Gallagher recently expanded its global footprint in Asia with a purchase of SP&G Insurance Brokers Sdn. Bhd., now known as SP&G Gallagher, a multi-disciplined commercial insurance broker specializing in coverages for the aviation market, as well as property & casualty insurance, marine insurance, engineering insurance and other risks. Gallagher’s International CEO Vyvienne Wade and U.K. CEO of Gallagher Global Brokerage Simon Matson weigh-in on 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 Gallagher to use its expertise and international knowledge to help these insurance buyers obtain the broadest, most tailored insurance solutions available. Gallagher is keen to work with our new local colleagues to service Malaysian clients promoting innovative solutions in the various niches of the Malaysian economy.
Vyvienne Wade: Not only are the Malaysian people very welcoming and friendly, 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. 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 regions. 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 2019, compared with just 2.3% throughout Asia (excluding Japan). Accordingly, Gallagher is keen to have a presence in the Malaysian market directly rather than only remotely as a wholesaler.
SP&G Gallagher specializes 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 specialized aviation insurance broker that has worked
with our aviation team in London for many years. They share our business culture and ethos which is most important.
We view having a presence with them in Malaysia will enable us to bring our specialty skills to other major sectors
in Malaysia such as oil and gas and manufacturing. We are also interested in developing financial service business
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. For instance, 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
dialogs. We had a very smooth, easy and expeditious process to be approved as an investor in SP&G
Gallagher.
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 center 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 a mind-boggling 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
– we feel that 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: - again, marine cargo insurance and trade credit insurance are also key products for
us at Gallagher, and this sector of the Malaysian economy offers interesting insurance opportunities. 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 on a fast track to re-engineer 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, Gallagher is well-positioned to provide insurance and reinsurance solutions to help fuel the country’s
continuing economic expansion.