered discounts for policyholders who had above-average health or who had healthy lifestyles.

'When the Hong Kong government announced its desire to move the health burden from the public to the private sector, there was an opportunity for us to develop the whole-life medical product,' Mr Cheng said.

Preferred life insurance originated in the US, but RGA saw  a potential market  in Asia.

'Instead of just selling term insurance, this was a way to break up the pool of people so that preferred policyholders could get more competitive rates,' he said. 'As the Asian markets mature and as the Asian consumer becomes more discerning, this product will continue to take off.'

Other recent RGA products included high net worth universal life insurance and cancer insurance.

'The high net worth product was imported from the US and is targeted at the very wealthy. But many wealthy people are secretive about  their personal financial information. One of the keys to these products is to find creative means of obtaining the information we need in a way the consumer is comfortable with,'  Mr Cheng said.

RGA developed a cancer insurance policy with a client who found a coverage gap in certain existing policies.

'Many critical illness products have the cancer element in them, but they generally cover only late-stage cancer and serve a different need. Our client's product pays a portion of the benefit at an earlier stage of cancer, when it is most needed. This early payment funds treatment and will ultimately prevent some cancers from moving into the final and more terminal stages,' Mr Cheng said.



RGA takes a healthy chance with whole-life coverage