Tough Future Predicted for Foreign Insurers in China

Posted on Nov 29, 2010 by Sergio Ulloa (G+)

A survey by professional service firm PricewaterhouseCooper (PwC) has shown that foreign insurers operating in China expect their market share of the overall insurance business in the country to remain static in the short to medium term. PwC surveyed 31 foreign insurers currently present in China. Expectations emerged that the next three years will be stagnant for foreign insurance companies as local based rival insurers take a stronger presence in the market. Life insurers are forecasting that their current market share of this sector of the insurance business will remain at around 5 percent for the next three years, while insurers in the property and casualty sector also expect no growth in China - with a continuing market share of 1 percent. A combination of facts has been highlighted as obstacles to further growth for overseas insurers in the Chinese insurance market. These include stringent measures imposed by the insurance regulator - the China Insurance Regulatory Commission (CIRC) - and increased competition from local insurance companies operating in the second largest economy in the world. Commenting on the survey, Tom Ling partner at PwC China said: "Foreign insurance companies operating in China have tried in vain to gain traction and increase their market share. Established domestic insurers and the aggressive geographic expansion of the smaller insurers are giving the foreign players a run for their money." During the first 6 months of 2010, the 46 foreign insurers present in China generated total premiums of CNY32.58 billion (US$4.9 billion) - a figure which accounted for 4 percent of total insurance premiums. The Chinese insurance market has seen a more aggressive approach from local financial institutes. The China Construction Bank Corporation and ICBC have stepped up their operations in the insurance sector in China, taking advantage of the growing demand for protection products from a more affluent population. Domestic provider Ping An Insurance - one the largest insurers present within the Chinese insurance market - received approval to merge with the Shenzhen Development Bank Co in a move which will increase the Ping An Insurance distribution network. Also, the Industrial and Commercial Bank of China (ICBC) agreed to buy a majority stake in the French-Chinese joint venture AXA-Minmetals Assurance Company giving ICBC - the world's largest bank by market value - access to the Chinese life insurance market and adding to their non-banking products in the most populous country in the world. Previously international insurers had been reporting substantial activity from their Chinese operations focusing on the country's insurance market for global growth and new premium sales. In October 2010, Zurich maintained a 20 percent share in their Chinese joint venture - New China Life Insurance (NCI) - ensuring the Swiss based insurer retained its original holding in the Chinese insurer and profit potential. The Belgium insurer Ageas - which emerged from the 2007-2008 global financial crises as a leaner business - also aims to strengthen its operations in Asia highlighting China as a key market for future growth. Europe's third largest insurer Generali is also focusing on China as part of its strategy to accelerate growth for the global Italian insurer. Canadian insurer Sun Life Financial has undertaken a restructuring of its joint venture in China - Sun Life Everbright - reducing holdings in the company from 50 percent to 24.99 percent, but this has enabled the dominant Chinese influence to expand its distribution network. Insurance companies, either foreign or domestic based, have been re-positioning and developing within the Chinese insurance market, committing themselves to potential growth opportunities. Multi-national insurers have established offices across China taking a positive foothold in the country and placing a strong focus on activities - with recognition of the prospects for expansion and premium appreciation. Although the recent survey by PwC highlights the tougher conditions for foreign insurers operating in China, multi-national insurers remain committed to the insurance industry in the country by improving links with local insurance companies in order to maximize opportunities in a market which has yielded positive returns for many insurers in the past. Companies Mentioned: Sun Life Financial Sun Life Financial is an international financial services organization providing a range of protection and wealth accumulation products and services to individuals and corporate customers. Sun Life Everbright Life Insurance Co. Ltd Sun Life Everbright Life Insurance was established in April 2002. It's shareholders include China Everbright Group, Canada's Sun Life Financial Group, China North Industries Group Corporation and Anshan Iron and Steel Groups, based in Tianjin Zurich Headquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries andoffices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world's largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers. Assicurazioni Generali SpA The Generali Group is one of the most significant participants in the global insurance and financial products market. The Group is a leader in Italy and Assicurazioni Generali, founded in 1831 in Trieste, is the Group's Parent and principal operating Company. Generali is one of the leading global players in the assistance sector thanks to the Europ Assistance Group, active in more than 200 countries with services in the motor, travel, healthcare, home and family sectors. In recent years, the Group has made a significant return to 14 central-eastern European markets and has set up offices in the principal markets of the Far East, including China and India. ICBC By the end of 2008, ICBC had altogether 385,609 employees and 16,386 domestic and overseas branches, providing extensive and high-quality financial products and services to 190 million personal clients and 3.1 million corporate clients. AXA-Minmetals Assurance AXA-Minmetals Assurance is the first Sino-French insurance company in China and also the first life insurer approved by China Insurance Regulatory Commission. Established in Shanghai in May 1999, the company has boasted stable and sustainable development with its ambition of Becoming the Preferred Company. In September 2010, AXA-Minmetals has achieved a total premium income of RMB 830 million, increased by 54% compared to the same period of last year and its new business volumes have also increased by 75%. Ageas Ageas is an international insurance company with a heritage spanning more than 180 years. Ranked among the top 20 insurance companies in Europe, Ageas has chosen to concentrate its business activities in Europe and Asia, which together make up the largest share of the global insurance market. They are grouped around four segments: Belgium, United Kingdom, Continental Europe and Asia. It is an undisputed leader in the Belgian market for individual life and employee benefits, as well as a leading non-life player, through AG Insurance. Internationally Ageas has a strong presence in the UK, where it is the third largest player in private car insurance. The company also has subsidiaries in France, Germany, Turkey, Ukraine and Hong Kong. Ageas has a track record in developing partnerships with strong financial institutions and key distributors in different markets around the world and successfully operates partnerships in Luxembourg, Italy, Portugal, China, Malaysia, India and Thailand. New China Life Insurance New China Life Insurance Co.,Ltd (NCI?has headquarters in Beijing and was established in 1996 It is a large national insurance company, with products including traditional protection products, bonus products as well as the products that have a strong financial management function. With sustained, healthy and harmonious development of the company, the brand value of NCI is a valuable asset. Ping An Ping An Insurance (Group) Company of China, Ltd. (Ping An) is engaged in providing a range of financial products and services. The Company focuses on three businesses: insurance, banking and investment. The Company operates in five business segments: life insurance business, property and casualty insurance business, banking business, securities business, corporate and other businesses. The Company's subsidiaries include Ping An Life Insurance Company of China, Ltd. (Ping An Life), Ping An Property & Casualty Insurance Company of China, Ltd. (Ping An Property & Casualty), China Ping An Trust & Investment Co., Ltd. (Ping An Trust), Ping An Securities Company, Ltd. (Ping An Securities), Ping An Bank Co., Ltd. (Ping An Bank), Ping An Annuity Insurance Company of China, Ltd. (Ping An Annuity) and Ping An Health Insurance Company of China, Ltd. (Ping An Health), among others.