Analysis by GlobalData projects an almost 33% increase in China’s gross written premiums (GWP) in 2024 from the level recorded in 2020, with growth expected to benefit domestic champions despite the country opening up.
China is on course to become the largest insurance market in the world, but while attracting foreign insurers to invest in the country will lead to growth, GlobalData feels that domestic players will benefit from any foreign competition.
The firm’s Global Insurance Database puts China’s GWP at $195.65 billion in 2020 and predicts that in 2024 this will rise by almost one third to $259.97 billion.
In recent times, China has been opening up its economy in a bid to attract investors from overseas. This includes the removal of the 51% cap on foreign insurers ownership in Chinese operating insurers by the China Banking and Insurance Regulatory Committee (CBIRC) in December of 2019, designed to level the regulatory playing field for overseas carriers.
In response to this, some re/insurers, notably Allianz, have been looking to become one of the first foreign insurers to run a fully owned operation in China by seeking 100% ownership of their Chinese entity.
But despite the 51% rule being abolished, GlobalData has stressed the importance of recognising that this move is designed to benefit Chinese firms rather than those from overseas.
“China’s strategy of opening its market to foreign players is part of the country’s wider economic efforts to bridge the gap between international competing firms and China. China is also expecting that foreign insurers will push domestic insurers to learn from global best practices, fostering better corporate governance, risk pricing, and investment management,” said Jazmin Chong, Insurance Analyst at GlobalData.
“As China continues to foster national champions, foreign insurers that wish to follow Allianz foot steps should take a holistic approach to this market space, challenging Chinese insurers on company best practices rather than diverting efforts and investment to target market shares and gross written premiums, as a benchmark for growth,” she added.
Following the removal of the capped ownership rule, the CBIRC revealed plans to delegate the supervision of property insurers and reinsurers to local authorities in July 2020.
Given the vast population of China, rising asset values and increased urbanisation across the country, coupled with the fact the region is home to a wide-range of potentially devastating natural catastrophe events, insurance penetration is expected to rise in many lines of business.
Although, as discussed recently by reinsurance giant Swiss Re, short-term health insurance could be a growth driver for non-life re/insurers operating in China.