Gallagher recently expanded its global footprint in Asia with the aquisition of SP&G Insurance Brokers Sdn. Bhd., now known as SP&G Gallagher, a multi-disciplined commercial insurance broker specializing in the aviation market, as well as property & casualty, marine and engineering insurances and other risks. Gallagher’s International CEO Vyvienne Wade and CEO of Gallagher’s broking and underwriting business in the UK Simon Matson discuss the investment.
How does having a Malaysian presence fit into Gallagher’s international growth strategy for insurance, risk management and consulting services? What other opportunities do you see in the region as Gallagher continues to pursue this expansion strategy?
Simon Matson: Malaysia occupies a strategic position as a bridge between Asia and the rest of the world. It is a transportation corridor for the region. Malaysia also is a heavy exporter with the top three exports being electrical machinery, oil and mineral fuels, and industrial machinery.
These sectors of the Malaysian economy all have complex and sophisticated insurance needs that align with many of Gallagher’s specialisms, so investing in Malaysia enables us to use our expertise and international knowledge to help insurance buyers obtain the broadest, most tailored insurance solutions available. We are keen to work with our new local colleagues to service Malaysian clients and provide innovative risk solutions in the various niches of the Malaysian economy.
Vyvienne Wade: The Malaysian people very welcoming and friendly and their workforce is young and educated. The country has generally embraced technology, and its people are continuously improving their skills and knowledge to transform Malaysia into a digital economy and we have a great team of experienced professionals in SP&G Gallagher.
How do current insurance market conditions in Malaysia factor into Gallagher’s decision to invest in SP&G Gallagher?
Simon Matson: The Malaysian insurance market is one of the most developed in the region. Premiums per capita stood at nearly $447 million U.S. in 2018, which is well above China or Thailand. Additionally, an 8.5% increase in gross written premiums was projected for Malaysia in 2020, compared with just 2.3% throughout Asia (excluding Japan). As a growing global company, it makes sense for Gallagher to have a presence in the Malaysian market directly rather than remotely as a wholesaler.
SP&G Gallagher specialises in the aviation insurance market but also offers insurance solutions for property and liability risks, as well as marine insurance, engineering, personal accident, group life and various other specialty lines. What made SP&G Insurance Brokers an attractive acquisition target for Gallagher? And how will Gallagher’s international footprint and expertise complement SP&G Gallagher?
Vyvienne Wade: SP&G Gallagher is a highly specialised aviation insurance broker that has worked with our aviation team in London for many years and they share our business culture and ethos which is very important. We believe having this presence in Malaysia will enable us to bring our specialty skills to other major sectors in the country such as oil and gas and manufacturing. We are also interested in developing financial service products with them.
What is the Malaysian government’s attitude regarding this and other foreign investments in its indigenous businesses?
Vyvienne Wade: The government of Malaysia has adopted a very pro-business stance and we had a very smooth, easy and expeditious process to be approved as an investor in SP&G Gallagher. The government allows foreign investors to completely own new projects as part of its Liberal Equity Policy. Ex-patriot staff are welcomed. The government also seeks feedback from the business community through government-private sector discussions.
The Malaysian economy advanced 4.5% in the first quarter of 2019, following a 4.7% expansion in the previous three-month period. What other opportunities do you see for SP&G Gallagher in relation to this economic prosperity?
Vyvienne Wade: Malaysia has an open, diversified and strong economy. Its financial and banking sectors are well-developed, and its financial centre in Labuan is well-known globally. Malaysia is currently also the world's largest centre of Islamic Finance. The Malaysian economy has grown strongly for the past decade, and the benefits of this expansion have filtered down to the population, with Malaysia being expected to shift from being an upper-middle-income economy to a high-income economy in the next few years.
In fact, with a per-capita income of US$10,620, Malaysia is the third-wealthiest nation in Southeast Asia after the smaller city-states of Singapore and Brunei. At the same time, Malaysia’s consumer price inflation has slowed to become the second-lowest in Southeast Asia after Singapore. So the near-term outlook looks promising.
How are the Malaysian government’s investments in infrastructure improvements helping the country transition into a developed nation?
Simon Matson: The infrastructure of Malaysia is one of the most developed in Asia. It has a stable power supply through thermal and hydro generation, and the government is looking to attract high-tech industries that are also environmentally friendly. It has a well-regulated water supply, which benefits consumers and business alike.
The government’s support for infrastructure is also evident in its development of an impressive network of air cargo facilities, new seaports, highways and railways serving the entire Malaysian area. An interesting fact: This country has 65,877 kilometers of highways, which is more than the Earth’s circumference of 40,075 kilometers. This continuing trend of public investment will create the need for complex insurance programmes and– Gallagher is well placed to supply these insurance solutions and to support local businesses as needed with reinsurance.
Malaysia shipped $247.3 billion worth of goods around the globe in 2018, representing US$7,800 for every resident of the country. What are Malaysia’s biggest exports? And who are Malaysia’s biggest trading partners?
Vyvienne Wade: Malaysia's main exports are: Electrical and electronics products (36 percent), chemicals (7.1 percent), petroleum products (7.0 percent), liquefied natural gas (6 percent), and palm oil (5.1 percent), and 40 percent of its workforce is employed in jobs that relate to export activities.
Almost three-quarters (72.2 percent) of Malaysian exports were shipped to other Asian countries, while 10.6 percent was sold to importers in Europe. Malaysia shipped another 10.3 percent worth of goods to North America, and 4.1 percent went to Australia, New Zealand and Papua New Guinea.
Simon Matson: Marine cargo insurance and trade credit insurance are also key products for us at Gallagher, and so this sector of the Malaysian economy offers interesting insurance opportunities and we will work with our colleagues in Malaysia to develop them.
How is adoption of new technologies helping to boost Malaysia’s manufacturing and agricultural industries?
Vyvienne Wade: The country has generally embraced technology, and its people are continuously improving their skills and knowledge to move forward and make Malaysia a digital economy. The Government is supporting this and is fast tracking re-engineering processes for greater prosperity. Various sectors of the economy are already moving on to automation and digitalisation, such as manufacturing, legal, financial services and to some extent agriculture.
Adoption of automation in the manufacturing sector is leading to increased efficiency and productivity in the agricultural sector which is an important part of the economy in many respects it is equipping itself with technology driven solutions for higher crop yield to meet the demands of the rapidly increasing population.
Productivity in Malaysia is significantly higher than in neighbouring Thailand, Indonesia, Philippines or Vietnam due to a high density of knowledge-based industries and adoption of cutting-edge technology for manufacturing and digital economy. For example, technology-driven solutions are producing higher crop yields to meet the demands of Malaysia’s rapidly increasing population, which currently stands at 32 million people. It is really interesting to see how Malaysia has advanced in many areas rapidly.
Given its robust productivity, skilled labor force and pro-business government, Malaysia is ideally positioned to become an economic leader in Southeast Asia. By partnering with an indigenous, multi-specialty commercial insurance broker, we are well-positioned to provide insurance and reinsurance solutions to help fuel the country’s continuing economic expansion.
