China’s first insurance exchange to launch in Shanghai as early as June 12

PUBLISHED : Monday, 06 June, 2016, 9:05pm
UPDATED : Monday, 06 June, 2016, 9:05pm

China will officially launch the nation’s first insurance exchange in Shanghai as early as this weekend as the city takes another step towards its goal of becoming a leading insurance centre by 2020, with the new bourse adding to the list of exchanges that already trade currencies, precious metals, shares and commodities.

Pei Guang, head of the Shanghai branch of the China Insurance Regulatory Commission, said the exchange, which will provide trading facilities and services for reinsurance, shipping insurance, insurance assets and special risk insurance, will be launched during the two-day Lujiazui Forum that opens June 12 in the mainland’s major financial hub.

Xiang Junbo, chairman of the nation’s top insurance regulator, is widely expected to join the launching ceremony when he is in Shanghai to co-chair the city’s flagship financial forum.

“Shanghai is poised to emerge as a major global insurance centre by 2020 with rising pricing power and a voice in reinsurance, shipping insurance and insurance capital operations,” said Pei during the 2016 Shanghai International Insurance Forum on Monday.

Pei said the bourse and the nation’s insurance investment fund, which are both based in Shanghai, were indicators of the city’s strength as it pursues the goal of becoming an insurance powerhouse on the global stage.

Shanghai is also well positioned to achieve the same ambition, being one of the core cities in China’s One Belt and One Road initiative and a major player in the Yangtze River Delta economic belt, Pei said.

Industry insiders said the symbolic launch of the exchange is a further step for Shanghai in flexing its muscles in the industry, with trading of products likely to come later this year.

Insurance assets could be the first products to be traded while the reinsurance business may be added later, said market watchers.

Shanghai is poised to emerge as a major global insurance centre by 2020 with rising pricing power and a voice in reinsurance, shipping insurance and insurance capital operations
Pei Guang, CIRC

So far official details of the trading products are being kept private, not surprising given the desire of Chinese authorities take cautious steps to avoid a repeat of the failure that once happened in the United States when a New York insurance exchange set up in 1980 was closed within seven years due to thin trading.

The State Council, or the cabinet, approved the creation of the Shanghai exchange at the end of 2015, the only one that has been given Beijing’s nod so far.

In May, 91 companies agreed to contribute 2.24 billion yuan (HK$2.69 billion) of registered capital for the bourse. Of those, 75 per cent are from the insurance industry.

The exchange will be tasked with aligning local businesses with global insurance practises, and upgrading the city’s insurance infrastructure to meet its ambitious goals.

The proposal was first mooted back in 2010, with cities including Beijing, Chengdu and Shenzhen vying to be home to the exchange.

Zheng Yang, head of the Shanghai Financial Services Office, said yesterday the insurance exchange is a means for the city to make better use of global resources and beef up its clout in insurance pricing against the city’s bigger ambition to become a global financial hub by 2020.

Shanghai already leads the mainland’s insurance market. In 2015, the insurance industry accounted for 4.5 per cent of the city’s GDP, with an average premium per capita of 4,659 yuan. The State Council expects the industry’s contribution to GDP to reach 5 per cent nationwide by 2020, with premium per capita of 3,500 yuan.