China's insurance industry watchdog is revising its rules on
foreign insurers' representative offices in China to include
tougher entrance criteria.
The revised draft requires foreign insurance institutions to
have at least 20 years of uninterrupted experience in running an
insurance business at the time of application for a licence to set
up a representative office in China.
For those running non-insurance businesses, they should have a
business history of more than 20 years, according to a statement by
the China Insurance Regulatory Commission (CIRC).
"Compared with the original rule which has no requirement
relating to a foreign insurer's years of experience, the revision
shows the regulatory authority's commitment to preventing potential
risks and strengthening the management of foreign insurance
institutions," said Wang Guojun, an insurance professor at the University of
International Business and Economics.
According to the existing rule, foreign insurance institutions
could apply for the licence to set up a representative office as
long as they reported a favorable business performance and had no
blunders on record three years prior to the application.
The CIRC also will require stricter management by chief
representatives by raising criteria of scholarship, capacity and
experience.
"I don't think there will be any influence on our representative
office," said Kumjoo Huh, chief representative of Kyobo Life
Insurance Co (Beijing representative office).
The South Korea-based life insurer entered the Chinese market in
2004 and is actively seeking local partners to start a joint
venture.
Akihiro Matsumoto, senior resident representative of Sumitomo
Life Insurance Company (Beijing representative office), also shared
the same view.
"The revised article has no influence on us," he said.
The Japan-based insurer, which set up its Beijing representative
office in 1991, took a 29 percent stake in PICC Life Insurance
Company last December.
"The revised rule will be a big challenge for those small and
medium-sized foreign insurers that are eager to cash in on the huge
Chinese insurance market," Matsumoto added.
China's insurance industry has maintained an average of 30
percent growth in the past decade, and the market is still
growing.
A Sigma report from Swiss Reinsurance suggests China's premiums
are likely to top 453.1 billion yuan (US$55.9 billion) in 2006.
Boston Consulting Group (BCG) believes that this figure will reach
830 billion yuan (US$102 billion) in 2008.
After opening its doors to foreign insurers in late-2004, China
has seen many multinationals expanding throughout the country in
the past year and grabbing a larger share of the market.
Joint venture insurers such as Skandia-BSAM Life, Generali China
Life, and Manulife-Sinochem nearly doubled their presence in China
in 2005.
CIRC's figure suggested that the 40 foreign insurers reaped 34.1
billion yuan (US$4.2 billion) in premiums last year, which
represented 6.9 percent of the market.
Three more foreign insurers were allowed to enter the market
last year, while a total of 25 operational entities by foreign
insurers were set up.
?
According to a report from the Development Research Center of the
State Council, domestic customers place high expectations on
foreign insurers.
It shows that 74.1 percent of Chinese consumers surveyed think
foreign insurers offer exceptional service, 82 percent trust the
employees of multinationals, and 77.9 percent prefer foreign
insurance products.
The revised draft is available for public feedback until March
9.
(China Daily February 28, 2006)