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China Insurance Report Q4 2011
Business Monitor International, Sep 2011, Pages: 91
Business Monitor Internationals China Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on China's insurance industry.
China is likely to remain bonanza territory in terms of its absolute size and growth potential.
The key driver of the life segment – the rising surplus of savings in a country where there are few attractive investment alternatives – will remain intact over the forecast period.
So too will the key driver of the non-life segment – the continuing growth in the number and value of insurable risks. The main risks are the lack of access to capital and potential volatility in China's domestic financial markets.
The corporate results published by local and major regional insurers in relation to H111 and Q211 confirmed that the growth boom that has long been evident in the statistics published by the China Insurance Regulatory Commission (CIRC) remains intact. Many insurers are increasing their profitability by developing new distribution channels, increasing the size and productivity of their agency networks or introducing new products. Some companies have published results that suggest they are gaining market share compared to entrenched players in both the non-life and the life segments.
In the life segment, premiums have continued to rise steadily thanks to the excess savings in China's economy, favourable demographic changes and the lack of attractive alternatives. In the short-term, the challenges remain relatively minor. Foreign companies can build what are, in absolute terms, very substantial businesses in China. However, they are generally restricted in what they can sell and where, as well as in relation to the sizes of their stakes in the various joint ventures. The regulatory regime is opaque and can from time to time produce perverse decisions. Over the long-term, there are two major obstacles. One is the need of many insurers (particularly in the life segment) to raise additional capital from global markets in order to support growth. The other is the potential for investment income to slide (or worse) in the event of volatility in China's equity and fixed income markets in the next year or so.
In the non-life segment, surging sales of motor vehicles and new apartment blocks, as well as the general expansion of commerce, domestically and internationally, mean the risks that have to be covered continue to grow. Unlike in other high growth markets, there does not appear to be a lack of discipline in pricing in ‘basic' lines such as auto insurance.
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