EUROPE – Geographical expansion and integration in the major developing economies of the world is seen as fundamental by large European insurance companies, according to a survey by consultants Arthur Andersen.

Due to fragmentation of the insurance market and heavy regulation in the US, the European players have a strong advantage in developing internationally, the consultant says.

“ Geographical expansion can come through an alliance, joint venture or acquisition but while payback on acquisitions is a medium term issue, it is by far the most logical use of capital for today’s market,” he adds.
“ The greatest challenge insurers face is knowing how to use their capital to greatest effect. They have to demonstrate that capital is being well used to support sensible business growth. Leaving capital unutilised is not an option,” says Eamonn Rice, head of UK insurance practice at Arthur Andersen.

Chief executive officers and board members of 26 of the top 50 European insurers were interviewed for the survey, including life, non-life and reinsurance sectors. According to the consultants, many of them have plans for international growth favouring less-developed economies over Western Europe: expansion plans in Brazil, China and Poland are popular.

Extensions of product range and customer base are also favoured growth strategies, including additional insurance and related services as well as expanding into banking and asset management services.
Enlarging customer base by allying themselves with banks and other financial institutions is seen as the future to success by a number of insurers.

Says Rice: “ What matters to European insurers is reaching the customer in any way they can. The buying and selling of financial products is moving toward an open architecture where some companies may manufacture products and sell through a variety of their own and others’ channels, while others may simply distribute others’ products.”