Regulator eases red tape for marine insurance in Shanghai free-trade zone
City's free port serves as test bed for moves to cut red tape and provide flexibility in the sector
The mainland's insurance regulator is using the Shanghai free-trade zone as a testing ground for more flexibility in marine insurance, furthering a goal of cutting red tape.
The recent move of the China Insurance Regulatory Commission would streamline the supervision and operation of the marine insurance business in the trade zone, according to Chen Xingyu, a Shanghai-based analyst at Phillip Securities.
The regulator announced last month that insurance companies could apply for approvals for new marine insurance products from the Shanghai Institute of Marine Insurance, for the first time allowing insurers to file applications with an industry association rather than the regulator.
The institute was set up in December last year with 31 members, including insurance and shipping companies.
Other measures that apply to insurers in the free-trade zone include allowing marine insurance centres and reinsurance companies to set up branches in the zone without prior approval, which is also no longer required for the appointment of senior executives in branches in the zone.
"The move is a clear step to cutting red tape and delegating power, which is positive to the marine insurance business, as more flexibility is allowed," Chen said.
Insurers were now able to freely provide customised products, which would help boost their profitability, he said.
Outstanding premiums on marine insurance in Shanghai reached 3.3 trillion yuan (HK$4.1 trillion) in September last year, a rise of 12.1 per cent from the previous year, the Shanghai bureau of the China Insurance Regulatory Commission said. The city accounted for 46 per cent of the national market in the marine sector in October last year.
Wang Xujin, an insurance professor at Beijing Technology and Business University, said the move was part of the regulator's efforts to let market forces play a bigger role.
"The regulator's policy direction to cut red tape is obvious, while the free-trade zone is an appropriate testing ground. More relaxations are expected in other insurance types," Wang said.
Zu Zhoujun, a manager at PICC Property and Casualty, told reporters in Shanghai the new rules would allow more flexibility in setting up insurance plans in trading with foreign countries.
Zu said that while one to two months would be needed to obtain approval for a new insurance plan from the regulator, he expected the time to be shortened if the approval was granted by the institute.
Sally Yim, a senior credit officer at rating agency Moody's Investors Service, said allowing approvals by the institute would help shorten the time required, and insurers could be more responsive to changes in the international market when setting terms and conditions.
As the government was gearing up to develop Shanghai, a city with an advantage in port facilities, into an international shipping centre, efforts were needed to foster a marine insurance business that met international standards, Yim said.
The free-trade zone was a good testing ground for deregulation, Chen said.
"Insurers' marine insurance business is relatively small. As the new rules are limited to insurers in the trade zone, the risks are therefore easier to control," he said.
The measures to cut red tape were expected to expand to other areas after the trial in the trade zone, Chen said.
Streamlining the administrative process in approving life insurance products would be a benefit to the industry, as it was a more significant part of the business, but the regulator would need to cut the red tape step by step, he said.