The Lion City roars, but what now for the cubs? Simon Wilson looks at how the development of local talent and skills will be the lifeblood for future growth in the Asian insurance market.
The Asia region has recorded strong growth and impressive performance since 2003, performing better than the global economy.
Asia is a rapidly developing and dynamic business environment, which economists and business strategists predict will make a significant contribution towards fuelling the economic engine of the world in the 21st century.
However, with the world economy slowing and weaker import demands from some key trading partners – such as the US – countries such as Singapore will need to ensure they have the right talent and skills in place to maintain their development.
After coming through the financial crisis of the late 1990s and the Sudden Acute Respiratory Syndrome (SARS) scare that affected large parts of the region during 2002/2003, the majority of countries in the Asia region have experienced strong economic growth over the past five years.
In 2003, Asia as a whole (excluding Japan) achieved economic growth of 6.5% – significantly beating the global average gross domestic product growth rate of 4%. The Association of South East Asia Nations (ASEAN), recorded growth of 5%, which has grown to 5.7% in 2006.
Singapore at the helm
With a skilled workforce, an advanced and efficient infrastructure, a proactive regulator in the Monetary Authority of Singapore (MAS), and a strong strategic location in the region, Singapore – which has been home to the Lloyd’s Asia platform since 2000 – has achieved the fastest rate of growth of all the ASEAN nations.
It had an annual GDP growth rate of 7.5% in 2006. The only nation in the wider region with a faster growth rate during the past five years is China, which has had an average annual GDP growth rate of approximately 10%.
“Countries such as Singapore will need to ensure they have the right talent and skills in place to maintain their development
While some Asian economies are still developing, the competition between the economies has been one of the key drivers behind their recent growth.
The rise of international business in Asia and more sophisticated financial sectors developing in the region has fuelled demand for specialist insurance products, requiring more breadth, depth and expertise in the local insurance markets.
Over the past 18 months the number of syndicates operating on the Lloyd’s Asia platform rose from eight in 2005 to 13 in 2007, total premium income received almost doubled from $66.1m in 2006 to $126m in 2007, and local underwriters are seeing a variety business lines, such as specific energy risks, that would not have previously been written in London.
After the recent strong growth; however, comes the vital question of how to support continued economic development in the region and maintain the expansion of the insurance markets in countries such as Singapore. The most important factor in this process will be the ability of the local insurance markets to attract and retain the best and the brightest talent.
Financial institutions choosing to locate in South East Asia will undoubtedly require more directors’ and officers’ insurance, while new energy business, as a result of the region’s developing oil sector, will require a greater amount of specialist insurance for activities, such as offshore drilling and transport.
With more business lines being provided through the local markets in the region, it is essential that the talent, skills and resources to cover new risks is developed at the same time, otherwise further development could be jeopardised.
In many ways the challenges faced by the Asian markets are similar to those currently faced in the London market. These include a poor perception of insurance in the eyes of the graduate sector and the popularity of the banking sector.
“The focus should be on developing talent from within countries, rather than sending foreign talent from more established markets like London and the US to fill the skills gap
Bright, creative and innovative graduates will be the lifeblood for future growth in the insurance industry, and an area that needs to be focused on. Furthermore, the talent that we have already needs to be developed and retained so that they continue to develop the industry. This talent should be developed locally.
As the insurance markets in Asia develop, cultural and local knowledge becomes as essential as industry knowledge when understanding the full nature of the region’s risks. This means that the focus should be on developing talent from within countries, rather than sending foreign talent from more established markets like London and the United States to fill the skills gap.
Lloyd’s Asia is now directly responsible for the creation of more than 100 jobs in Singapore and takes seriously its responsibility to support and foster further development of the country’s insurance industry as well as developing local talent.
In order to improve the perception of the non-life insurance sector among high achieving Singapore graduates, the General Insurance Association (GIA), in conjunction with the MAS, has established a Steering Group of industry leaders.
This group has proposed an elite internship programme to provide graduates with a better understanding of the different areas of the industry including broking, underwriting and loss adjusting.
Lloyd’s will be hosting part of this Global Internship Programme in London and Singapore during 2008.
Through working with the Chartered Institute of Insurance and the Singapore Insurance Institute, the market is also encouraging all of its staff working on the Asia platform to undertake the Lloyd’s and London Market Introductory Test. This provides essential grounding for London market practitioners and promotes professional qualifications and development.
With such a dynamic pace of growth in Singapore, organisations need to be built for change, be dynamic and nimble, see change as the norm, and have people working in them who are entrepreneurial, collaborative and forward-looking. These people also need to be retained through constant challenges and development of their skills.
Simon Wilson is managing director of Lloyd’s Asia.
Talent crisis revisited
Speakers at the World Insurance Forum in Dubai in March highlighted the growing lack of talent in the insurance industry. This was a 'serious issue that needed to be resolved', they said.
"It worries me that we don't make our industry attractive enough," said Henry Keeling, COO of XL Capital.
Catlin CEO and deputy chairman Stephen Catlin agreed. "The great shame about the insurance industry is that it's actually quite fun," he said. "The lifestyle is a hell of a lot better than being an investment banker."
To really 'crack the nut' the industry has got to start attracting those individuals who opt for a career in investment banking and do not consider insurance, was Catlin's verdict.
Chilton thought this was aiming too high as 'Goldman [Sachs] pays them twice as much money because they can'. He recommended targeting the next level of graduates.
"We try and pick people who aren't sure where they want to go and then try to plant a love of reinsurance." He blamed the lack of investment in training and recruitment for the talent crisis.
"In the insurance industry we don't put any budget towards training. You reap what you sow," he said. "The moment you cut your training budget you cut your future."
For RenaissanceRe it is all about bringing in 'good thinkers' and then training them up, according to CEO Neill Currie. "I don't care what degree they've got," he said. "If you're energetic and smart we'll take you into 'RenRe University' and train you up."
This is also the Flagstone way, according to chairman Mark Byrne.
"If we have a high IQ and a high desire to achieve, we can take care of the rest." Byrne added that there is a correlation between those insurance centres where local people have good skill sets and those that 'truly succeed in the long run'.