News agong, the Chinese rating agency, believes it can bust the status quo in the


rating agency world by offering a different approach to the incumbent agencies and also credibility to international companies targeting the increasingly attractive Chinese market. Dagong Europe, which is based in Milan


but has plans shortly to expand to another financial hub in Europe, awarded its first public rating to a European insurer earlier this year. The reasons for that rating being sought reveal the rating agency’s potential in Europe. Credit insurer Euler Hermes secured a long-


term credit rating of AA- from Dagong Europe in January this year. The company sought the rating partly because it wanted to do business with Huawei, a Chinese telecoms company seeking coverage on its receivables from its consumer business in Europe. According to Dagong Europe, the fact that


Euler Hermes had a rating from a Chinese rating agency was pivotal in its winning that business. “There are several reasons that insurers or


reinsurers would benefit from securing a rating from us,” said Linas Grigaliunas, director in the financial institutions analytical team at Dagong Europe. “The first is if they wish to target the Chinese insurance market itself.” He points out that a new solvency regime in China and an opening up of the market could mean greater opportunities for re/insurers to


WEDNESDAY 16.09.15


Chinese ratings agency offers new approach D


is rated by us. Some of the details also make a difference: we translate everything into Mandarin, for example, whereas some of the other rating agencies only make shorter versions available.” Dagong Europe has been up and


Linas Grigaliunas and Sidney Dung


launch in the local market. “If the parent in Europe has a rating that indicates there is an appreciation of the cultural differences between the markets. It will help Chinese companies get more comfortable with the idea of working with a particular partner.” The second reason, as the case of Euler


Hermes demonstrates, is that there may be re/insurers wishing to work with or partner Chinese companies targeting Europe. This could either be through insuring them or in by partnering with them as strategic investors. “More and more Chinese companies are


targeting Europe. We expect a 60 percent growth rate in 2015–16 for China’s outward foreign direct investment and the insurance sector is seen as a very positive sector for this. Again, having a rating which is well respected and understood in the Chinese market makes a big difference. “Chinese companies will choose Chinese


companies and there is a level of trust and education in place when they know a company


running in Europe since 2013, when it was approved by the European Securities and Markets Authority (ESMA), but this is the first time it has attended the Monte Carlo Rendez- Vous. Its parent, Dagong, has been operating in China for more than 20 years. Sidney Dung, chief communications officer


for Dagong Europe, said there are other reasons that companies would seek a rating from Dagong Europe. “Our methodology is not radically different from that of other players but we do take more of a long-term view, as is the way of the Chinese. Some companies believe that is a good thing and will want to seek a different opinion.” Dung noted that although Euler Hermes is


the only company it has rated publicly, it has rated other companies on a private basis. Asked whether he believes many European re/


insurers will eventually seek a rating from Dagong, Grigaliunas said: “It is like the chicken and the egg. And when companies do choose to invest in another rating, do they choose a smaller player? “We believe as the Chinese market becomes


more and more important to the world, we will gain leverage in Europe and start to disrupt the status quo.” n


Technology could disrupt casualty insurers’ model C


asualty insurers could lose out if motor companies choose to cover their risks


in a different way as technology in that sector advances, Andrew Newman, head of global casualty and co-president of Willis Re, told Monte Carlo Today. He made the claim in relation to the


increasing technology influx to the motor sector, particularly the potential of driverless cars. He said that there are “some underlying taking place


changes in the industry” with


regard to technology, which have the potential to “challenge the entire structure of the business”. Driverless technology will affect the nature


of the risk as drivers will be relying on the technology to drive the vehicle. But if motor companies do decide to work


with insurers, it could also represent a huge opportunity


to “transform the way motor


insurance is processed,” he said. He also said rates remain soft in the casualty


sector, driven by property cat reinsurers moving into the casualty sector in search of growth. “The margins in the property cat business


are going down, and reinsurers looking for growth or to hold their position are seeking diversification”, said Newman, adding that these reinsurers are clearly experiencing the “grass is greener” effect. This has led to a buyer’s market for the


casualty sector, according to Newman, who said clients now “have more choice of what they buy, and who they buy from, than they have had in the last two decades”. n


4 | MONTE CARLO TODAY | DAY 4: Wednesday September 16 2015 Andrew Newman www.intelligentinsurer.com | www.bermudareinsurancemagazine.com


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