By Enda Curran
HONG KONG--Two octogenarian insurance magnates are making bets
on Asia. Warren Buffett's Berkshire Hathaway Inc. and Maurice
"Hank" Greenberg's Starr Cos. are quietly expanding their
operations, hoping to capitalize on a fast-growing market that they
believe is underserved by existing insurers.
In recent months, the two have been building up their presences
in Asia's general insurance market, a sector that remains dominated
by local players though some foreign firms, such as France's AXA
SA, are active here. Mr. Greenberg, 89 years old, a former chief
executive officer of American International Group Inc., completed
the first foreign takeover of a Chinese state-owned general insurer
last month. The 83-year-old Mr. Buffett's firm has been hiring
high-level executives from AIG and others as it builds up its
fledgling commercial insurance business.
"The insurance market in Asia offers so much potential for
growth," said Sally Yim, a senior credit officer at Moody's
Investors Service. "That's why these two tycoons are expanding
here."
AIG remains one of the most significant insurers in Asia, with
property-casualty operations in Japan, China, South Korea,
Singapore, Vietnam, Thailand, Australia and Indonesia. Other
foreign insurers, including the U.K.'s Prudential PLC and Germany's
Allianz SE are also present, selling life insurance and general
protection policies. But analysts say that in general insurance,
outside of auto protection, there are large coverage gaps in areas
from real estate through to aviation. Those underserviced markets,
mixed with a rapidly rising middle class and relatively strong
economic growth, have caught the eye of Mr. Buffett and Mr.
Greenberg. Premiums in Asia outside of Japan for property and
casualty insurance grew almost 15% a year in the decade ending in
2012, compared with 3% in the U.S., according to Swiss Re.
Last month, the Starr group, led by Mr. Greenberg, completed its
takeover of China's Dazhong Insurance in the first foreign buyout
in the country of a state-backed general insurer. It originally
held a minority stake.
Mr. Buffett's Berkshire Hathaway Inc. has hired two senior
executives from AIG's Asian operations and has picked up staff from
other companies too, as part of ambitious plans to boost its
commercial insurance business in the region, according to people
familiar with the matter.
"People like Warren Buffett have a very sensitive nose," said
Jonathan Zhao, head of actuarial and insurance-advisory services
for the Asia-Pacific region at Ernst & Young. "There is a big
potential for commercial insurance in Asia that has not been
captured and this is one area that could potentially push the local
players out and get the international players in."
Mr. Greenberg's acquisition of Dazhong turned heads in the
industry and marked a significant expansion in China by the man who
helped turn AIG into the world's biggest insurer before his forced
departure from the company amid an accounting scandal in 2005.
Since then, Mr. Greenberg has been building the Starr Cos.'
insurance operations across the world.
He has already started to restructure his Chinese acquisition,
renaming it Starr Property & Casualty Insurance (China) Co.
Ltd. (Starr China). New product lines are planned in commercial
property-and-casualty products, covering everything from political
risk to food safety.
"We'll make whatever changes we need to make,' he said in an
interview in March to mark the acquisition.
Mr. Greenberg's company, which already has operations in Hong
Kong, Japan, Australia and elsewhere in Asia, has deep links to
China. The purchase of Dazhong was made by Starr Indemnity &
Liability Co., part of the Starr group, which can trace its roots
back to Cornelius Vander Starr, who founded insurer C.V. Starr
& Co. in Shanghai in 1919.
Mr. Buffett's conglomerate, which has long been a big player in
insurance in the U.S., established a U.S. commercial-coverage
business last year. It has been in the process of expanding
globally. Berkshire Hathaway Specialty Insurance, which provides
commercial property, casualty and other types of coverage, is
applying for licenses to regulators in Sydney, Hong Kong, Singapore
and Europe, as well as recruiting talent from established rivals
such as AIG, a separate person familiar with the matter said.
Omaha-based Berkshire Hathaway has hired Marc Breuil, who was
previously head of AIG's country operations in Hong Kong and
Taiwan, and Marcus Portbury, who was the head of casualty for the
Asia-Pacific region, the people with knowledge of the hires
said.
They also said the hires are part of the investment firm's
effort to build a commercial-coverage business in Asia. Berkshire
already has an insurance presence in Asia through Gen Re, its
reinsurance unit. The company was visible in the aftermath of
large-scale flooding in Thailand during 2011, when insurance claims
ran into billions of dollars.
"Both Buffett and Greenberg are tried and tested. They are good
operators who have been in the industry for decades," said Credit
Suisse analyst Arjan van Veen. "There is a good chance that both of
them will succeed."
Anupreeta Das contributed to this article.
Write to Enda Curran at enda.curran@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires