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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. 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) |
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