Posted on 07 Nov 2011
Joe Plumeri, chairman and chief executive of insurance broker Willis Group Holdings PLC, in an interview with the Wall Street Journal, says doing business in China can sometimes be easier than in the West.
Mr. Plumeri doesn't think red tape has held back his firm in China. Willis this year increased the controlling interest in its Chinese joint venture, Willis Pudong, and now is the first foreign company to own a majority stake in a fully licensed broker in China.
"We had no problem in getting our license," he said in an interview. "It's easier than people expect. I've had more problems in some parts of the world with developed regulators than I've had here in China."
Even with the license, U.S.-listed, London-based Willis faces challenges in establishing itself with local companies. Mr. Plumeri recently spoke with Jason Chow on Willis's plans in the region, how rapid development in Asia can spur businesses and strategy for dealing with inflation.
The following interview with the Wall Street Journal has been edited.
WSJ: Where does Asia figure in Willis's growth plans?
Mr. Plumeri: I think the growth in the next three to five years will come from this part of the world, not because of what's happening today, but because of what's happening demographically in the next few years.
The population explosion will be predominantly here. By 2025, we should have eight billion people on the planet, with 55% living in Asia.
If you believe in the population explosion, it happens in developing countries, not developed. And if you look at a lot of cities in Asia and China, the infrastructure needs for those cities is going to be enormous. Just transportation alone is enormous, let alone the businesses built around the infrastructure.
There's going to be a middle class that emerges, and that only happens if they have jobs and feel a sense of satisfaction that they can grow. That means insurability of the business, jobs, infrastructure, the buildings, the liability—those are all the things that go with it.
WSJ: What parts of Willis's business are growing fast in Asia?
Mr. Plumeri: Construction, for one. With demographics growing like that, construction is growing with infrastructure, like the building of tunnels and rapid transit. Also, with more wealth means there's more need for financial services, and with the creation of more jobs and employment comes the whole issue of employee benefits like health care and pensions.
WSJ: What is your strategy in China in particular?
Mr. Plumeri: There are a lot of international companies that do business in China, and we could choose to just take care of those clients in China and their insurance needs in China. Or, we could decide, which we did, to open offices in 21 different cities in China so we can be there locally as these businesses are growing and consult them as they grow so they have someone local to help them.
Once we decided to get a license in China, our ability to operate and to grow our business in China has been fairly easy. The China Insurance Regulatory Commission has been very cooperative with us.
In order for us to get a license, we had to buy an ownership stake of a pre-existing business. We bought 50% of Pudong Insurance Brokers in 2004. Then we had to get permission to go to 90%. We chose to keep local owners and management (as minority owners) as an incentive to stay on.
WSJ: Were there any regulatory issues in obtaining the license?
Mr. Plumeri: We had no problem. Regulation is more nascent here. In developed countries, first the industry developed, and then the regulation developed. Here, the regulation developed first, and then the industry came along. It's much easier way of doing it, because you know the rules going in, whereas the other way around, the rules are made after a problem occurs.
I think it's better. There's less room for problems because the conditions are laid out.
WSJ: What are the risks to growth?
Mr. Plumeri: The risk for us is to not establish ourselves in the business community in China and Hong Kong, and let them know who we are, what we do and what we offer.
The second biggest risk is not making the sufficient investment in our infrastructure, in our systems, so that we are able to take advantage of the growth. We've decided to have a lot of offices locally. As cities grow, we're growing along with them.
WSJ: How much can inflation impact your business here in Asia?
Mr. Plumeri: Inflation impacts what people pay for insurance. The trick is that our business has to grow faster than the cost of insurance, and our job is to keep that rate down against the backdrop of what people are insuring.
With inflation, the cost of employment, everything, goes up. Inflation is another risk that we advise people about. Understanding your risks is more important in an inflationary environment. Everything that can happen to you is going to cost more.