XL Capital, one of the world's top 10 insurers, wants to focus its future business in China on reinsurance and liability insurance, the company's top management told China Daily.

 

The company has set up a representative office in China, opened in Beijing in January, but is not yet directly involved in the insurance business in the country.

 

"Liability insurance and reinsurance, the new growth points for China's insurance industry, are the key areas that XL Capital would like to focus on," Brian O'Hara, president and chief executive officer of XL Capital Ltd, said in an interview with China Daily.

 

The Bermuda-based company, mainly a non-life insurer, specializes in offering tailored-made products using insurance and reinsurance. It has a strong background in liability insurance and reinsurance.

 

"Although liability insurance is still in the early stages in China, market demand has increased rapidly as more multinational companies rush into China and more local enterprises go global," O'Hara explained.

 

In terms of the reinsurance sector, there are also plenty of opportunities, especially in the satellite sector, said Clive R. Tobin, executive vice president of XL.

 

"Although the local market has been quite competitive, very few insures have the capacity to handle risks rising from catastrophes," said Tobin, "Besides, as more Chinese enterprises enter America and the European market, they need an insurer with a wide network to provide global protection."

 

With more than 90 subsidiaries globally, XL is one of five insurers that have a presence in 30 countries.

 

Although XL Capital lags behind other foreign insurers in exploring the Chinese market, O'Hara believes now is the right time to enter the market.

 

"If you want to make money from the insurance business, you should move carefully and slowly," O'Hara said, explaining the company's "prudential" strategy in exploring new markets.

 

"Following our multinational clients' pace, we have now decided to move into China," said O'Hara.

 

Most of XL's clients are large-scale companies involved in industry, and quite a number of them have set up plants in Shanghai and other Chinese cities. With a physical presence in Beijing, XL can better support its global customers, the firm said.

 

China's huge potential in the insurance sector is also a magnet for XL.

 

Despite more than two decades of growth as high as 30 percent a year, the insurance sector only accounts for 3.8 percent of China's financial industry in terms of assets.

 

Total premiums, which hit 492.73 billion yuan (US$62 billion) in 2005, accounts for only 3.4 percent of GDP, compared to 9.4 percent in the US.

 

The company set up its first representative office in Beijing on January 30 this year, an office that is currently simply monitoring the market.

 

"We would like to better understand the market before making any strategic moves," said O'Hara. "That's why we prefer to establish a representative office first rather than setting up a joint-venture, although the latter choice would bring about more speedy expansion."

 

After a close study of the market, XL will consider setting up a wholly owned company or start a joint venture with a Chinese partner. "It all depends on the opportunity," added O'Hara.

 

Before setting up the Beijing representative office, XL has had close cooperation with major Chinese insurers, such as China Reinsurance, Ping An of China, and PICC Property and Casualty Company Limited.

 

The company has also been providing insurance services to China Ocean Shipping Company (COSCO) through its operating subsidiary in Singapore.

 

"For the moment, we would like to strengthen our cooperation with local companies to provide better pricing and risk evaluation for our clients," said O'Hara.

 

Statistics from the China Insurance Regulatory Commission (CIRC) show that there were 40 foreign companies and 44 domestic firms operating in the Chinese insurance market by December 2005.

 

Approximately 124 foreign insurers from 18 countries have established representative offices in China.

 

From January to October last year, foreign insurers' premiums hit almost 30.2 billion yuan (US$3.7 billion), a 78 percent yearly increase. Their market share also increased from 2 percent in 2004 to 10 percent in 2005.

 

(China Daily March 14, 2006)