Insurance Invasion(2)

Editor:at0086 | Resource:AT0086.com

No international insurer wants to be the one to accuse the government of not meeting its WTO commitments although many complain in private that Beijing has not acted in the spirit of the WTO’s mantra of equal treatment for all market participants.


In the country’s biggest cities, where international players have had more success at getting approval for branches, analysts say the they have carved out a relatively significant market share, though figures are not available.


Still the foreigners have been constrained by a limited supply of agents and other industry professionals. Many prefer to work for domestic companies because of perceived better career opportunities. Consumers have also shown limited enthusiasm for foreign groups’ policies, which, though aggressively priced, are often more expensive than those issued by local companies.


Global insurers, such as HSBC and Axa Winterthur, that have chosen to invest directly in existing Chinese insurers have been more successful than those striking out on their own or through newly formed joint ventures. Like their counterparts in the banking sector, they have found it more profitable to tie their fortunes to state-owned partners than to fight them.


Draft industry regulations released last week restated the limit on foreign ownership in local insurers as 20 per cent for each individual investor and 25 per cent for all foreign shareholders combined, the same limits that apply in the banking sector.


Investors can still exceed those limits, but in practice are likely to continue to find expansion difficult because they will not be considered local.


The regulations, most of which are aimed at excluding short-term foreign investors, will also introduce a $2bn minimum asset requirement and make offshore investors hold their stakes for at least three years. Investors will also have to have top ratings from an international credit rating agency, a barrier that may screen out some institutional investors.


On the other hand, the draft regulations would allow banks to invest in domestic insurance companies, a long-expected move that fits with Beijing’s plan to foster home-grown full-service financial institutions.


But companies such as China Life, which took in Rmb121bn, or 47 per cent, of total life assurance premiums in the first half of this year, are not going to be satisfied with domination of the domestic market. They are already investing large sums in offshore securities markets.


With Beijing’s wholehearted support, these behemoths may turn the tables on the foreign insurers through takeovers that will give them access to foreign markets as well as inter-national expertise. International groups may find that being acquired by a Chinese insurer is the best way to improve their chances in the murky Chinese market.

 

Minority holdings find favour in booming market


International insurers have been able to buy minority stakes in Chinese underwriters with relative ease in the past few years and almost every domestic life insurer, besides market leader China Life, now has a foreign strategic investor.


Analysts say that, on the whole, these investments have been successful thanks to the rapidly growing market, but because only a few Chinese insurers have sold shares to the public, foreign investors have not seen the kind of huge returns made by foreign investors in the Chinese banking industry.


Investments in the insurance sector include HSBC’s 17 per cent stake in Ping An Insurance, Carlyle Group’s 19.9 per cent stake in Pacific Insurance, Zurich Insurance’s 19.9 per cent stake in troubled New China Life Insurance and Axa Winterthur’s 15.6 per cent stake in Taikang Life Insurance.

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