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Foreign insurance firms expect strong growth in China

Offshore life insurers want bigger slice of mainland pie, which may expand up to 30pc in premium income terms by 2015, a survey finds

PUBLISHED : Tuesday, 11 December, 2012, 12:00am
UPDATED : Tuesday, 11 December, 2012, 2:55am

Foreign insurance companies operating on the mainland expect to post strong growth over the next three years, driven by China's rapid economic expansion and the low penetration rate of insurance products.

Foreign life insurers expect their business in the world's second-largest economy could grow by up to 30 per cent, in terms of premium income, in the next three years, according to a survey released yesterday by accounting firm PricewaterhouseCoopers. Foreign companies selling general insurance said they expected their growth to reach 20 per cent over the same period.

Hong Kong investors seem to share that view, pushing share prices of many mainland insurance companies up yesterday, and putting them among the most actively traded stocks. Shares of newly listed People's Insurance Group closed at HK$3.75 each, up 0.81 per cent from its maiden close on Friday. Ping An Insurance, in which HSBC has agree to sell its 15.6 per cent stake to Thailand's Charoen Pokphand Group, saw its share price rise 0.42 per cent to close at HK$60.25 each.

"Optimism among foreign insurers belies the continuing challenge they face in trying to build market share in China," said Peter Whalley, PwC Insurance Leader for Hong Kong.

While foreign insurers have high hopes, their current market position in the mainland remains small. The 27 foreign life insurance companies operating there represent only 4.3 per cent of the total market, with the remainder held by domestic insurers. Likewise, the 21 foreign general insurers have just a 1.2 per cent share of the market.

While both life and general insurers expect high premium growth in the next three years, the life insurers anticipate only a slight increase in total market share. According to the most recent survey, foreign life insurers expect their share of China's total market to edge up to 5 per cent by 2015. That is a less bullish outlook than a 2007 survey when the insurers believed they would snare 10 per cent to 20 per cent of the market within a few years.

Two general insurers, however, predicted market share for foreign general insurance companies would go up to 5.5 per cent by 2015 as China was opening the mandatory third party liability sector to foreign firms.

"There's no doubt foreign insurance companies would like a larger market share in China. It's a hard market to crack. But it's not impossible," Whalley said. He said premium income had grown strongly while the proportion of mainlanders buying insurance lagged most Asian and Western markets.

The foreign insurance companies stick to banks for their sales and plan to reduce the number of insurance agents. Two-thirds of respondents believed the agency channel was losing traction.

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