Chinese insurer seeks bridge with UK

Company has ambitious plans to double its revenue again in the next five years, and to increase its financial rating

China Taiping Insurance is fast expanding its UK business with a vision to unleash big market potential by bridging the UK's leading insurance expertise with China's fast-growing opportunities in the industry.

Despite having over three decades of history in the UK, the company's growth in the country really took off in recent years, with revenue doubling between 2012 and 2015.

Geng Jinhai, chief executive of China Taiping Insurance (UK), says his team has ambitious plans to double UK revenue again over the next five years, and to increase its rating to A from its current BBB rating.

"Our UK expansion optimistically sits against the background of Chinese companies' international expansion and exciting new developments of China's Belt and Road strategy," says Geng, sitting in his spacious office at the heart of the City of London, the capital's main financial district.

The new office was purchased by Taiping in 2012, at a time when Geng thought the firm should significantly boost its image and build visibility in the UK's mainstream insurance market.

Around the same time, Geng also placed an emphasis on internal processes, documentation and risk controls, to ensure the company's long-term sustainability. The measures paved the way for Taiping's compliance with Solvency II, a law that sets strict standards for insurance industry documentation and procedures, which came into force this year.

"In order to take on an increasing amount of insurance business, we need to have very solid foundation and great internal control processes," Geng says.

Perhaps one reason Geng emphasized internal control so seriously is that the group suffered a big underwriting loss as a result of the 2008 financial crisis. In addition to the general downturn faced by the insurance industry at the time, Taiping suffered particularly severely because of its miscalculation of risks relating to professional indemnity claims.

Professional indemnity refers to coverage of risks raised by professional advisory and service providers if they give clients insufficient or wrong advice.

"In the wake of the financial crisis, we took a large underwriting loss. It was hard for us to make a profit, due to low insurance revenue and the lack of good opportunities to actually invest the insurance proceeds," he recalls, remembering a painful time.

Fortunately, Taiping learned its lesson, managed to recover the loss and grow its revenue significantly in recent years.

Today, Taiping has established partnerships with about 200 British insurance brokers, who recommend insurance business to Taiping.

Founded in Shanghai in 1929, Taiping is the oldest insurance company in Chinese history. In 1956, Taiping and a few other Chinese insurance companies merged to become the People's Insurance Company of China, as a part of China's process to nationalize its industry.

In 1998, when PICC was again split into four state-owned Chinese insurance companies, most of the overseas business became a part of Taiping. As a result, Taiping has built up lengthy and extensive international history and expertise. It located its new headquarters in Hong Kong.

Geng said the company has three key advantages in the UK: strong support from its headquarters, a unique selling point as the only Chinese state-owned insurance company with operations in the UK and its already extensive partnerships with UK and other Western insurance companies in London.

"We can work with other Chinese insurance companies to act as a bridge between China and the UK," Geng says.

"We've also established very good partnerships with UK insurance firms, to co-insure or reinsure business relating to Chinese firms that we already have a good relationship with, so that our collaboration is focusing on win-win partnerships."

Currently Chinese individuals and corporations constitute 30 percent of Taiping's revenue in Europe, meaning 70 percent of business is generated from local market activities.

Its insurance activities cover a wide range of industries including banking, telecom, aviation, energy and leisure.

As a Chinese firm in the UK's mature insurance market, Taiping's strategy is to strategically focus on niche market insurance sectors, Geng says. Currently it is a market leader in the UK's mobility scooter industry - which serves disabled people - and food catering .

It started insuring the catering industry initially with Chinese restaurants. As it gradually built up expertise, its client base grew. Now it provides cover to more than 16,000 restaurants, insuring them against risks such as fire, food poisoning and property damage.

The mobility scooter industry is another good example. Noticing that margins were thin in the car sector in general, Geng's team was inspired to tackle the scooter subsector. Margins are slightly better, but because clients in this sector are mostly disabled users, Taiping made sure it provides premium services to match customer expectations.

"We wanted to conquer this sector because we know service is particularly important for the disabled population. As a small and flexible team, we respond to customer needs very quickly and with minimal bureaucracy. So we made a name for our services," Geng says.

Currently 75 percent of Taiping's European businesses are in the UK, which is also its European headquarters. The group also has a smaller European branch in Holland.

Geng says that, despite Brexit uncertainties, his team is still optimistic about UK market growth.

"I still have great confidence in the strength of the London insurance market. In particular, London's time zone, language, legal structure and financial market strength are all very positive."

Looking into the future, Geng says Taiping will increase collaboration with Western insurance leaders to increasingly provide coinsurance or reinsurance in China. For example, it has just started a collaboration with the British insurer Aviva.

Taiping's Asian teams will provide insurance for Aviva's clients - British companies expanding into China and other Asian countries. These insurance deals, made by Taiping's Asian subsidiaries, can then be coinsured or reinsured by Taiping UK and Aviva.

"If this partnership structure goes well, we can expand it to other UK firms' partnerships as well," Geng says.

Another plan for Geng's team is to invest in other syndicates that work at Lloyds of London, the reinsurance market. Syndicates are members of Lloyd's and have the right to reinsure deals that enter the Lloyd's market.

By investing in these syndicates, Taiping can participate in reinsuring some of these activities, and enjoy revenue growth of the syndicates as financial investors.

Other strategies include adding new personalized insurance product offerings (aimed at retail clients), increasing the company's European foothold and looking for suitable acquisition targets.

In addition, it hopes to become a strategic bridge over which to carry UK insurance expertise to China, to help increase the insurance rate in China's public sector, such as government-led social projects and infrastructure deals.

Meanwhile, expansion is not all about revenue, because corporate social responsibility is just as important, Geng says. As a highly localized company in the UK with Chinese roots, Taiping sponsored the construction of a new arch in London's Chinatown last year.

It also jointly sponsored a concert to celebrate the 70th Anniversary of victory in the Chinese People's War Against Japanese Aggression and World War II, alongside Reignwood Group.

Geng says he is very optimistic about Taiping's future in the UK, and talks enthusiastically about the improvements he wants to make to prepare for the group's expansion:

"Over the long term, we want to improve our insurance portfolio quality, introducing innovative insurance products, improve IT technology support, improve regulatory compliance and risk management, and continuously think about how to reward employees for their hard work."

cecily.liu@mail.chinadailyuk.com