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Write an executive summary for the essay below:
• A brief overview of the paper, summarizing the key findings related to the company
and its expansion opportunities.
• This section should be concise and to the point.
Group Research Assignment
International Business, MAN 6686
Professor David Wernick
Team 2
Executive Summary
Company Overview
Sompo Holdings, Inc., was established in 2010 through the merger of Sompo Japan Insurance and Nipponkoa Insurance, one of Japan’s leading insurance companies. The founding vision was to consolidate the strengths and abilities of both companies to provide a more comprehensive set of insurance services. The company’s mission is to “contribute to the realization of a sustainable society by creating a future of security, health, and wellbeing” (Sompo Holdings, 2023). Sompo’s vision reflects a commitment to innovation, customer trust, and social responsibility, emphasizing resilience and adaptability in addressing the evolving risk landscape. Sompo Holdings has embraced digital transformation and sustainability as cornerstones of its strategy, aspiring to lead the global insurance market. Now, the company’s vision emphasizes becoming a trusted global leader in insurance and reinsurance, committed to fostering resilience amid an ever-changing risk landscape (Sompo International, 2023). By leveraging cutting-edge technology, the company aims to provide data-driven solutions that meet the evolving needs of its diverse client base.
Sompo Holdings operates across four primary business segments:
Domestic P&C Insurance: Offers personal automobile, fire, and accident insurance, making it a household name in Japan.
Domestic Life Insurance: Focused on providing savings, protection, and hybrid insurance products to meet the diverse needs of Japanese consumers.
Overseas Insurance: Conducted mainly through Sompo International, it includes commercial and specialty insurance and reinsurance operations globally. Additionally they offer additional forms of insurance such as Crisis Management insurance that aims to protect their consumers during times of political instability and terrorism perils (Sompo International, 2024).
Nursing Care & Healthcare: A pioneering initiative in Japan, providing nursing and healthcare services to address the challenges of an aging population.
Sompo Holdings has positioned itself as a customer-centric innovator, leveraging technology like AI and data analytics to provide tailored risk solutions. The group has also invested heavily in climate resilience initiatives, such as insurance solutions for natural disasters and renewable energy projects (Sompo Holdings, 2023).
Organizational Structure
According to their website, Sompo Holdings follows a decentralized yet integrated organizational structure, enabling flexibility across diverse markets while ensuring strategic alignment with corporate goals. Sompo, is a company with committees and it has established a governance structure where the Board of Directors composed mainly of outside directors, provides oversight of the management (Sompo, 2024). The board of directors and three statutory committees, namely the Nomination Committee, Compensation Committee, and Audit Committee are part of this structure. This allows for fair engagement and active discussions aimed at strengthening the organization (Sompo, 2024).
Additionally Sompo Holdings uses the “Business Segment System and Group CxO System” for business execution under the overall leadership of the Group CEO to facilitate agile and flexible decision-making and business execution as well as clarify authority and responsibilities (Sompo, 2024). The Director’s Skills Matrix reinforces Sompo’s goal to “increase resilience” and implement “strategies to connect with customers and deliver connected services”. As of April 2024 the group has been led by group CEO, Mikio Okumura.
Domestic and Foreign Operations
Sompo Holdings specializes and leads the Japanese insurance market by offering comprehensive property & casualty as well as life insurance products. The domestic operations account for a significant portion of the company’s revenue, mainly driven by its extensive customer pool and innovative product offering. As one of Sompo’s primary business segments, the property and casualty insurance segment dominates with over 20% market share in automobile insurance, establishing them as a trusted insurer among Japanese households (Sompo Holdings, 2023). In addition to P&C insurance, Sompo pioneered in integrating nursing care and insurance, which addresses the challenges faced by Japan due to their rapidly aging population. Through Sompo Care, the company offers nursing homes, at-home care services, and specialized insurance products aimed to cater to the needs of elderly clients (Sompo Holdings, 2024). This segment is unique to Japan and reiterates Sompo’s commitment to Japan’s social needs. Sompo’s domestic operations are driven by strong brand recognition, a well established distribution network and a strong focus on data driven and digital innovation to improve customer experience, integration and operational efficiencies.
