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The Reinsurance Group of America (RGA), the world largest life reinsurer, has made its first foray into China's market by establishing a representative office in Beijing yesterday.
"With a population of 1.3 billion, only 4 percent of people buy insurance, and we were lured by this huge potential market," said Jason Ou, chief representative of RGA Beijing Representative Office.
Compared with Munich Re, Swiss Re and Hannover Re, all of which have branch companies in Beijing, RGA is a latecomer.
"We made the decision to enter into the China market when we were sure that a large number of our existing customers have business here, and now there is an emerging reinsurance market that we are poised to get into," Greig Woodring, president and chief executive officer of RGA, said in an interview with China Daily.
But that does not mean RGA will lag behind them in business, he said.
Eleven years ago, RGA had no presence at all in Asia Pacific areas, but now it has offices in seven countries. "And in no time, we will expand our business into all Asian markets," said Woodrich.
"Compared with the three world leading reinsurance companies mentioned above, RGA is well known for its underwriting strength," Woodring explained. "Besides, RGA focuses on life reinsurance only, and the other three have both life and property reinsurance."
RGA's target customer includes all companies in China, both foreign and domestic ones. But more often than not their customers are at the high end.
Although a recent Standard & Poor's report showed that the risks in China's insurance industry are high, RGA believes that the potential opportunities are worth the risk.
"In any new and emerging market, insurers will come across higher risks. With a sound risk management system, those risks can be kept under control," Woodring added.
RGA has been impressed by China's improved investment environment.
"We filed our application to the China Insurance Regulatory Commission (CIRC), the industry watchdog, in mid-November last year. And 20 days later we got our licence. It is really amazing." Jason Ou said.
The Chinese reinsurance market, with the China Reinsurance Group as the only current local player, badly needs new underwriting capacity from global players such as RGA, as the rapidly growing primary insurance industry keeps generating huge demand for reinsurance arrangements, analysts say.
China's insurance industry has boasted an impressive 30 percent average annual growth rate during the past 20 years. Property insurance premiums surged by 23 percent in the first half of this year, although the life sector reported its first decline in a few years as major players trimmed unprofitable operations.
Unlike many developed markets, Chinese primary insurers have ceded the majority of their business to reinsurers overseas in recent years. In 2002, they gave 90 percent of their commercial business, or US$6.7 billion, to foreign reinsurance companies, statistics indicate.
"That itself shows the gap between the huge demand and inadequate supply of reinsurance," Wang Simiao, deputy director of the CIRC's Reinsurance Regulatory Division, told China Daily.
(China Daily August 5, 2005)
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