Zurich Insurance Group AG plans to expand in China and Saudi Arabia as the insurer seeks to capitalize on economic growth in the world’s second-biggest economy and largest oil exporter.
Switzerland’s biggest insurer plans to set up as many as five branches in China by 2016 after winning a license that allows it to apply for expansion beyond its presence in Beijing, Geoff Riddell, chairman of Asia-Pacific and the Middle East, said today in an interview at the World Economic Forum in Jordan. In Saudi Arabia, the firm has been in talks with the central bank on the best way to enter the market, he said.
The two countries were among the top three performing economies in the Group of 20 from 2008 to 2012, according to the International Monetary Fund. The possible expansion in China comes as authorities put more emphasis on the quality of economic growth and urbanization to boost domestic demand.
“The question is how fast will the authorities let us get extra licenses” in general insurance, said Riddell, who is based in Hong Kong. “Shanghai is our first priority.”
A recession in Europe and the sputtering economic recovery in the industrial countries is pushing more companies to focus on emerging markets. While growth in China is moderating, the economy may still expand 7.9 percent this year from 7.8 percent in 2012, according to the median estimate of 55 economists surveyed by Bloomberg. The U.S. economy, the world’s biggest, may grow 2 percent this year, according to the median estimate of 83 economists on Bloomberg.
Foreign insurance companies in China have less than 1 percent of the market share between them because of regulatory restrictions and the companies’ own “fear of growing too fast,” Riddell said.
In Saudi Arabia, the government is spending more than $500 billion to build homes, roads and airports in an attempt to create jobs and boost the economic output of the non-oil industries. The kingdom appointed Fahad al-Mubarak, a managing director at Morgan Stanley, as governor of the Saudi Arabian Monetary Agency, as the central bank is known, in December 2011 and also named a former World Bank executive to lead the Capital Markets Authority.
“Saudi Arabia is where we’d like to be doing more, the question is when is the right opportunity,” Riddell said. “There is clarity where Saudi Arabia is going as an economy, but with the changes in leadership at SAMA and CMA, we need better understanding of how the insurance market will be managed going forward.”
Zurich Insurance may also enter the Takaful business in Malaysia, he said, adding the company isn’t in talks on any acquisitions.