Fitch Ratings suggests its neutral outlook for the Chinese non-life market reflects its view that the sector will maintain a sound solvency buffer and steady premium growth, alongside its expectation that insurers’ flexibility to raise capital in support of business expansion will remain intact.
Further, Fitch expects a sustained moderate pace of premium expansion for Chinese non-life in 2023, though it notes that pandemic restrictions in some cities could temporarily lessen the need for insurance.
The rating agency adds that non-motor insurance is likely to remain the lead driver of growth due to regulatory initiatives and low market penetration.
Fitch anticipates motor insurance pricing will remain steady, while motor premium growth dynamics will hinge largely on the sales of new automobile vehicles.
Though still, it believes higher overheads will constrain smaller insurers’ capability to reduce the magnitude of underwriting deficits.
Meanwhile, as the growing frequency of climate-related catastrophe perils such as typhoons, floods, and droughts continue to threaten underwriting stability, Fitch expects Chinese non-life insurers to rely consistently on reinsurance to mitigate the aforementioned risks, as their solvency buffer has dropped after the implementation of C-ROSS Phase 2.
As of December 6, there have been no rating upgrades nor downgrades for the Chinese non-life sector in 2022, and its Insurance Financial Strength Ratings range from ‘AA-’ to ‘BBB’, with concentration in the ‘A’, ‘A-’ and ‘BBB’ levels, depending on an insurer’s company profile and financial performance.
