Sompo Japan to Open Reinsurance Unit in Kuala Lumpur

Sompo Japan Insurance Inc. plans to establish a new reinsurance unit in Malaysia with an eye on business from Southeast Asia and the Middle East markets.

The new reinsurance unit will operate as a branch of Hong Kong-based Sompo Japan Re, a wholly owned subsidiary of Sompo Japan. The Kuala Lumpur branch will be Sompo Japan's second reinsurance operation outside Japan.

The new operation is expected to receive a license from the Labuan Financial Services Authority soon and it aims to start operations in October, said a spokesperson of Sompo Japan.

"We've decided to set up Sompo Japan Re's new branch in Kuala Lumpur to develop the Southeast Asia, which is considered to have a great deal of potential," said the spokesperson. The new reinsurance unit will offer property, engineering, casualty and marine cargo treaty and facultative reinsurance.

In the first financial year of operation, the new unit aims to generate about 500 million yen (US$5.7 million) in reinsurance premium for Malaysian business only.

The business target for the 2012 fiscal year is expected to increase to about 4 billion yen in reinsurance premiums for Southeast Asia and the Middle East business, according to Sompo Japan, a subsidiary of NKSJ Holdings Inc.

Overseas insurance business is "a core profit driver" following domestic nonlife and life business for the group, according to NKSJ, a holding company formed for the merger of Sompo Japan and Nipponkoa Insurance Co. Ltd.

"We will accelerate mergers and acquisitions overseas, and assume investing as much as 200 billion yen for three years ending the 2012 fiscal year," said NKSJ in a statement. The merger and acquisition targets mainly focus on sectors "which can realize synergies with our business, especially property and casualty insurance, mainly in growing emerging countries."

The insurance group aims to increase its adjusted consolidated profit to 160 billion yen in the 2014 fiscal year, from 89.9 billion yen in the 2009 fiscal year.

In the 2014 fiscal year, overseas insurance is targeted to generate 16 billion yen in profit, accounting for 10% of total consolidated profit. Domestic nonlife and life insurance are expected to bring 90 billion yen and 50 billion yen in consolidated profit, respectively, in the 2014 fiscal year.

Sompo Japan started reinsurance business in Hong Kong in 1989, offering property, engineering, casualty and marine cargo coverage. Sompo Japan Re, an underwriting agent based in Hong Kong, has expanded its reinsurance business, with most of its customers in China, South Korea and Taiwan.

In the 2009 fiscal year ended March 31, 2010, Sompo Japan reported net written premiums of 1.29 trillion yen for nonlife business, down 1.3% from the previous year. The company's net income amounted 39.3 billion yen, up from a loss of 66.7 billion yen a year earlier.

Sompo Japan Insurance Inc. currently has a Best's Financial Strength Rating of A+ (Superior).

(By Iris Lai, Hong Kong bureau manager: [email protected])