Munich Re, the world’s biggest reinsurer, said China will remain its biggest growth market in Asia as it considers countries such as India too unpredictable to step up investment.

“Our biggest customers in China are still growing their business by more than 15 percent a year, driven by motor insurance as the boom in car sales continues,” management board member Ludger Arnoldussen said in an interview. “We want to expand our market position in Asia, but is has to be done on a profitable basis.”

Munich Re, led by Chief Executive Officer Nikolaus von Bomhard, reported 4.7 billion euros ($6.5 billion) in gross premiums written in Asia including Japan and Australia for 2012, the same as a year earlier after Munich Re terminated a motor reinsurance contract in China with 700 million euros in premiums. Asia represented about 17 percent of the Munich-based company’s reinsurance premiums last year, its third-largest market behind North America and Europe.

“Greater China is our biggest market in Asia with a share of more than 50 percent,” said Arnoldussen, who joined the reinsurer in 2006 from Zurich-based Swiss Re Ltd. “While China is by far the biggest market, the margins are also lower than in other regions due to regulated prices in some lines of business and fierce competition.”

China, India

Insurance premiums in the Asia-Pacific region are expected to double by 2020 with China seeing the highest increase worldwide, according to estimates by Munich Re. More than 1 trillion euros in additional premiums will be generated in the region over that period with growth markets such as China and India contributing almost 70 percent, the reinsurer has said.

“At the moment our reinsurance premiums from India are about 30 million euros, while we have roughly 1 billion euros in China,” Arnoldussen said. “Regulation in India is still too spontaneous and some protectionist tendencies still exist.”

Munich Re’s primary insurance unit, Ergo Versicherungsgruppe, only owns minority stakes in its Indian operations as the country limits foreign ownership of insurers to 26 percent. Ergo sells property and casualty insurance with Mumbai-based Housing Development Finance Corp. and plans to provide life insurance through a joint venture with Avantha Group next year.

India could become Ergo’s biggest international market by premium income by 2020, Jochen Messemer, Ergo’s management board member responsible for international operations, said in an interview last month.

Swiss Re

“India has great potential for reinsurers, but rates have been run down and at the moment it’s more attractive for primary insurers than for reinsurers,” Arnoldussen said.

Swiss Re, the world’s second-biggest reinsurer, said on Oct. 16 that it will invest as much as $425 million in FWD Group, the former insurance and pension business of ING Groep NV in Hong Kong, Macau and Thailand.

At Munich Re, the focus on acquisitions — “if they are a topic at all” — will also remain on primary insurers in growth markets, while takeovers of reinsurers are less likely, said Arnoldussen, who is responsible for Germany, the Asia-Pacific region and Africa at the management board.

“If we would buy a rival reinsurer, we would risk losing part of the business due to overlaps with our existing book,” he said. “It would have to be a very specialized reinsurer in a market that we don’t yet have access to, but I don’t see anything specific in that area at the moment.”

In the past, Munich Re held marketing stakes in insurers in Asia of 5 percent or 10 percent to secure access to their reinsurance spending. That doesn’t make sense economically anymore so these participations were reduced “considerably,” Arnoldussen said. One of the few remaining exceptions is the company’s 10 percent stake in U.K. motor insurer Admiral Group Plc, he said.

–Editors: Steve Bailey, Keith Campbell