|
The opening up of China's group insurance market at the end of this year is expected to bring significant changes to the marketplace, but local insurance companies will not suffer a broad retreat as some fear, officials and experts said.
"There will be major changes in the marketplace in three to five years, but it will not be anything resembling a full-scale retreat (for Chinese insurers)," said Du Hongmei, deputy foreign institutions division director at the International Department of the China Insurance Regulatory Commission (CIRC).
According to the promises made upon its accession to the World Trade Organization more than two years ago, China will fully open the local insurance market to foreign insurers at the end of this year, including the promising group insurance sector.
China's total group insurance premiums stood at 58 billion yuan (US$6.9 billion) last year, official statistics indicated.
The market is estimated to grow to 100 billion yuan (US$12 billion) by 2006.
Many foreign-invested insurance companies, including Sino-foreign joint ventures (JVs), have publicly expressed their interest in grabbing a piece of the growing market when the door is thrown open.
Among others, Manulife-Sinochem Life Insurance, a joint venture between Canada's Manulife Financial and Sinochem, China's largest chemicals trader, said it started planning for group insurance operations as early as the beginning of last year.
"When the group insurance sector is opened up, Manulife-Sinochem will be exploring potential business by using the resources of our Chinese shareholder," said Zhang Jianfeng, assistant general manager of the company.
The company also has easy access to the expertise and technical strength of Manulife Financial, the world's fifth largest life insurer, he said.
That model, said Wang Xujin, director of the Insurance Department under the Beijing Technology and Business University (BTBU), is likely to prove a highly powerful weapon for JV insurers in the Chinese group insurance market, and may greatly revise the landscape of the market in a couple of years.
"The group insurance market will see significant changes, and that needs the attention from regulators," Wang said.
The Chinese shareholders of those JVs, many of which have a leading position in their respectively industries in the local market, will play a pivotal role in future market competition, experts say.
The number of Sino-foreign insurance JVs has capped 20 so far.
A senior official at Generali China Life Insurance Co Ltd has reportedly said, for example, that the company is bound to win group insurance business for 1.2 million employees at China National Petroleum Corporation (CNPC), the nation's largest oil firm, and their 800,000 relatives.
The firm is a JV between Italian insurer Assicurazioni Generali and CNPC.
Chinese insurance firms have their own advantages, including long-standing ties with local companies and their deep understanding of the local market and culture, officials and experts say.
"Both foreign and local insurance companies have their own strengths," CIRC's Du said.
She said the market share of foreign-invested insurance companies in group insurance would not grow too rapidly. Instead, it would be a gradual process similar to the situation for the entire insurance industry.
In the first quarter of this year, foreign insurers grabbed a 12 percent share of the local insurance market in both Shanghai and Guangzhou in South China's Guangdong Province, the two cities believed to be most deeply penetrated by foreign insurers.
Wang at BTBU proposed adjusting related policies to prevent an abrupt loss of market share to foreign insurers, including the requirement that the establishment of a Chinese insurance firm needs a minimum of five investors.
Many insurance JVs have only two investors, he said.
But the liberalization of the local insurance market is accelerating. In a new CIRC regulation that became effective earlier this month, the capital requirement for foreign insurance firms' branches is lowered to 20 million yuan (US$2.4 million) each, from 200 million yuan (US$24 million) previously.
(China Daily June 22, 2004)
|
