September 2014 Bermuda:Re/insurance+ILS 13


TMR did for the Tokio Marine Group from the outset. This has meant that TMR has become less and less reliant on its parent’s balance sheet, driving real value for the Tokio Marine Group by building on its international business. Hoshina said that TMR’s ambitions include further geographical expansion; the company already “has eyes on Asia”—with Singapore being a possible business hub—as well as Latin America.


The success of each new strategy that TMR has implemented has helped to foster a sense of confidence within the company. “When we first set TMR up, we asked ourselves, ‘Will we be able to compete with the major companies already in this space? Can we keep up?’” TMR has proved that it can go one better and has established a strong track record in the market, one that has enabled it to pursue growth, geographical and line diversification, as well as a number of strategic acquisitions.


An active acquirer


The Tokio Marine Group has been active in the M&A space, acquiring Kiln and Philadelphia Insurance Company in 2008 and Delphi Financial Group in 2012, in moves that have strengthened the capabilities of TMR and the wider group. Hoshina says that there tends to be two approaches when considering M&A: the first being to pursue strong companies and letting them continue operating much as they are; the second being to acquire distressed companies and turning them around.


“The common thread with all our acquisitions is that the management is strong, the companies are well-run and have great potential for growth.”


“Tokio Marine Group has consistently pursued the former approach,


building on the strengths of existing teams and businesses,” Hoshina said. “The common thread with all our acquisitions is that the management is strong, the companies are well-run and have great potential for growth. We put members of the board in place, but let the companies continue doing what they have been doing with success. When we acquire a strong company, we have no intention of changing the existing culture.”


This philosophy reflects TMR’s emphasis on the importance of human capital. As Hoshina explained, “When developing by line and geography and pursuing acquisitions, hiring the right people is key. We can build strategies, but what we need are the people to execute those plans, and that is difficult in any market.


“It is particularly difficult when you are a newcomer—as we were in Zurich, Sydney, and Stamford—but our reputation has enabled us to attract and retain the top individuals in the market, no matter where our offices might be located.” Its careful, considered method of hiring both internally and at acquired entities has resulted in one of the lowest staff turnovers in Bermuda, for example.


Third party capital


Complementing TMR’s geographic expansion has been its deepening involvement in the capital markets through Tokio Solution Management (TSM), allowing the company to further diversify its book of business and pursue innovative and creative products, resulting in knowledge transferred to the Tokio Marine Group and its clients.


Formed in 2012 in order to capitalise on and manage third party


capital entering the reinsurance industry, TSM was created as a “fusion of the capital and reinsurance markets” and has helped to drive an increasingly innovative approach to the convergence space. Already it has established itself as the leading fronting entity in the third party space and there are further ambitions for growth.


“Our intention is to utilise the capabilities of TSM even further,


collaborating more with hedge funds and asset managers to bring new products and capacity to the market.” Hoshina added that the market can expect more activity on its TSM and Shima Re platforms as the company continues to build out its already impressive third party capabilities.


Third party capacity will also help TMR realise its ambitions for


further growth. As Hoshina explained, capacity and line size will be among the leading measures of future success, and it is through TSM that the company intends to deliver larger line sizes on a gross basis. Additional capacity through the capital markets should also enable TMR to pursue two other key measures of growth: “customer- centricity” and the ability to offer multi-line structured products to clients, said Hoshina. So too will its growing international footprint and the increasing diversity of its underwriting.


Reflecting on developments in the wider industry, Hoshina describes the market as dynamic. He said that companies should not be complacently satisfied with their current position, but instead strive to pursue new opportunities and embrace change in order to move forward.


TMR’s geographical and line expansion and the development of TSM


reflect such a philosophy. Addressing the current tough cycle, Hoshina warned that the sector should “never lose sight of the underwriting— never go for the top line”, adding that if companies continue to emphasise analytics and put the right people in place, they can expect to outperform the market and move beyond expectations, much like TMR has done. 


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