Moody’s Investors Service has issued a stable outlook for China’s property and casualty (P&C) insurance industry in 2020, based on diversifying business growth, stable profitability, and strong capitalisation.
Offsetting these factors is the fast growth in unseasoned non-motor lines, as well as potential acceleration in motor pricing liberalisation, analysts said.
“China’s P&C insurers continue to record strong growth in their non-motor lines, led by health, agricultural and liability insurance, which is bringing benefits in terms of product diversification, but will also test underwriting discipline,” said Moody’s analyst Kelvin Kwok.
“However, profitability will remain supported by stable underwriting results and steady investment income,” he added.
“Specifically, motor line profitability will be balanced between a significant drop in acquisition expenses from tighter commission practices and higher loss ratios from premium liberalization.”
Moody’s considers Chinese industry capitalisation to be strong, with a comprehensive solvency ratio of 279% at the end of June 2019, the highest level since 2016 and well above the regulatory minimum.
The firm also expects insurers to make changes to growth strategies and reinsurance purchases to reduce the impact on their capitalisation ahead of the second phase of China’s Risk Oriented Solvency System (C-ROSS).
Additionally, analysts said that the industry has moderated its allocation into alternative investments, alleviating erosion risk from potential impairments.
