By Cyril Tuohy
There's plenty of business to be had in China, and lots of premium to collect. But who's benefiting most from all that business?
First, consider the numbers, big numbers.
Nonlife net premiums in 2010 for the three largest property/casualty insurers reached RMB 233.3 billion, up 42.1 percent from RMB 164.2 billion in 2009, according to data compiled by A.M. Best Co. Inc. Nonlife combined ratios were 87.4 percent in 2010, down from 92.2 percent in 2009.
To say that China's profitable property/casualty insurance market "has maintained a phenomenal growth trend," as Vivian Cheung and Yvette Essen of A.M. Best wrote in an October report on the China market, would be an understatement.
A hopping economy means contributions to the Work Related Insurance Fund, China's equivalent of workers' compensation funds here in the United States. Demand for product liability coverage, particularly in the mining, manufacturing and construction industries, is also expected to rise, according to the A.M. Best report.
In addition, Chinese regulators last August set five-year targets to increase premium income and boost insurance penetration to five percent. So who are the beneficiaries of this exploding market? Chinese insurers, mostly.
PICC Property and Casualty Co., Ping An Property & Casualty Insurance Co. and China Pacific Property Insurance Co. have the lion's share of the property/casualty market.
Foreign property/casualty carriers operating in China include Allianz, Chartis, Chubb, Groupama, Liberty Mutual, Mitsui Sumitomo, Royal & Sun Alliance, Tokio Marine & Nichido Fire and Zurich Insurance, according to a PricewaterhouseCoopers report published in September 2010.
Foreign carriershave not found it easy, and the PwC survey found foreign insurers expecting their market share to remain stagnant over the next three years, even as the insurance pie grows bigger. "Many foreign players are taking a fresh look at their business models and are re-examining their China positions, wrote Shu-Yen Liu, the Asia actuarial practice leader with PwC and Peter Whalley, insurance industry leader for PwC.
Insurance Australia Group and Starr International Co. have recently taken foreign investments in Chinese insurers, and Lloyd's has begun underwriting direct business in China.
Other companies have sold their stakes. New York Life, for example, has sold its stake in Haier New York Life Insurance to Haier Group and Meiji Yasuda Life Insurance Chinese.
In addition, Zurich Financial Services sold part of its stake in New China Life Insurance. The sale, said Best citing Zurich, wasn't an exit strategy but rather an overall risk management strategy.
May 1, 2012
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