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China Insurance Report Q1 2012
Business Monitor International, Jan 2012, Pages: 94
Business Monitor International's 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.
As of November 2011, it is reasonable to use the words ‘boom' and ‘bonanza' in relation to the insurance businesses of some of the leading insurance companies in China. It is no longer correct to apply these descriptions to either the life or the non-life segments. Company results and reports in relation to Q311 have highlighted how a number of challenges have become more important than they were three months ago. However, the challenges are consistent with a pause in growth – and not a contraction. For 2011 as a whole, BMI is now looking for single digit rise in premiums in both major segments.
In the life segment, a number of companies have commented publicly on a regulatory change imposed by the China Banking Regulatory Commission (CBRC). That regulator had ruled that life insurance products that are distributed through banks must be sold to clients by the banks' own employees – and not specialists who work for the life insurance companies. This has hampered the business development of a number of players who had seen bancassurance as an important distribution channel.
Some insurers have seen outflows from savings-type products as a result of a rise in inflation which has caused real returns from the products to become negative. Meanwhile, banks and other organisations have developed savings products that have attracted household savings away from the life insurers. This is at a time where many insurance companies have endured a contraction in their capital bases as a result of the fairly dismal performance of China's stock and bond markets.
Given the importance of auto insurance, it is a reasonable proposition that some property & casualty insurers are suffering from a compression in prices and margins in particular markets. However, the general slowing of the economy, and – in particular – the cooling of the residential real estate markets thanks to official measures to curb speculation, also appear to be having an impact. Figures published by the China Insurance Regulatory Commission (CIRC) and the major companies suggest that the larger players are gaining market share at the expense of the long tail of smaller domestic and (especially) foreign joint venture (JV) insurers.
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