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Manulife-Sinochem Life Insurance, the first life insurance joint venture in China, opened its Beijing branch Thursday.
The new branch is the third the company has set up, following the launch of its headquarters in Shanghai in 1996 and an office in the southern coastal city of Guangzhou at the end of 2002.
Applications to insurance regulators are also under way for branch licenses in Ningbo and Suzhou in east China, said Victor Apps, Manulife Financial Asia's senior executive vice-president and general manager.
It is hoped that those licences would be awarded this year and start up next year, he told China Daily.
Manulife Sinochem is a venture between Canada's Manulife (International) Ltd, a life insurance arm of Manulife Financial, and the China Foreign Economic and Trade Trust & Investment Company, a member of the Sinochem Group, a big Chinese company. The Canadian party holds 51 percent and the Chinese 49 percent.
Shanghai and Guangzhou were among the first Chinese cities that were opened up to all foreign insurers in the first year after China joined the World Trade Organization (WTO) at the end of 2001.
And Beijing was opened last December. The three cities are usually the first choices for foreign insurers. Apps said Manulife-Sinochem would start in the three major cities and gradually move to other cities that are close to the first three in the next few years. It was also interested in big central and western cities like Chengdu and Wuhan.
China has promised to lift geographical restrictions for foreign insurance companies three years after it joined WTO, which means all domestic cities will be opened up by December and new licence approval will hopefully be quicker.
"Eventually we will open business in all the places (in China)," said Marc H.Sterling, Executive Vice-President of Asia Regional Operations at Manulife Financial, Asia.
Foreign life insurers will also be able to do group insurance and pension business in China in December.
Sterling said Manulife-Sinochem has started preparations for group life insurance policies and would apply to the regulators shortly.
With expertise in pensions in overseas markets, Manulife Financial is interested in pension business in China, such as providing pension management and investment for domestic firms.
For Manulife, pensions are the second most profitable business in China, after life insurance.
However, the company is still awaiting clearer policies about the participation of the private sector in insurance before making concrete moves, Apps said.
Compared to developed markets, life insurance is underdeveloped in China. Domestic companies did not sell commercial life insurance policies until the end of the 1980s. The business picked up in the 1990s, when a few foreign companies, such as AIA and Manulife, entered the market to trial its opening-up and brought competition.
Life insurance was still a very new business in China, said Apps. But it will grow hugely in the future, because of the fast growing economy, a large savings pool and huge population base in China.
"Eventually, China will become the largest insurance market in the world," Apps said, "And we want to be a part of that."
Foreign insurers and insurance joint ventures have become a major force in China's insurance market. They achieved a 56 percent growth in premium sales in the first four months of this year to 2.9 billion yuan (US$350.2 million), according to statistics from the China Insurance Regulatory Commission.
Chinese insurers are still the big brothers in terms of national sales, given their vast network and history. But foreign companies are quickly catching up.
It would be hard to outstrip big Chinese insurers such as China Life and Ping'an Nationwide, but foreign companies could catch up quickly in individual cities, Apps said.
The fundamental issue was how to develop enough qualified salespeople and managerial staff to do business in China, he said.
The challenge was the same for Chinese firms.
(China Daily May 21, 2004)
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