Sompo’s global footprint has expanded significantly through its overseas operations. Sompo Holdings is currently operating in 46 countries, has 75,000 employees and is rated A+ in Financial strength (Sompo Intl, 2024). Their overseas insurance operations are primarily managed by Sompo International with a focus on commercial insurance, reinsurance and specialty products with key markets in North America, Europe and Asia-Pacific. Sompo has leveraged technology and data analytics to empower their underwriting and claims processing efficiencies across its international operations (S&P Global, 2023). The company has approached their expansion with a centralized oversight while empowering local teams to ensure an effective adaptation to local needs. Sompo Holdings has indicated that their main future initiatives include adaptation to the expected dynamic business environment including a premium rate environment to keep pace with claims inflations, interest rates, and economic inflation while still maintaining their underwriting discipline(Sompo,2024). In addition, they plan to expand their customer base by investing in the future as well as portfolio diversification and geographical expansion.
Financial Performance
Sompo Holdings, Inc. is currently traded on the Tokyo Stock Exchange under the ticker TSE (8630), has roughly $108 billion USD in total assets, $28 billion in net premiums, and $35 billion in gross premiums written (Sompo Intl, 2024). Specifically for Sompo International, key statistics as of September 30,2023 include the following:
As of December 5, 2024, the stock price for Sompo Holdings ADR is standing at $4,178 JPY as noted below:
Sompo Holdings ended September 2024 with a revenue of 1.44T Yen, a 20.61% year over year increase (Google Finance, 2024).
Target Market Analysis
Market Selection
Our group has chosen the UAE as the target market to study for Sompo’s overseas expansion based upon the following several reasons.
First, the market potential in the UAE is promising because it is now actively diversifying its economy beyond oil to other sectors like finance, technology, and healthcare (Crupi & Schilirò, 2023). There are numerous multinational companies and small-to-medium enterprises in diverse industries, all of whom require insurance coverage for safe operation, employee health, and asset protection. This diversification and huge numbers of corporations mean a huge demand for insurance products.
Second, as a global business hub and trade center that connects Europe, Asia, and Africa, the UAE is a good market for insurance products in relation to international trade (Dubai Government, 2019). Its geographical proximity to the Middle East and North Africa also paves the foundation for Sompo to expand further in the future.
Third, its growing population and increasing urbanization result in higher demand for personal insurance. Currently, its insurance penetration of 2.5% remains lower than that in mature markets, suggesting significant room for growth (Khan, 2023). Overall, the economic potential, the strategic location, the increasing population, and the less mature insurance market all make the UAE a promising target market for expansion. Yet there are both opportunities and challenges for the expansion, which will be analyzed using the PESTEL and CAGE framework in the following section.
PESTEL Framework
Political Factor
The political environment of the UAE is highly stable with a robust legal and regulatory system to support market development and economic expansion. Since 1971, the UAE has been ruled by the Al Nahyan family. In addition, political unrest is uncommon in the UAE even during the political Arab Spring upheaval in 2011 when many of its nearby neighbors experienced uprisings, revolutions, and civil wars (Gold, 2020). The UAE government has maintained firm regulation over the nation by promoting economic prosperity, ensuring security, and offering modern infrastructure for its citizens. Moreover, the UAE is renowned for its low crime rate and great public safety due to the political stability and stringent law enforcement by the government (Halford, 2024). By joining several key international organizations, the Gulf Cooperation Council and the Arab League, the UAE has been a leader in advancing regional stability with a strengthened geopolitical position (Sarto & Soler, 2024). The stable governance ensures that policies and regulations will remain consistent over time, favoring Sompo’s operation in the UAE. Sompo could make long-term strategic decisions with greater certainty, like hiring, long-term product design, and investments, without the fear of sudden policy disruptions.
Economic factor
The UAE is on the way to transit from an oil-based economy to a diverse economy with sectors like finance, technology, healthcare, and tourism (Crupi & Schilirò, 2023). This economic diversification reduces its economic volatility and diversifies the demands for various types of insurance products. The UAE economy has been resilient and growing over the past years even during the global economic crisis. Its currency dirham is pegged to the US dollar, meaning that the foreign exchange rate is fixed with minimum risks (Federal Exchange, 2024). These favor Sompo’s expansion and operation in the UAE as it could benefit from a stable and predictable financial environment to launch products and make investments with fewer risks. Moreover, the UAE economy is stable with resilience and rapid growth. It has a high GDP per capita ($77,251 in 2024) and a wealthy population (Trading Economics, 2018). It is projected that more than 6,700 millionaires will flow into the UAE in 2024 (Amarante, 2023). This is a unique opportunity for Sompo because these high-net-worth individuals/families need a high-value and wide range of premium insurance products, such as asset protection, life insurance, and health coverage that are designed for the affluent market sector.
