In response to a cluster of natural disasters that has hit the reinsurance segment hard, Tokio Marine has announced its intention to move away from European reinsurance, selling its wholly owned units Tokio Millennium Re AG and Tokio Millennium Re (UK) Ltd to Bermuda-based reinsurer RenaissanceRe Holdings.
Tokio Marine will receive approximately US$1.5 billion in total consideration for Tokio Millennium Re AG, headquartered in Switzerland, and Tokio Millennium Re (UK), based in the UK, with the transaction expected to complete in March 2019, pending the necessary approval from regional authorities.
While the Japanese insurer is stepping away from European reinsurance, citing the increasingly harsh environment precipitated by increasingly prevalent high-risk events, it has said that it will maintain its operations in the Japanese reinsurance sphere, considering these a core element of its business.
Since 2007, Tokio Marine has made a string of acquisitions worth approximately $15 billion; the sale of Tokio Millennium Re represents its first major sale, but it has said that if necessary, it will consider further sales of overseas units. It intends to put the proceeds of the sale towards other specialised fields such as cyber insurance.
“The global reinsurance market has recently undergone various changes such as continuing soft market environment driven by steady inflow of capital from outside the reinsurance industry, which has been causing impact on the return earned from the business,” the company stated. “The contribution of reinsurance business in profit terms to our international operations has reduced significantly from approximately 50 per cent to below 10 per cent in a decade. Our core strategy is focused on expanding profitable and stable primary insurance business, and as a result we have taken the strategic decision to divest [our] dedicated reinsurance companies.”