Tokio Millennium Re will be ramping up its stateside operations in 2014 with the formation of a US office, as the reinsurer looks to further diversify and expand its global footprint.
That is the news from Tatsuhiko Hoshina, CEO of Tokio Millennium Re (TMR), who said that the location of TMR’s office would depend very much upon intellectual capital, with Connecticut currently a strong contender. Hoshina said that a local office would allow the company to increase the frequency of face-toface meetings with clients and enable TMR to carry out more in-depth underwriting and claims audits with clients.
Hoshina said that the US office would be writing non-cat business and, while he admitted that margins are not particularly strong on such lines, by sourcing quality accounts he expects the company to build a lasting presence in the US.
“Ours isn’t going to be a lines focus; rather our underwriting approach will be one that is client and transaction-orientated. It is important that we maintain discipline and find and work with quality accounts in the US,” said Hoshina.
He said that clients would typically be smaller and medium-sized US insurers. “Such clients tend to appreciate face-to-face meetings and a presence on the ground—more so than larger, international players.” TMR’s move into the US aims to satisfy this demand.
Addressing the impact of convergence capital on TMR and the wider industry, Hoshina said that for those re/insurers with a large, diversified portfolio “there has been too much hype around its implications”. However, he admitted that for monoline players or those with a focus on US cat— such as TMR—the influx of convergence capital has proved a challenge.
“At TMR cat risks are a dominant part of our portfolio and US risks have a considerable weighting. As such we are looking to diversify into non-cat lines in response to the influx of convergence capital. This capital has the potential to affect both profitability and our bottom line,” said Hoshina.
“In response, we formed Tokio Solution Management and Shima Re, which have enabled us to work with alternative capital to generate fee income from transformer and convergence transactions. While we lose out on traditional property cat reinsurance business, we are now able to increase our income from transaction management fees. Profitability at TMR will be about careful management of this balance and the reinsurance cycle.”
While TMR is making its move into the US, its parent Tokio Marine & Nichido Fire continues to weigh up further M&A opportunities in the US, said Hoshina. “M&A opportunities outside Japan are a good option for our parent to diversify its portfolio.”
Tokio Marine already owns the Philadelphia Insurance Company and Safety National, he said, adding that the company is always keen to consider potential synergies in the US. “If the company has good volumes of business and a strong management team, then Tokio Marine has the appetite to consider further US acquisitions.”
Tokio Millennium Re, expansion, redomestication