Giant Chinese technology conglomerate and fintech company Tencent is applying for a license to operate a reinsurance entity in China, according to reports in local media.
It’s a natural step for the company which has already expanded successfully into direct to consumer insurance business.
Tencent has leveraged its deep connections with customers through a range of technology and social platforms it owns, to bring them personal insurance products.
The company has also partnered with industry specialists such as reinsurance firm Swiss Re, to research the application of advanced technologies in the reinsurance industry, such as artificial intelligence.
WeSure, the insurance platform launched by the Chinese multinational conglomerate in 2017, had already acquired some 55 million users as of the end of 2019, counting more than 25 million as its policyholders.
Tencent has leveraged its massively popular WeChat social messaging application to reach directly into consumers lives and offer them a range of financial services products, with insurance seen as a significant growth driver under the WeSure insurtech branding.
Having built this offering on partnerships, WeSure had more than 20 global insurance and reinsurance partners in 2018, the company is reportedly keen to have the capabilities to operate more of the financial stack by itself.
Hence applying for a license to operate a reinsurance entity will fit well with Tencent’s expansive ambitions on the front-end of insurance.
Being able to reinsure some of its own business, perhaps also tapping other reinsurance capital sources via retrocession, will help Tencent lower WeSure’s cost of underwriting capital even further and alongside its direct to consumer approach, as it owns the relationship with its WeChat users, promises to make for a compelling re/insurance offering.
Of course, Tencent could also be keen to expand reinsurance activities within China and abroad as well, to diversify the risk portfolio and generate even greater efficiencies, to drive down the cost of its WeSure products.
Given Tencent also has direct to consumer routes in other markets outside of China, it could also look to expand personal lines products more broadly around the world, leveraging its reinsurer at the same time.
The Chinese media reports that Tencent sees opportunities to own more of the re/insurance value chain, connecting reinsurance capital more directly with its own tech platform consumers.
As said, it’s a natural step for a company as sophisticated as Tencent and it would make sense for the company to look to reduce its reliance on outside providers of reinsurance by operating its own reinsurer alongside these relationships, while it is experiencing strong growth across its insurtech ventures.