Social Factor
The population of the UAE is diverse and rapidly growing. Expatriates account for about 88.5% of its population (about 11 million) and Emiratis make up around 11.5% (GMI Research, 2022). As It means that Sompo may need to offer insurance products that are specially tailored to the needs of expatriates from diverse cultural backgrounds. A substantial proportion of businesses these expatriates owned are in industries like finance, technology, real estate, health care, and legal services (ARN News Centre, 2024). This could be an opportunity for Sompo because this wealthy population needs more diverse and premium insurance products for their businesses that financially benefit Sompo. Moreover, the UAE population is now becoming more aware of health and wellness due to government initiatives on health, changing lifestyles, and the greater influence of global wellness information and trends. The UAE government has rolled out a series of initiatives to advance health and wellness. For example, the UAE Vision 2021 program promotes healthier lifestyles, and fitness and improves access to high-quality healthcare. The government also invested in fitness centers and education campaigns to raise people’s awareness of preventative care and healthier lifestyles (United Arab Emirates, 2022). These government initiatives try to reduce the prevalence of chronic diseases like obesity and diabetes, which are key issues in the region (United Arab Emirates, 2022). This social trend means an opportunity for Sompo to launch commercial insurance for UAE’s healthcare providers.
Technical Factor
The UAE has been at the forefront of adopting up-to-date technologies across various industries, including insurance. Insurance companies in the UAE are now using mobile apps and user-friendly websites to help customers purchase and renew insurance policies, file claims, and manage their accounts. Many insurance companies have adopted AI-supported chatbots to offer 24/7 customer services to guide customers in the claiming process and selection of products (Ezzeldeen, 2024). All these suggest that Sompo needs to catch up with these technological services when expanding to the UAE in order to compete well with other insurance providers.
Additionally, big data and AI are now revolutionizing the insurance industry which enables insurers to analyze customer needs, assess risks, and improve customer services (Magyar, 2023). If Sompo could leverage this opportunity upon entering the UAE market, it may gain a competitive edge to improve its service delivery and risk assessment and management. With the increasing reliance on digital services, cybersecurity has become a major concern. There is a growing demand for cyber insurance in the UAE, particularly for corporations in the finance sector. This cyber insurance market is projected to grow at a compound annual growth rate of 25.6% from 2023 to 2028. Revenue from this sector is also estimated to grow by 10 percent per year, reaching $10.6 billion in 2025 (Cyber Hero, 2023). This could be an opportunity for Sompo to offer specialized cyber insurance products and become a market leader.
Environmental Factor
The climate change risk in the UAE is high. It faces great challenges in dealing with extreme weather events, such as extremely high temperatures, sandstorms, and flooding. Its summer temperature highs often surpass 50 degrees Celsius, producing intensified heat waves that impose great risk to public health, particularly outdoor workers and the elderly. In July 2022, the northern Emirates experienced heavy rainfall and flooding, which damaged many infrastructures (Smith, 2024). These events may disrupt business operations and even damage corporation properties, suggesting the demand for climate-related insurance products to cover property and business disruption loss and therefore an opportunity for Sompo to grasp.
Legal Factor
The insurance and relevant regulations are stringent in the UAE to protect consumers and maintain the stability of the insurance market. The Insurance Authority (IA) of the UAE is a pivotal player in regulating and monitoring the insurance sector. Its Solvency Regulation (2018) requires a risk-based capital approach to ensure that insurance companies keep sufficient financial reserves to fulfill their liabilities. Insurance companies are demanded to submit regular solvency reports to show their financial capability. They are also required to provide documentation in both Arabic and English to ensure that customers understand the policies. The IA also oversees mandatory health insurance programs, such as the Essential Benefits Plan (EBP) in Dubai, to ensure sufficient coverage and fair premiums, particularly for low-income populations (Insurance Authority, 2024). These stringent yet different regulations on insurance companies can be a challenge for Sompo to learn and adapt to. It needs to invest in legal expertise to understand the regulatory landscape of the UAE to ensure compliance.
