Money

China mulls insurance market easing for foreign firms

(Agencies)
Updated: 2010-08-05 17:12

'Well-Positioned'

"A number of foreign insurers feel trapped" as they are unable to grow at a pace that would accelerate profitability, the PwC report said. "At the same time they fear that if they leave the market the regulator would look unfavorably on any request to reenter at a later date."

While it may take another few years to break even, Sun Life Everbright now is "well-positioned to capture more than a fair share" of China's life insurance market after its restructuring, according to Dikran Ohannessian, president of Sun Life Financial Asia. Premium income is forecast to more than double this year from 2009's, he said.

"It's not fair to say the commitment has diminished," Ohannessian said in an interview on Aug 2. "The market is attractive, we are committed, and we want to grow the business."

Biggest Earner

While foreign life insurers are now able to offer the same services that local rivals can, a constraint on overseas non- life insurers is the fact they still can't write legally required business, including the compulsory third-party liability auto coverage.

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In the total property insurance market -- which includes auto, commercial property, homeowner and cargo cover -- the share of foreign companies slid 0.1 percentage point in 2009 to 1.06 percent, according to data from the regulator. Foreign life insurers doubled their share to 5.2 percent last year from 2.6 percent in 2004. Only five of the 15 overseas property insurers were profitable in 2008, according to the yearbook.

The CIRC held discussions this year on opening up the compulsory business, the people said. The Ministry of Commerce, which leads China's WTO negotiations, supports the liberalization although the nation isn't obliged to do so under its WTO commitments, two of them said.

A press official at the regulator said no immediate comment was available.

China added almost 50 million vehicles in the six years since 2004, according to the China Association of Automobile Manufacturers, and overtook the US as the largest auto market last year.

'Crying Wolf'

Beijing-based PICC won't object to the regulatory relaxation, Chairman Wu Yan said in an interview in Shanghai.

"We'll follow any decision by the CIRC," he said. "Foreign insurers have been here for many years and people have been crying wolf, but look at the market share."

In the fight for new clients, overseas insurers "definitely aren't as competent as local companies," which have stronger ties with car dealers and more outlets in inland cities where most future growth is forecast, said Nan Sheng, a Shanghai-based analyst at UOB Kayhian Investment Co

"If lots of foreign companies come into the market, there will be some pressure on policy acquisition costs" at local insurers, he said, referring to higher expenses on commissions and agents.