Insurance Companies Diversifying Into Real Estate: Deal Of The 21st Century?

Given that a number of Chinese insurance companies have already diversified into the real estate business with lucrative results, does this move represent the “Deal of the 21^st Century”? 

By: Ringo Bones 

As of late, a number of Chinese insurance companies had diversified into the real estate / real property business during the past few years with lucrative results profit-wise. As far back as October 2014, Hilton Worldwide Holdings agreed to sell the storied Waldorf Astoria hotel to Anbang Insurance Group Co. of China after Anbang Insurance offered a bid of 1.9 billion US dollars. But it is only during the last week of January 2015 that US regulators gave the green light for the purchase. Anbang Insurance Group Co. sealed the 1.9 billion US dollar purchase of New York’s Waldorf Astoria hotel, which has been used by foreign dignitaries including Queen Elizabeth II. The Lloyd’s Of London building has also been recently bought up by a top Chinese insurance firm. 

Chinese insurers have been drawn to European office buildings because they are typically anchored by tenants with a 10-year leases and offer yields as high as 5 percent. This compares to Shanghai offices where 3 to 5 year leases and 4.5 percent interest yields are typical. 

“We consider high quality overseas property as a good substitute for fixed income investment” says Hing-Yin Lee, a senior executive director who manages overseas property investments for Ping An’s trust unit, told an investor conference back in December 2014. “Core offices in prime locations not only offer investors stable rental returns, the property prices may also go up in a few years”. With such investment returns, it looks like insurance companies diversifying into the real estate / real property business might as well be the “Deal of the 21^st Century”. 

German Chancellor Angela Merkel: Risk Averse?

Given that the recent WikiLeaks revelation has allegedly revealed Chancellor Merkel as “risk-averse”, can she eventually use this “cloak-and-dagger-gossip” to her advantage?


By: Ringo Bones


The worlds leading insurance providers are all probably very busy at this very moment trying to “monetize” the damage made by those pesky WikiLeaks on-line revelations. Around November 29, 2010 the most “unusual” of these revelations is probably on German Chancellor Angela Merkel on her being “risk-averse” as uploaded by a Wikileaks whistleblower from top secret US Diplomatic Cables. Even though being risk-averse has never been a disparaging trait in established German cultural norms, can Chancellor Merkel eventually use this rather pesky cloak-and-dagger gossip to her advantage?

Even though the risk-averse accusation of Chancellor Merkel is speculative at best, after all she managed to okay “less-than-business-friendly” climate bills / greenhouse gas reduction bills during her first term in office that wasn’t really business friendly and she managed to secure a second term. And they call her risk-averse? After her term ends, Angela Merkel could probably earn a lucrative living in the speaking circuit like speaking in seminars of graduating college students slated to work in the insurance industry given her risk-averse nature. Merkel’s advise to prospective claims adjusters and insurance brokers who will soon be very busy leaning into a team of insurance underwriters in the underwriters’ box at Lloyd’s is probably good as gold if she embraces her “risk-averse” personality.

During the past few years, former US President Bill Clinton had made a “killing” in the speaking circuit when it was revealed that Cushman & Wakefield had paid the former US president rather handsomely in one of his famous speaking gigs. At the end of her term as Germany’s chancellor, Angela Merkel would probably become a guest speaker of choice in various Eurozone insurance company functions thanks to WikiLeaks. At least the current German chancellor has never resorted to mangling the English language in order to advance her own political ends like that former Alaska governor named Sarah Palin.

Are Insurance Companies Currently Engaged In War Profiteering?

With their ability to sell war risk insurance that’s akin to selling ice cubes to Eskimos, are insurance companies virtually engaged in war profiteering in our post 9/11 world?


By: Ringo Bones


From the aftermath of the September 11, 2001 terror attacks to the ever increasing scourge of maritime piracy off the coast of Somalia, war risk insurance had managed to turn itself almost into a household name – albeit for all the wrong reasons. Such insurance policies do provide a service to corporate entities that allows them to hedge their risks in the brave new word after the 9/11 terror attacks. Despite of its “apparent” usefulness in our post 9/11 world, isn’t war risk insurance just another name for war profiteering?