CAGE Framework
The cultural distance between Japan and the UAE is large. Language is a moderate barrier but can be overcome by English-based communication. Japanese is the dominant language in Japan. English proficiency varies across regions and individuals. Arabic is the official language of the UAE, but English is widely applied in businesses, which may facilitate communication with Sompo employees. Buddhism and Shinto are the dominant religions in Japan. Yet business approaches are largely secular (Scroope, 2021). However, in the UAE, the religion of Islam deeply affects laws and social practices in terms of working hours, women’s positions and roles, and product acceptability (like alcohol) (Nurmohamed, 2020). To succeed, Sompo must fully understand and adapt to Islamic customs. Moreover, the demographic of Japan is highly homogeneous while the UAE population is highly diverse with a large proportion of the foreign expatriate workforce (Taylor, 2024). Therefore, consumer preferences may vary significantly in the UAE, requiring Sompo to tailor its products to multicultural business customers.
The administrative distance is moderate. The UAE applies a Sharia-compliant regulatory framework that follows Islamic religious norms and principles, such as Takaful (Islamic insurance) (Hijazi, 2023). This contrasts with the context in Japan where conventional and secular financial models are applied with basically no exposure to Islamic finance. Fortunately, the UAE is investor-friendly with favorable foreign investment policies and tax benefits. It ranks high on global indices for ease of doing business (Alshamlan et al., 2021). The regulatory environment of Japan is stable and systematic, making it easier for companies to operate in a structured way like in the UAE. Namely, the moderate administrative distance means that Sompo needs regulatory adaptation to fit into the Islamic finance system. Yet this alignment is not hard due to the welcoming business environment in the UAE and its similar structured market to that of Japan.
Although the geographic distance between Japan and the UAE is great, modern communication and logistics connect the two markets well. Japan and the UAE are about 8000 kilometers apart, equaling about 10 hours of air travel (DistanceFromTo, 2024). This may delay communication and supply chains. Japan is five hours ahead of the UAE, creating some challenges for real-time communication. Fortunately, the two markets are well connected with Dubai and Abu Dhabi as core aviation and maritime centers to facilitate trade and business trips (International Trade Administration, 2022).
The economic distance is low between Japan and the UAE. The income levels of both markets are high with relatively affluent populations although the UAE has more high-net-worth individuals and wealth in Japan is more uniformly distributed. In Japan, insurance penetration is high with high levels of acceptance of various insurance products (Agrawal et al., 2014). Yet in the UAE, insurance penetration is lower (Statista, 2024), which means a good chance for Sampo to grow and expand upon overcoming cultural, administrative, and geographic distances.
Value Proposition, Potential Customers, & Competitors
Sompo Holdings is a global leader in insurance and financial services, and the United Arab Emirates would be a great fit for the innovative insurance solutions that Sompo has to offer. Through various mergers and acquisitions, Sompo has decades of experience under their belt. Sompo has been around for so long and they have proven they can be successful in different markets, as they operate in 28 countries (Sompo, 2024). They are well positioned to take the dynamic and emerging insurance market of UAE by storm. The competitive advantage that Sompo has over its competitors is its innovative and diverse range of insurance products. The flexibility and customization options that Sompo offers all its clients, is a business model destined to be successful globally. Sompo offers health, auto, home and life insurance solutions and tailor-made policies for companies such as energy, construction, and technology. The world is changing, technology is constantly evolving and to keep up adaptability is key. Sompo has embraced this and has thrived because they leverage AI and data analytics to provide digital solutions to their customers. The incorporation of AI has not only helped to develop solutions to clients, but also to analyze their company with products such as data-driven models and predictive analytics. Customer service is Sompo’s top priority, and this emphasis has given customers great experiences which is why their loyalty is so strong. Cultural sensitivity will be huge in the UAE and understanding the culture and respecting local values. The UAE has a long-term plan called Vision 2030 which states how they want to diversify economically, implement technological advancements such as artificial intelligence, environmental sustainability/clean energy, global competitiveness, and education/healthcare improvements (UAE Portal, 2024). Vision 2023 would be more feasible for the UAE with Sompo Holdings entering the market. Sompo would provide insurance solutions that could help companies in Sompo manage risk and help with infrastructure development. Going green will also be easier as Sompo can offer businesses tailor made solutions such as initiatives and insurances to get them involved with renewable energy, and new technologies that are following environmental regulations. Technology is an innovative sector, and cybersecurity is huge for any market using technology significantly. Sompo would aid in cybersecurity insurance and technological insurance. Sompo Holdings is bringing a wide range of products and solutions into the UAE market. Their diverse portfolio of solutions includes world-class insurance that is globally recognized for its excellent customer service. Sompo has proven to be adaptable to different markets around the world, with a futuristic