Expert on Development, Challenges of China's Reinsurance Industry

Home>>Business

Last updated at: (Beijing Time) Friday, November 23, 2001

Expert on Development, Challenges of China's Reinsurance Industry

China, following its entry into the World Trade Organization (WTO), will strengthen the development of and supervision over the reinsurance industry, facilitate the integration of China's reinsurance market into the international market, and forge an open and competitive market.

Ding Xiaoyan, vice-director of the Property Insurance Regulation Department of the China Insurance Regulatory Commission, made the remark on Friday at China's WTO Insurance Summit, which debuted Thursday.

Ding said that the reinsurance market in China is still in the initial stage, facing a lot of problems including low commercialized economy, limited players in reinsurance market and insufficient reinsurance supply, and relatively low technology and services of domestic reinsurance market.

According to her, currently, China Reinsurance Corporation is the only specialized reinsurance company in China's insurance market, whose core business is legal reinsurance.

Statistics show that at present, legal reinsurance accounts for 88 percent of the total reinsurance market, while commercial reinsurance accounts for 12 percent. In case of China Reinsurance Corporation, the exclusive operation of legal reinsurance businessprevents the upgrade of the reinsurance technology and services.

In the meantime, the regulation of commercial reinsurance needs to be strengthened, Ding pointed out. At present, the regulation on reinsurance market is mostly focused in legal reinsurance business.

Ding said that in the September 11 event in the US, 70 percent risk is shared by the international reinsurance market, which shows the important role reinsurance played in risk spread and drew enough attention from China's insurance regulation authority.

China, with its entry into the WTO, will meet great opportunities and challenges as overseas competitors entering China market.

According to China's commitment to the entry of WTO, upon the entry, foreign companies are allowed to provide life and non-life reinsurance service in the form of joint ventures, branches and subsidiaries. And there should be no limitation of the numbers and districts; Legal reinsurance business is to be reduced by 5 percent annually, with 4 years after the entry of WTO, 20 percent legal reinsurance share will be canceled.

She said that China will develop reinsurance market and increase competing players. China will first regulate the current market players, and carry out mechanism reform in state-owned reinsurance firms. New reinsurance bodies will be approved into the market including domestic specialized companies and foreign companies. China will also develop reinsurance intermediaries, provide intermediate service to direct insurance companies.

Ding concluded that China will enhance risk avoidance in reinsurance market and establish effective reinsurance regulations, which include establishing and optimizing reinsurance regulations, strengthening regulations on compensation capability, introducing reinsurance credit classification, and rectify regulations on routine work and reinsurance intermediaries.

World Leading Reinsurance Company Opens Beijing Office

Move aims to stimulate reinsurance