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Foreign companies gain further access to insurance market

By Li Qiaoyi (Global Times)

07:57, May 02, 2012

Foreign insurers have finally been given the green light to enter China's compulsory transport accident insurance market, according to a government ruling effective from yesterday, a move signaling the nation's full opening-up of its insurance industry.

Starting from yesterday, any insurer gaining approval from the China Insurance Regulatory Commission (CIRC), the nation's insurance watchdog, will be eligible to engage in the compulsory transport accident insurance business, which was previously open only to Chinese insurers, according to an amended regulation promulgated by the State Council Monday.

The final announcement came after China had declared its determination to free up its compulsory transport accident insurance sector to foreign insurers in February, during Chinese Vice President Xi Jinping's visit to the US.

Although the move is likely to intensify market competition, experts noted yesterday there is unlikely to be any big change in the market structure in the near term.

"Foreign insurers, who were only allowed to sell commercial auto insurance products before, would certainly be interested in getting involved in the compulsory business, as few car owners would bother to buy the two types of products separately," Luo Qi, an industry analyst with Pingan Securities based in Shenzhen, told the Global Times yesterday.

The move should also help foreign insurers gain a bigger foothold in the country's huge auto insurance market, which accounts for roughly 70 percent of the nation's property and casualty insurance market in terms of premiums, Luo said.

However, "any big expansion in the short term would be unrealistic for foreign insurers, as they remain weak in competing with their Chinese rivals in terms of sales network and after-sales capacities," Luo noted.

"The compulsory auto insurance business, which has long been mired in the red, would also be a challenge for foreign insurers," Hao Yansu, dean of the School of Insurance of the Beijing-based Central University of Finance and Economics, told the Global Times yesterday.

The Chinese government has kept tight controls on pricing in the compulsory transport accident insurance market since the compulsory insurance policies were introduced in 2006. As a result, Chinese insurers have been reporting losses in the sector for years, amid rising costs.

There are currently 21 foreign firms operating in the country's property and casualty insurance market, recording premiums totaling 5.2 billion yuan ($826.41 million) in 2011, equivalent to only 1.1 percent of the combined premiums of the 38 Chinese firms in the market, according to data from the CIRC.

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