30th December 2019 – Author: Charlie Wood
The liberalisation of China’s insurance industry is set to offer vast opportunities to foreign life insurers, GlobalData analysts say.
Although the share of foreign insurers is low, GlobalData expects the Chinese life insurance market grow to a compound annual growth rate of 9.6% from $316.6 billion in 2018, to $484 billion in 2023.
Of the 50 foreign insurers present in China, 28 are life insurers and in the first half of 2019 foreign insurers reported 44.8% year-on-year growth in premium income to $25.9 billion.
Analysts say they held a share of 6% in the overall Chinese insurance industry and 8.1% in the life insurance market in 2018.
“Increased foreign participation is likely to bring more benefits for mainland consumers,” explained Ashish Raj, Senior Insurance Analyst at GlobalData.
To enhance the participation of foreign insurers, the China Banking and Insurance Regulatory Commission (CBIRC) relaxed rules requiring any foreign insurer to have at least 30 years operating experience before entering the market.
CBIRC also relaxed the mandatory condition for foreign insurers to establish a representative office in China for at least two years before applying for authorisation.
However, GlobalData notes how complex, tedious and time-consuming the authorisation and licensing processes for foreign insurers and their branch offices and call centers in China are.
Furthermore, the solvency requirements for insurers differ based on their business structure, risk profiles and risk management capabilities.
In addition, a foreign-funded insurer must maintain a minimum capital requirement of $30.2 million or an equivalent amount in a freely convertible currency.
“The Chinese life insurance industry is a lucrative market for foreign insurers but there are sizable entry barriers,” adds Raj.
“The removal of limits on foreign ownership can lead to the overall development of the life insurance industry. Large foreign insurers are expected to apply for new licenses while existing foreign life insurers are expected to increase their stake in the operating joint ventures.”