Germany's Allianz and Shanghai's Dazhong Insurance have begun setting up a life insurance joint venture in Shanghai following preliminary approval from China's central bank. Dazhong Insurance foreign affairs spokesman Han Zhuowei said the People's Bank of China (PBOC) last week verbally agreed to allow the venture to be set up within six months. While official approval could be obtained within two months, the pair have already started recruiting staff and looking for offices, he said. The venture has a registered capital of 200 million yuan (about HK$185.6 million). Allianz will have a 51 per cent stake in the venture and Dazhong will have 49 per cent. Allianz, Europe's largest insurer, clinched the deal with Dazhong, a small player on the mainland, to set up a life insurance business in Shanghai in November last year. Business could begin as early as next year once preparations had been completed, assuming full PBOC was obtained, Mr Han said. 'As with other life insurance companies, we expect to make a loss in the first few years but hope to break even after five years,' he said. 'Life insurance companies keep a portion of their premiums received as reserves against future claims by clients. 'The proportion is usually higher than those kept by non-life insurance companies.' Mr Han was optimistic about the insurance sector in China, particularly in Shanghai, and believed there was plenty of room for new players despite increasingly fierce competition. 'The changes in the social welfare structure have meant the government is getting out of the insurance business at the same time as a lot more people have to take on insurance policies,' he said. Allianz is the fifth foreign insurer to operate in China after American International Group (AIG) of America, Tokio Marine & Fire Insurance Co of Japan, Manulife Insurance (International) Co of Canada and Winterthur of Switzerland. Only AIG, Allianz and Manulife are allowed to sell life insurance. The rest are confined to non-life insurance such as general and property insurance.