Earnings at mainland insurers are expected to bottom out this year after a sharp fall in premium income growth last year, analysts said. However, regulators have warned of a tough year ahead for the insurance industry. "This year may be the most difficult year for the insurance industry," the China Insurance Regulatory Commission said in a statement on Thursday after an annual work conference. The downside risk to the global economy would make the operating environment for the mainland's insurance industry more uncertain, Xiang Junbo, the commission's chairman, told the conference. Lower investment returns and rising costs were also challenges for insurers, Xiang said. The commission also warned against surrender risks due to early redemption by policyholders on low returns. Insurers should also be aware of investment risks, their ability to meet solvency requirements and other operating risks. Reduced returns to policyholders, caused by lower investment returns from weak stock markets, have limited premium income growth. CIRC said premium income rose 8 per cent to 1.55 trillion yuan (HK$1.93 trillion) last year from 2011, compared with an average growth of more than 20 per cent in the past two decades. The life insurance sector posted a 2.4 per cent rise in premium income while the non-life sector's growth was 15.4 per cent. Chen Xingyu, an analyst with Phillip Securities in Shanghai, said premium income would improve this year. "I think the worst is over," Chen said, noting that the share market's recovery would help boost investment returns. Huang Biao, an analyst at Guangdong-based Great Wall Securities, said in a research report that premium income for life insurers was expected to rebound after insurers expanded their sales channels and diversified investment products. Huang also expected property and casualty insurance to maintain stable growth on a rebound in vehicle sales. However, Chen warned against potential risks for non-life insurers due to unexpected natural disasters. Solvency would be another concern, he said.