Watchdog warns operators that efforts to cushion crisis impact point to big challenges
Mainland insurers will face tremendous challenges in the next two years and must broaden their portfolios to tide them over the deepening economic crisis, the industry regulator has warned.
Wu Dingfu, the chairman of the China Insurance Regulatory Commission, said the meltdown might dampen demand for insurance policies and endanger domestic insurers linked to troubled overseas financial institutions.
'The global financial crisis has not hit the bottom. Its impact on the real economy is deepening. The widely open insurance sector faces a real challenge next year and probably the year after,' said Mr Wu at the CIRC's annual meeting on Saturday.
Amid the worsening credit crunch, insurers should diversify their income sources by investing in infrastructure construction projects, acquiring stakes in companies and financial institutions, and expanding in rural areas, he said.
'We should closely monitor the risks of life insurance policy returns and the insolvency of loss-making insurers,' Mr Wu said.
The official noted with concern the limited choices in overseas investments, higher prices quoted by international reinsurers, reduced willingness of domestic firms and households to buy or keep policies, and lower bond yields after the interest rate cuts since mid-September.
