Singapore lures West's insurance heavyweights
25 February 2008
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In September 2006 the prime minister of Singapore Lee Hsien Loong urged London's leading insurance figures to look east for investment opportunities. The insurance market has since responded with vigour and Lloyd's of London is thriving in the region.
It is a success that UK firms with insurance practices and offshore firms are keen to emulate. For years Bermuda has dominated the offshore insurance world, but Singapore is becoming increasingly attractive to those firms and businesses looking to emerging economies for growth.
Kennedys plans to open in Singapore in the second half of 2008 with two partners. "For a long time people took the view they could run Greater South East Asia and Indonesia from Hong Kong," says senior partner Nick Thomas. "But now it's much more important that any firm with a South East Asia presence is based in Singapore."
Thomas admits Lloyd's has been successful in the region, but says it is the international insurers that have driven the firm's move. "Quite a lot of our chums are operating from Singapore," he says. "To support them and get their international work we need to be out there." These include the world's largest insurer AIG, as well as ACE and Axa.
US insurers have suffered a bumpy ride of late, with the subprime crisis having a knock-on effect on bond insurers. Bond insurers guarantee municipal bonds and more complex structured bonds offered by banks. The insurers' loss exposure has prompted credit rating agencies to threaten downgrades and suddenly New York looks like a less safe place to do business.
Against this background, firms are seeing a wealth of capital flowing in from the east. Those firms wanting to safeguard balance sheets from an economic slowdown in the West have a footing in both jurisdictions.
"This big theme [of firms moving east] is reflective of the broader financial markets," says Mourant Du Feu & Jeune chief executive Stephen Ball. The offshore firm already has an office in New York, but is considering an expansion into Singapore. "US banks have had cash injections from the east and we're starting to see it in where offshore firms are going," says Ball.
Isle of Man firm Cains is opening in the region in July. Managing partner Andrew Corlett insists that it is necessary to service work coming from India and China.
Offshore firm Appleby also recognises that Singapore has "good business potential", according to managing partner Peter Bubenzer, who says his firm is "keeping a watchful eye" on the region from its Hong Kong base.
Kennedys will begin building its presence in Singapore by first developing a joint venture with a local firm. This cautious approach will be reflected in how long it will take the firm to have a fully fledged practice in the region. "We're taking it very slowly," Thomas admits.
For the past two years much has been made of the exodus of Lloyd's underwriters to Bermuda. The jurisdiction gave insurers a base from which to do business in the US. Since 2005 Bermuda has benefited from benign hurricane seasons that has driven down loss exposure. If there is a threat to Singapore's rise it will come from Bermuda.
Reynolds Porter Chamberlain, which has a significant London insurance practice, is sending a team to the island to research its viability as an offshore jurisdiction. Clyde & Co and Norton Rose have also expressed interest in the region (see page five).
As Singapore examines whether it should relax its regulatory framework firms already in the jurisdiction are beefing up their resources. Lovells doubled its office space at the end of 2007 ahead of launching a corporate offensive, for example.
When Singapore's prime minister visited London in 2006 his clear aim was to drum up foreign investment in the region. It may have had a trepid start, but the flow of firms going to Singapore is gaining momentum. Soon it could be a heavyweight in the offshore world.