Banks in the Asia Pacific region could improve their resilience by selling their insurance units, according to an S&P report, underlining tighter regulations as a hurdle.
Banks in the APAC region could improve their health by selling their insurance arms, according to an analysis from S&P Global Market Intelligence, citing tighter regulations as well as limited benefits from cross-selling banking and insurance products compared to expectations.
In addition to improving their shrinking values – all of the region’s 20 largest banks saw their market capitalization decline in the second quarter this year – sales will be able to support insurance offerings at a lower cost.
«Typically, banks will maintain long-term distribution agreements with the buyers of their insurance units, allowing them to continue offering insurance services to their customers without having to take on the cost of such products,» the analysis said.
Insurance Acquisition
In 2021, there were ten transactions that saw banks sell their insurance units, compared to just seven in the previous year.
According to S&P, the buyers were largely insurance-focused companies such as AIA Group, which purchased Bank of East Asia’s portfolio of life insurance policies in September 2021 and is in the midst of buying Blue Cross Insurance from the same bank.