A war profiteer is often defined as someone who makes what is considered an unreasonable profit on the sale of essential goods during times of war and / or conflict. War risk insurance may not – or will ever be – classified under “essential goods” by ordinary folks like us, yet ever since the 9/11 terror attacks – and especially the rise of piracy targeting maritime commerce of the coast of Somalia – premium rates of war risk insurance has been on the rise, and making insurance companies who flog them unreasonable profit from our perspective. If things go on as they are, the time would come that premium rates of even the most basic of war risk insurance policies will no longer be deemed economically viable by corporate entities that need them the most.

So, are insurance companies engaging themselves in war profiteering when it comes to providing war risk insurance in a post 9/11 world? It is best to be pragmatic when it comes to such matters, but corporate entities finding ways to hedge their risks against the next 9/11 or just coping with the inherent risk involved doing maritime commerce in the pirate infested waters of the Somali coast are prone to financial exploitation by insurance companies. Given that the risk dynamic of terror attacks and piracy seems to defy the somewhat relatively "static" mathematical models used in most risk assessment tools, a re-evaluation of war risk insurance premiums would not be that much unreasonable - unless of course insurance companies are truly engaged in war profiteering in our brave new post 9/11 world.

Do Pessimists Make Good Insurance Company CEOs?

Given that the primary business of insurance companies has been on dwelling on what’s the worst that could happen, does this make pessimist prime candidates for insurance company CEOs?


By: Ringo Bones


Maybe that bloke named Murphy who they named Murphy’s Law should have started his own insurance company, who knows, he could have made a bundle – or what about Friedrich Nietzsche? Just a few historically famous “pessimists” who would have made top notch CEOs for today’s insurance companies. A will to power ones investment portfolio? Or is it just a routine risk management as usual?

After reading Bright-Sided by Barbara Ehrenreich, a pet theory of mine has been renewed once again. A theory pertaining to why people with a naturally pessimistic disposition are better suited to be insurance company CEOs compared to their cheery, chirpy counterparts – especially ones that practice unnecessary discrimination when it suits them while maintaining a happy disposition. Despite the howls of protest of those cheery CEOs that ran their company to the ground during the Bush Administration over the accuracy of Barbara Ehrenreich’s pet theories on why Wall Street buckled only proves Ehrenreich’s insights on this contentious issue to be self-evident. Even though recent findings in cultural anthropology and archeology had always tried to tell us that too much positive thinking – especially when combined with leaving things to chance – could be humanity’s undoing.

Humanity’s earliest ancestors manage to survive through a series of supposedly insurmountable challenges like climactic extremes, super-volcanic eruptions and earthquakes that would make those catastrophic tragedies that happened within our living memory seem tame in comparison. Thanks to humanity’s intelligence and wit – largely driven by constantly worrying about the worst that’s yet to come. In other words - pessimism. Could it be that Natural Selection is Mother Nature’s very own risk assessment strategy? If humanity manages to survive through the worst aspects of climate change that is yet to come, it is safe to bet that it is because we finally took action on the most pessimistic ramblings of Al Gore over the dangers of climate change.

Unfortunately, corporate America has a habit of firing overtly cautious employees with pessimistic disposition. The very same people who could have warned the impending subprime mortgage crisis that can trace its roots back in 2006. The Wall Street overlords have no use for such folks, favoring instead to “yes men” too spineless to point out to their very own mistakes and shortcomings. Sadder still, this corporate oversight grew in popularity during the time when Ronald Reagan ruled the Free World where Wall Street amassed huge profits during the “Decade of Greed” of the 1980s.

Bright-Sided by Barbara Ehrenreich really did point out the culture of a “happiness delusion” that undermined the true potential of corporate America. An overtly positive thinking without a safety net, or worse still – using the ideology of happiness delusion as a safety net, really did almost destroy America. During the 1980s, this happiness delusion became an industry in itself with books, office accessories, posters, etc. and it did become mandatory in the corporate world – especially Wall Street. I just hope that an overtly positive thinking won’t be used as a fairy-dust against failure anymore. Folks that worry so much in working out solutions in making good out of worst situations now need the much-deserved commendation they were once ignored. Maybe somebody should hire Barbara Ehrenreich as a risk assessor.