Local Insurers Have Edge Over Globalizing Giants.

Insurance companies in emerging markets have some comparative advantages that allow them to mitigate the major problems resulting from globalization, an industry observer said.

A recurring asset for insurers in emerging markets is local knowledge, which confers a distinct advantage, said Patrick Goergen of the insurance unit at the United Nation Conference on Trade and Development.

The local knowledge that insurers have includes consumer habits, statistics on loss experience, court rulings, established networks with the authorities and other insurers and an in-depth understanding of the local labor market for potential recruitment, Goergen said.

He argued that local insurers are more likely to establish and maintain personal links with holders of large books of various types of business.

The new competitive environment created by globalization "requires adaptation" as well as a set of new skills, Goergen said. The new milieu is marked by a change from producer-oriented to consumer-oriented attitudes.

Extending the domestic market base involves developing new markets and products--especially niche prod-pursuing mergers and acquisitions, he said. Outside the home country, he suggested alliances and the establishment of branches and subsidiaries. "Be innovative in your distribution channels," he said.

On capital issues, he admitted there were substantial difficulties, especially on the investment side. "But one area which is often forgotten is to improve underwriting results and investment returns."