CEO hopes to make a splash in China's under-served specialty market.
November 26, 2024
(Re)in Summary
• Rare Earth Partners established a new office in Shanghai on 23 October – the first independent broker to set up in the country.
• The broker says there is growing demand for marine cargo and freight liability insurance.
• There may also be scope for the development of employment liability and personal accident products.
• The move into China followed the acquisition of a domestic broker, which provided the licence.
• China is trying to shift from reliance on overseas reinsurance to more onshore capacity.
• But there are economic headwinds, and the country is not fully out of the Covid-19 malaise.
Wei Wang, Chief Executive Officer of Rare Earth Insurance Partners, says that there is a huge and growing demand in China for marine cargo and freight liability insurance – two areas overlooked by other international brokers active in the country.
Rare Earth Partners is also exploring the possibility of developing employment liability and personal accident products for the Chinese market.
“We want to be that bridge between mainland China and the world that is outside mainland China.”
While other large brokers such as Aon and Marsh have already signed up to trade in the Shanghai International Reinsurance Exchange, which was officially launched last October, Wang says that these global giants are not adequately serving the niche areas that Rare Earth Partners wants to develop in the country.
“China has always been the main market for us. We want to be that bridge between mainland China and the world that is outside mainland China,” says Wang.
In August, the National Financial Regulatory Administration (NFRA) and the Shanghai Municipal Government issued new guidelines to support international (re)insurers and brokers in coming to the country.
Rare Earth Partners was set up in 2017 as a marine and specialty insurance intermediary headquartered in Hong Kong. The broker is a member of +8 Partners, an association of insurance businesses.
Rare Earth Partners officially opened its Shanghai office on 23 October, with Mark Gu as CEO and Wei Wang as Chairman.
This followed the firm’s acquisition of a domestic Chinese broker (Shanghai Chengji Insurance Broker) earlier in the year, which provided the licence that Rare Earth Partners is now able to use in the country.
By acquiring a domestic broker, Rare Earth Partners sidestepped the need to apply for a separate licence from the National Financial Regulatory Administration, which regulates China’s financial services sector. This could have delayed things, says Wang.
Opportunities abound
For nearly a decade, Rare Earth Partners has taken reinsurance business from the local market and pushed it out to international players.
With the establishment of the Shanghai office, Rare Earth Partners is now able to develop direct insurance products, which will attract more capacity from the local market and help support the broker’s international reinsurance business.
“We don’t have the resources to be what one might call a traditional broker in the country, but what we can do is use our expertise and knowledge of the international markets to design products for small or medium-sized brokers, who can then offer them to the local market,” says Wang.
“We have some clear advantages in the market: an excellent knowledge of these insurance lines, robust experience in the market, good relationships with insurance and reinsurance companies and a broad international perspective.”
The CEO says that there are huge opportunities in the market, especially in the specific areas that Rare Earth Partners is targeting, chiefly marine cargo and liability.
“We have some clear advantages in the market: an excellent knowledge of these insurance lines, robust experience in the market, good relationships with insurance and reinsurance companies and a broad international perspective,” says Wang.
Rare Earth Partner’s push into the mainland comes as the market shifts its focus from reliance on overseas reinsurance to building up more onshore capacity – a trend that the new Shanghai International Reinsurance Centre is part of.
Christie Lee, Head of Analytics for North East Asia at AM Best, recently said: “Over the past 24 months of hard market conditions we have observed a number of reinsurers scaling down their business appetite in China because some are not meeting the target profit margins.
Coupled with domestic primary companies looking to expand their top line, this has resulted in more domestic companies entering the competition field, including medium-sized companies that want to expand their portfolio to do some inward reinsurance.”
Economic headwinds
Not everything about China has been positive, though, and the domestic economy has struggled to recover from the dramatic measures taken during Covid-19.
“The insurance market in China has been developing with lightning speed over the past 10 years, and even in the recent difficult period – the last two to three years – we can still see growth in the insurance industry.“
“The Chinese engine for economic growth and development has had slow growth over the past two to three years, and the situation will probably last for the next couple of years,” says Wang.
But he puts this down to “simply a matter of timing”.
He adds: “The insurance market in China has been developing with lightning speed over the past 10 years, and even in the recent difficult period – the last two to three years – we can still see growth in the insurance industry. Those volumes have not fallen.”
Into the economic mix enters Donald Trump, who assumes the presidency of the United States on January 20 following the election that took place on November 5.
“I don’t think this will make much of a difference to the Sino-US relationship,” says Wang. “There is a great deal of difference between the two countries, but there is also a great deal of room for co-operation within business and commerce. I’m a business, not a politician, and this is the way we should think about things.”
