China will encourage foreign companies to become shareholders in its State-owned and public insurers in a bid to step up structural reform of its domestic insurance industry.
A senior insurance regulatory official said yesterday in Beijing that ushering more shareholders into the industry would allow domestic insurers to swell their capital assets, upgrade corporate governance and improve solvency.
Wu Xiaoqiu, vice-chairman of the China Insurance Regulatory Commission (CIRC), pinpointed foreign companies, private businesses and listed firms as those most likely to benefit from becoming stakeholders.
He was speaking at a conference discussing the change in the regulator's role after China joins the World Trade Organization (WTO).
He added there was still a big gap between domestic and foreign insurance companies in management, operational mechanisms and competitive edge.
So far, only a limited number of shareholding insurers have ushered in foreign shareholders, and their investment is limited to 25 percent of a company's total capital.
Industry experts said acquiring stakes would be an easier way for foreign insurers to enter the tightly controlled market rather than waiting years for a licence.
Wu said great progress has been made in introducing foreign shareholders and in preparing for public listings.
Besides introducing shareholders, some eligible insurers will be urged to float themselves on the stock market to enable a modern enterprise mechanism to be set up and prepare more thoroughly for competition with international players.
Wu said the CIRC will also step up the approval of operational outlets of shareholding insurers to enlarge their networks and market share.
Some regional companies will also be able to gradually expand their business across the country.
He noted the role of the CIRC will also shift from an almighty regulator who oversees everything in the market to an efficient supervisor and co-ordinator who focuses on the solvency of insurance companies after the country's WTO accession.
But this change must be based on an established legal framework and high levels of market self-regulation, he added.
To make this occur, the CIRC will remove a batch of regulations and rules not in accordance with the WTO stipulation and establish necessary new ones, including the insurance investment management provision and the reinsurance management provision.
Wu said the CIRC will put on its agenda the revision of the Insurance Law to bring it in line with the WTO.
To create a healthy competition environment for domestic and foreign insurers, the CIRC also launched a clean-up campaign, which started in April and will continue until the end of the year.
He said the insurance market registered strong growth in the first nine months of this year thanks to a cleaned-up market.
In the period, total industry premiums reached 149.3 billion yuan (US$18 billion), up 30.26 percent on last year.
Non-life premiums stood at 53.37 billion yuan (US$6.43 billion), up 14.03 percent on the same period last year, and life insurance premiums amounted to 95.96 billion yuan (US$11.57 billion), up 40.37 percent.
Total claim settlements valued at 39.98 billion yuan (US$4.8 billion) in the period, up 13.61 percent on the same period last year, Wu added.
(China Daily October 26, 2001)
