Foreign insurers embrace China as ownership and operating barriers go on fast-track easing

Foreign insurance companies are expected to expand further into mainland Chinese market as the country removes a cap on foreign ownership and other regulatory hurdles, analysts said.

The China Banking and Insurance Regulatory Commission will allow foreign investors to raise their stakes in local life insurers to 100 per cent from January 1, widening the access one year ahead of the initial target. The limit was raised to 51 per cent in mid-2018 from 50 per cent.

The People's Bank of China separately announced in July that it would scrap a rule requiring insurance companies to have at least 30 years of operations before they can apply to enter the mainland market, a boost for key players seeking a foothold in what analysts forecast will be the world’s biggest insurance market by 2030.

The move comes amid sweeping liberalisation in the financial industry in the past few years, where the government has also eased ownership barriers in stockbroking and banking sectors. There were 28 foreign life insurers with varying degrees of partnerships with local investors in China at the end of 2018, according to government data.

“The removal of the ownership limit will give foreign investors the chance to buy out their local shareholders, which will give the foreign companies greater or full flexibility in determining and implementing their strategies,” according to Fitch Ratings. “This should reduce internal conflicts as well as the cost of internal communication.”

While the easier rules should encourage more foreign insurers to step up their investment in the onshore market, they are unlikely to pose a big threat to local players, Fitch added. Foreign insurers controlled only about 8 per cent of premium in the life insurance business in 2018, Fitch said.