Foreign insurance companies' business in China is likely to accelerate after the full opening-up of the market at the end of this year, a senior Chinese regulator said yesterday.
The rapid growth of foreign insurers, as well as intensified competition with local players, will also boost the development of the domestic insurance industry and deliver stronger support to the nation's economic growth, the official said.
"No matter whether they are foreign or Chinese, insurance companies' strong growth will be conducive to the development of the local insurance industry and the economy. And it's a good thing," said Meng Zhaoyi, deputy director-general of the International Department of the China Insurance Regulatory Commission (CIRC), according to China Daily.
China is scheduled to lift nearly all restrictions on foreign insurers at the end of this year as part of its commitments made upon its World Trade Organization accession more than two years ago.
That would include opening key market segments such as group insurance and annuities, as well as allowing foreign insurers to operate in all Chinese cities, although they will still need regulatory approval before new branches are set up.
The breakthrough on business and geographical restrictions, coupled with the gradual accumulation of experience in the local market, will greatly propel foreign insurers' business growth and increase their market share. The effect is being clearly seen even in the first two years after the full opening-up, Meng said.
"The trend is already reflected in first-half-year data," he said.
Foreign insurers achieved an impressive 50 per cent growth in new business in the first six months of the year, on a year-on-year basis, more than two times faster than their Chinese counterparts, the official said.
Thirty-nine foreign insurance companies have so far entered the Chinese market and have set up 70 operational entities, including branches and joint ventures. They are currently allowed to operate in 15 Chinese cities.
In Guangzhou, a major target in their China strategies, foreign insurers seized an unexpectedly large 41.5 per cent market share in terms of first-year life insurance premiums during the first five months of this year.
And American International Assurance has reportedly overtaken New China Life Insurance Co recently to rank the fifth in terms of sales through agents in the domestic market. The US-based insurer reaped 2.5 billion yuan (US$301 million) in premiums during the first seven months of this year, representing a 1.26 market share, official statistics indicated.
The broad difference in growth rates between foreign and local insurers this year, Meng said, was partly due to foreign players' relatively low base figures and the fact that Chinese insurers are undergoing reforms and business structure reshuffles that hamper premiums growth.
Analysts said that a broad reduction in the sales of five-year single-premium products this year, with major local insurers trimming unprofitable operations, was a major reason for the abrupt downshift in the growth rate of China's life insurance sector in the first half of this year.
"But the growing competition will promote mutual growth and improve the overall competitiveness of the domestic insurance industry," Meng said.
Nearly all the foreign life insurance companies are joint ventures with Chinese partners, although foreign property and accident insurers have mostly set up branches.
The rapid growth of China's insurance industry and its huge potential is drawing growing attention from the international insurance community.
The Chinese insurance industry grew by more than 30 per cent during the past two decades. "And that will continue in coming years," Meng said.
The CIRC will host the 13th annual conference of the International Association of Insurance Supervisors (IAIS) in 2006 in Beijing. Wu Dingfu, chairman of CIRC, has also been especially invited by the 11th IAIS annual conference, to be held in Jordan next week, to deliver a speech.
Source: China Daily