Sunday, September 15, 2013

TMR: M’sian reinsurers left out of Battersea project

By Azli Jamil

Malaysian reinsurance or retakaful operators could have benefitted from the London-based Battersea mega development project, led by SP Setia Bhd as the project principal, if the project owners had made it a condition for insurers to park a portion of reinsure with these companies.

The project, managed by Battersea Power Station Development Co Ltd (BPSD), would involve taking insurance coverage such as contractor’s all risk insurance, workmen compensation, advance loss of profits and motor, with total premium charged running into millions of ringgit.

An insurance industry veteran suggested that although the risk would be insured in the UK, the reinsurance of the risks could be done with Malaysian companies, reinsurance or retakaful, if the project principal were to include the condition in the insurance tender.

“If I’m directed by the principal to parcel some of the retakaful to Malaysian companies, I would do so. The question is if the principal of the project has or intends to do so,” said the veteran insurer.

When asked to comment on the matter, BPSD chairman Teow Leong Seng said qualified insurers, irrespective of their nationality, but with the requisite financial standing, experience and expertise in each particular area, will be invited to bid. “All bids will be carefully evaluated to ensure that awards go to the party which provides the best terms at the most competitive price,” he said in an email response to The Malaysian Reserve.

Teow said as the Battersea project is a UK asset, the risks would be insured in the UK in pound sterling to guard against foreign exchange risks.

One local reinsurance company is Malaysian Reinsurance Bhd and MNRB Retakaful Bhd on the takaful front, both wholly owned by MNRB Holdings Bhd which in turn is 69%-owned by Permodalan Nasional Bhd (PNB) and its schemes. SP Setia, helmed by Tan Sri Liew Kee Sin, is about 70%-owned by PNB.
Another local reinsurer is Asia Capital Reinsurance Malaysia Sdn Bhd which was established in 2007 with Khazanah Nasional Bhd holding a 70% stake and the rest by ACR Capital Holdings Pte Ltd.
The foreign reinsurers players with a presence in Malaysia are international giants Swiss Re, Germany-based Munich Re, Hannover Re and Japan- based Toa Reinsurance Company Ltd.

The insurance veteran said all reinsurance companies operating in Malaysia will have the capacity to underwrite the risks.
“The project client can instruct in their initial agreement for the insurer to look at Malaysian retakaful companies once they have exhausted the net retention.
The insured can insist that beyond the primary insurer’s net and treaty capacity, retakaful capacity from Malaysia be given priority before reinsurance capacity.
“This insurance arrangement could set a new trend for future major projects taken on by Malaysian-based companies,” he said.

When asked if BPSD had made such a request to the insurance companies, BPSD declined to respond.
Insurance industry executives were unable to recall of any significant Malaysian-led projects abroad which benefitted Malaysian reinsurance or retakaful players.
Battersea is owned by a consortium with SP Setia and conglomerate Sime Darby Bhd each holding a 40% stake respectively and the Employees Provident Fund another 20%.
BPSD will develop the project with an estimated gross development value of £8 billion (RM38.96 billion) in eight phases over the next 15 years.