way of thinking that breeds innovation which will result in businesses thriving in the UAE. The UAE provides Sompo with a surplus of potential customers. Sompo’s solutions are so broad, that there is no such thing as a segment of the market that would not fit Sompo’s target audience. They can offer solutions to individuals, SMEs, and large businesses. Every set of potential customers have their own needs, behaviors and characteristics. There is no group of customers that could not benefit from Sompo’s exceptional insurance solutions. Individual consumers are a very strong target customer for Sompo, including expatriates. The UAE is home to many individuals who have high incomes, which means these clients aren’t looking for low-cost insurance, they will most likely be in the premium insurance market. Individuals with high incomes are always looking for premium insurance in home, life, health and auto insurance. With regards to expatriates, Sompo can use their competitive advantage and offer solutions that would not be otherwise offered in UAE that will be a better fit for these expatriates, which would be more comparable to the insurance of their home country. In this new era of technology, Sompo has been very open to innovation, and this will also appeal to the younger consumers in the UAE as they are very technologically friendly, especially in comparison to their competitors. The UAE individuals usually prioritize quality of products and services over lower prices. With a strong brand recognition and brand loyalty, as well as the ease of their digital channels, Sompo’s priority consumers should include regular individuals. Businesses in the UAE would also thrive with a company like Sompo entering the market. Small and medium-sized businesses are always looking to scale and grow. Doing this is not easy, and there is a tremendous amount of risk. These small and medium companies are perfect for Sompo because they offer many services to their business clients as well, which will help them protect resources such as property and employees. Companies like these are focused on expanding and growing revenue, and Sompo can help mitigate these risks with the choice of bundled insurance policies like worker’s compensation, property insurance and even cyber security to help protect their intellectual property. The option of managing claims, pricing and policies online will be an added benefit for these SMEs to work with Sompo. Sompo will offer the affordable yet high quality insurance these companies need to protect their assets as they take the leap into becoming a large business. Sompo will not only help with insurance but as a business grows, they would like to offer their employees benefits which Sompo has shown flexibility with, in certain packages. As much as individuals and SMEs would be good for Sompo in the UAE, the most attractive customer in this market would be large companies. Large corporations are not usually just regional, and what better insurance for a global company than a global insurance company like Sompo, that will offer the products and services these large companies need, all over the world in different markets. These companies all have valuable assets and are constantly navigating risks, in various sectors in the UAE. These risks can include making sure the company complies, risks in supply chain management, and even environmental initiatives. What these large corporations look for is loyalty, as they cannot afford to be using time and resources to be switching insurance companies constantly. A top priority may be establishing trust and a genuine relationship with the company that will make the company’s life easier, at a reasonable price. Sompo is no stranger to dealing with large corporations and the complications that can arise. Sompo’s large insurance portfolios can be exactly what these companies are looking for, as they are able to provide risk assessment, risk mitigation, and like all their customers, have customizable options. These large companies need to make sure they are fully protected, and with a strong history of success to back them up, Sompo Holdings is the way to go. Included in these large corporations can also be government organizations. They have similar needs and characteristics as these large corporations and require the same level of expertise and customizable options. An aspect of key interest for government organizations can be sustainability that lines up with their political and economic outlook for the UAE. To have a chance in the UAE, Sompo must have an effective analysis of its competition in this market. The insurance market is fiercely competitive in the UAE, as there are firms both locally and globally, like Sompo. Insurance companies that will be competitors include the Dubai Insurance Company, the Emirates Insurance Company, AXA and Gulf Insurance, Oman Insurance and Allianz UAE (Atlas, 2024). These companies have the advantage of familiarity of the market over Sompo Holdings, and stronger brands locally. Sompo will have to differentiate itself from these companies, and liability of foreignness can be an obstacle. Sompo’s competitive advantage is its adaptation locally while being a major firm globally. In terms of digital solutions and technological innovation, Sompo has the upper hand over these other competitors, which lead to efficiency and sustainability. The customization and flexibility Sompo offers its clients is a major factor in their competitive advantage. With the UAE’s recent trend towards environmental products, Sompo will be at the forefront of this movement, while specializing in green technologies and renewable energy. The insurance landscape can be a very bad experience for customers, and with Sompo’s history of excellent customer service, this is a strength that travels across all markets and cultures. The combination of expertise globally, digital solutions, customization and customer service will make Sompo stand out from its competitors in the UAE.
