Life companies perish away from home
Basic barriers like language and culture, along with ever-changing market conditions, have limited the expansion of life insurance companies as far across Europe as they would have liked, as reports. It is hardly surprising given their mature and competitive domestic market that UK-based life insurance companies have looked enviously at the growing equity culture and ageing population across the English Channel. But the floors of banks and financial advisers are littered with the corpses of life companies that have failed to replicate their domestic success in Continental Europe. The latest casualty is Royal & SunAlliance Eurolife, which informed its 96 employees at the end of July that it was closing to new business. Established in Dublin in 1998, with branches set up branches in Italy, Spain and Germany to sell insurance policies to expatriates and local investors via institutions and financial advisers, RSA Eurolife had attracted only 1000 policyholders and less than Ł50m (E78m) in assets. RSA’s decision to close its subsidiary came after it failed to sell the business to Friends Provident and nine months after Nigel Watson, formerly of Scottish Provident International, was recruited as general sales manager of Eurolife to try to kick-start its fortunes, recruiting a handful of high-profile salesmen from other insurers to help him. Eurolife is not alone among life insurers withdrawing from Continental European markets. Scottish Equitable International (SEI), despite being a UK subsidiary of Dutch company Aegon, decided to close its branch in Milan last summer and stop selling offshore life products elsewhere on the continent. Even SEI’s decision to focus on the UK market from its new Dublin base was not free of problems as its planned launch of a with-profits bond was pulled last September because of concerns about the level of capital required to establish the product. Another insurer that has struggled to make an impact has been Irish-based Nascent, which was established as a joint venture in June 2000 between J Rothschild International Assurance and Securitas. In July 2002, St James’s Place, parent company of J Rothschild, which made an initial investment of E80m in the joint venture, announced it was slashing the value of its 26 per cent minority stake in Nascent to zero. Nascent was set up to become a pan-European life assurance operation but failed to expand outside Italy. But it’s not all doom and gloom. Scottish Mutual International has reported strong sales of with-profits bonds in Germany, Austria, Greece and Spain, while Standard Life has been building domestic businesses in Spain and Germany. There are a number of reasons why UK life insurers have struggled to carve out a significant presence in Continental European markets, including the obvious cultural and linguistic barriers. Products must be designed to meet the demands of local distributors and high net worth investors rather than simply offering the local market replicas of UK insurance policies. Finally, as Gail Wilson, director of insurance consulting at Luxembourg-based James Ball International has argued, insurers should target one market at a time rather than trying to distribute to every market in Continental Europe from the start of an operation.
