Munich Re scaling back Hong Kong presence as part of regional revamp which sees expansions in Beijing, Singapore
Many of the reinsurer’s estimated 50 staff in the city ‘will be offered positions’ elsewhere, says spokesman
Munich Re, one of the world’s biggest reinsurance firms, is scaling back its Hong Kong office and expanding its Beijing operation, within a major regional restructure.
The revamp will also see Hong Kong losing out to long-term rival Singapore as the reinsurer plans to expand its office in the city state to play a bigger role in managing its Southeast Asia business.
The company will increase its staff in Singapore, where it already employs 200 people. Until now the Hong Kong and Singapore sites have shared regional responsibility.
The plan also includes an expansion in Tokyo and its offices in Shanghai and Kuala Lumpur closed altogether. The reorganisation will be completed by the end of next year.
Munich Re, which is 2.5 per cent owned by US billionaire investor Warren Buffett, explained in a statement it was “making changes to its strategic set-up in the region...to focus more closely on local markets, while creating a more flexible structure”.
“In future, Chinese clients will primarily be managed out of Beijing, while the Hong Kong presence will be greatly reduced and the Shanghai property-casualty office closed. The Taipei Liaison Office will remain,” it added.
The company said Asia will have double-digit growth in the following year, particularly China.
“According to the latest figures, in 2015 China pushed the United Kingdom from third place (behind the USA and Japan) in the ranking of the largest primary insurance markets.
“China is expected to become the world’s second-largest insurance market behind the USA by 2017,” the statement said.
A spokesman for the company in Hong Kong, where the firm is believed to employ around 50 staff, told South China Morning Post that it will maintain an office in the city.
“Munich Re is making a clear commitment to the greater China market by building up critical size and the full range of front-office services in Beijing,” she said.
“We will maintain a non-life presence in Hong Kong to service our local clients. This process will take some time and we have no figures at this stage on affected colleagues, many of whom will be offered positions in Beijing or Singapore. Our life operations and asset management in Hong Kong are not affected by the organisational change.”
Ludger Arnoldussen, a member of the Munich Re board of management with responsibility for Asia Pacific region, added the changes will “streamline our structures to be better placed to respond quickly and effectively to the challenges of these highly competitive markets”.
An industry source close to the Munich Re operations here said the change came as no great surprise as its Beijing business volume is much bigger than in Hong Kong.
According to the company’s latest annual report, the Germany company’s mainland China reinsurance premiums stood at 1.4 billion euro (HK$12.17 billion) last year, representing about 5 per cent of its global reinsurance business, which is the second largest market in Asia Pacific for Munich Re, after Australia. That was 17 per cent rise from 1.2 billion euros collected in the mainland in 2014.
In comparison, Munich Re in Hong Kong was the fourth largest reinsurance player with reinsurance premium income of HK$294 million in 2014, according to latest data available from the Office of Commissioner of Insurance of Hong Kong.
“Before China opened up its reinsurance business, many companies like Munich Re conducted business in mainland China from Hong Kong,” the source said.
“Now, much of its business is conducted directly in the mainland and the gap in business volume between the two has widened, leading the company to make what looks like a natural choice.”
Chan Kin-por, a lawmaker for Hong Kong’s insurance sector who is also an advisor at Munich Re, said the restructuring shows the Hong Kong government needs to do more to keep international reinsurers in the city.
“The government needs to cut compliances costs and make it easier for companies to operate in both Hong Kong and the mainland.
“Hong Kong still has a lot of advantages for international insurance companies to operate, but the business volume here will never be able to match the mainland,” Chan said.
Chan said Hong Kong still remains an attractive market for life insurance companies as many mainlanders like to buy their products here, as more investment choices exist, meaning it is unlikely other companies might be tempted to move to Beijing instead.