Partners and Collaboration
Regulatory and Legal Environment
Opportunities and Challenges
The UAE market offers Japan’s insurance company (Sompo Holdings) significant opportunities for growth and development. One of the opportunities is strong and rapid insurance market growth in the United Arab Emirates (Burling & Lazarus, 2023). Sompo Holdings can expand its operations in the fertile ground of the UAE insurance market, which is consistently growing. Rapid urbanization, infrastructure investment, and increased expatriates drive increased demand for comprehensive insurance solutions. The non-life insurance segment, mainly property and casualty coverage, is expected to drive the market to grow at a compound annual growth rate (CAGR) of more than 6% (Suryawanshi & Aher (2023). Government initiatives to promote economic diversification complement these trends. Sompo can quickly capitalize on these high-growth areas by providing products geared toward the local market’s needs.
While the market continues to develop, there are still wide gaps in the health, life, and cyber insurance sectors. The precise pathway for market penetration is through mandatory health insurance schemes implemented by the UAE government. These programs aim to provide additional health coverage to demographics not yet covered, leading to a demand for new, customized solutions (Wakerley et al., 2023). With innovative city projects and others, such as ambitious digital transformations undertaken in the UAE, cyber insurance and risk mitigation products have become more relevant. Given this growing demand, Sompo Holdings has a unique opportunity to introduce niche offerings that address evolving consumer and business needs and differentiate itself in an underpenetrated market.
The other opportunity is in the concept of digital transformation, particularly in modern technology in the UAE market. Without any reasonable doubt, the UAE stands out possibly as one of the most technologically advanced nations compared to other nations in the Asian region. It, therefore, becomes the right market for companies in the insurance sector (Wakerley et al., 2023). Sompo Holdings has good experience in using digital transformation and technologies. UAE is in a place to provide the company with all technology developments, including Artificial Intelligence, machine learning, and blockchain. In this context, the company could leverage its tradition of applying technological advances to streamline operations such as customer services, claims processing and underwriting, and policy management in the UAE market, thus catering to the growing demand for convenience and efficiency (Shuhaiber et al., 2023). Sompo Holdings can also deploy mobile apps and online platforms for instant customer support, which would fulfill the tech-driven preferences of UAE residents, thus differentiating the company from its competitors.
The UAE has developed a liberal legal framework for foreign investments and economic growth. The strategy leverages an ingenious move to merge UAE’s central bank and its insurance authority to administer pitent governance while simultaneously providing an ideal regulatory context. The potential market also has other favorable initiatives that promise the company’s growth. For instance, Blanke & Shafi (2024) opine that the introduction of Federal Decree-Law No. 48 of 2023 represents a transformative shift in the UAE’s regulatory landscape for insurance brokers. These frameworks facilitate market access and offer sweeteners to insurers from other countries. The policies supporting digitalization and customer experience management also complement Sompo’s strategy. By following these guidelines while at the same time exploiting the permissibility of their implementation, Sompo Holdings can set up a strong operational foundation bolstered by the encouraging regulatory environment that supports long-term business growth and sustainability in the UAE.
Challenges
Wakerley et al. (2023) stipulate that the UAE is a multicultural country with a diverse insurance consumer base, characterized by expatriates as the more significant part of the population. Although the increased expatriate diversity creates an opport
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