Steingold's return

This is an updated version of the original Insider Briefing, published on 18 September 2018.

The path to launching a balance sheet reinsurer rarely runs smoothly – especially when Chinese money is involved.

But if anyone is likely to get such a start-up off the ground, you’d be tempted to place a bet on Malcolm Steingold.

As reported yesterday, the former Aon Benfield Asia Pacific CEO has secured a commitment from a Chinese investor to launch a reinsurer – likely to be based in Singapore.

Chinese-backed launches are fraught with delays and regulatory hold-ups, which thwart many others’ attempt to launch their ventures.

Aon Benfield alumnus Steve Warwick spent two years trying to get his $500mn-balance sheet reinsurer Nine Merchants Re off the ground, but finally called it a day this summer.

And John Tan, the founding CEO of Singapore-based Asia Capital Re, has been forced to abandon plans to launch an ambitious Hong Kong-based reinsurer after hitting regulatory and financial hurdles.

But there are notable success stories. Fosun-backed Peak Re launched in 2012 after at least two years of planning. You could also look to PICC Re and China Taiping Re for examples.

Part of the problem for those who have struggled has been that putting Chinese money to work outside of the country is becoming increasingly difficult, as the Chinese government clamps down on outbound capital expenditures.

The Chinese regulator has also strengthened its oversight of newly formed (re)insurers in the latest example of stricter controls over the industry.

However, sources have suggested Steingold’s backers are using cash that is already being held outside of China, so this should be less of a hurdle for him.

In addition, if he is to set up in Singapore, Steingold’s positive reputation with the Monetary Authority of Singapore and the country’s top brass is likely to weigh in his favour.

In November last year, Steingold received a public service medal from the Singapore government in recognition of his service to the (re)insurance market – a highly prestigious award not often bestowed on outsiders.

One thought to finish on – market observers might ask whether the Asian market really needs another reinsurer?

There has been a continued inflow of capital and interest into the region since the 2011 Tohoku earthquakes and Thai floods, and the low-interest rate environment and the attractions of un-correlated risk of reinsurance have been persuasive arguments for investors who have flocked to an already over-capitalised marketplace.

Having said that, reinsurers can help address the acute problem of under-insurance by collaborating with primary insurance companies, not just from a capital standpoint, but also by offering customised solutions to provide disaster relief.

It’s too early to ascertain the full impact of the devastating Typhoon Mangkhut, which hit the Philippines as a Cat 5 and Hong Kong as a Cat 1 before barrelling into the highly populous Guangdong province in China.

But early suggestions that the region may still find itself under-reinsured suggest that – provided rates can be obtained at a technical level – there’s still scope for new reinsurers in that market.