Allianz wins approval for China’s first wholly-owned foreign insurance holding company – four years earlier than promised by Beijing

  • CBIRC announcement on Sunday comes after Beijing initially announced a five-year wait for removal of cap on foreign ownership in November last year
  • Foreign insurers face uphill battle, must compete with domestic heavyweights
PUBLISHED : Sunday, 25 November, 2018, 5:55pm
UPDATED : Sunday, 25 November, 2018, 10:58pm

Beijing has given German insurer Allianz the go-ahead to set up a wholly-owned insurance holding company in Shanghai next year – four years earlier than promised.

The approval, which points to an acceleration in the opening up of China’s banking and insurance sectors, was posted on the website of the China Banking and Insurance Regulatory Commission (CBIRC) on Sunday.

China opens finance industry to foreign firms, but is it too late for Hong Kong players?

“This year, the CBIRC has followed Beijing in expanding ‘opening’ policies to foreign banks and insurance companies, and we have approved a number of overseas companies’ applications,” the commission said in its announcement. It added that Allianz was the first foreign insurance company to get approval for setting up a wholly-owned holding company.

Beijing said in November last year that a 49 per cent cap on foreign ownership at securities firms, futures companies and fund houses would increase to 51 per cent before being scrapped in three years, while for insurance companies the cap would rise to 51 per cent in three years from 50 per cent, and would be removed in five years.

“The approval for Allianz’s wholly-owned insurance holding company in China came faster than the market expected, as the regulator last year indicated it would only remove the cap on foreign company ownership in mainland China after five years,” said Chan Kin-por, a Hong Kong lawmaker who represents the insurance sector. “This is good news for international players who want to tap the world’s fastest-growing insurance market.”

The company said it would set up Allianz (China) Insurance Holding Company in Shanghai next year. “Allianz is proud to be the first foreign insurer to commence the establishment of a holding company in China – a significant milestone for us to expand our presence in this strategic market,” Oliver Bate, the chairman and chief executive of Allianz Group, said in a statement.

This is good news for international players who want to tap the world’s fastest-growing insurance market
Chan Kin-por, Hong Kong lawmaker representing the insurance sector

Allianz declined to disclose how the holding company will work with its existing life insurance joint venture and general insurer. “More details on how the holding company will work with the several mainland joint ventures will be shared during the preparatory process,” said an Allianz spokesman.

George Sartorel, regional CEO for Asia-Pacific at Allianz, said: “China is central to our growth strategy for Asia. This development positions Allianz strongly to combine our global knowledge with deep insights into local consumer and industry needs.”

Headquartered in Munich, the company is one of the largest insurance groups worldwide, with 140,000 employees globally. In China it has 2,000 staff members, including at its life insurance joint venture set up in 1999, in which Allianz owns a 51 per cent stake and Citic Trust owns a 49 per cent stake. The joint venture recorded 426 million yuan (US$61.3 million) in new business in the first nine months of 2018, representing 0.07 per cent of overall market share and 2.4 per cent among foreign players, according to the CBIRC.

The company also owns 50 per cent of Allianz China General Insurance Company, which is based in Guangzhou and provides car, property, travel and health insurance. It reported 848.64 million yuan in new business in the first nine months this year, representing 0.1 per cent of overall market share and 5 per cent among all foreign players.

It said it expects insurance premiums in China to rise by 14 per cent per annum in the coming decade.

New life insurance business sales in China grew by 28 per cent year on year in the first nine months of 2018 to 503.32 billion yuan, according to CBIRC. This growth was, however, driven mainly by the mainland’s 56 domestic life insurers. The 28 foreign life insurance joint venture companies present in China reported a decline of 35 per cent year on year in sales in the first nine months to 35 billion yuan.

These foreign insurers also had a combined market share of only 2.8 per cent in terms of new sales, and 7.2 per cent in terms of total outstanding business, in the first nine months of 2018.

General insurance business also presents a similar picture. The 22 foreign insurance joint ventures only had 16.32 billion yuan in premium in the first nine months this year, representing 1.8 per cent of overall market share. The 66 domestic general insurers reported 864.52 billion yuan in business, representing 98.2 per cent of the overall.

According to Chan Kin-por, the Hong Kong lawmaker, “It will be an uphill battle for these foreign insurers on the mainland, as there are many big players, such as China Life and Ping An, that have dominated the market.”