As the Chinese government seeks to liberalise the country’s insurance sector, a record number of applicants have sought to do insurance business in the giant Asian market. Many of these entities do not have insurance as their primary line of business.
However, the regulatory watchdog China Insurance Regulatory Commission (CIRC) is cautious in granting new insurance licenses, as the current rush could spin out of control. In 2016, 20 insurance licenses were approved, with the pace expected to increase. In January 2017 alone, five licenses have already been granted.
Many of the newly granted licenses were given to subsidiaries of state-owned enterprises and private companies with nationwide coverage. One new entrant, COSCO Shipping Property Insurance, which was given permission to operate in late 2016, is affiliated with the country’s largest shipping group, China Ocean Shipping Company.
In 2014, China’s State Council released new rules aiming to strengthen coverage, innovation, functionality, fundamental protection, and competitiveness for the insurance industry. The directive is considered a vital step towards regulating the mainland’s insurance sector.
With China gearing toward a more robust regulatory environment, along with increasing domestic wealth, the scalability of the market has increased tremendously. In November 2016, the Chinese insurance sector had around RMB2.34 trillion (US$339.8 billion) in total assets under management, a growth of 26.96% compared to January of that year.
The industry’s rapid growth make it attractive to many business entities, but the CIRC is exercising due diligence to safeguard the sector. The regulator recently declined the applications of Shenzhen Excellence Logistics and ZDZT International Investment Co. as these applicants could not clearly define their business scope and some of their shareholders were not able to satisfy the agency’s financial criteria.
According to a report by BMI Research, the Chinese insurance market is expected to remain one of the strongest in the Asia-Pacific region in the coming years, in line with the rising disposable income levels of Chinese households. The report predicted total life premiums to grow from RMB1.5 trillion (US$217.17 billion) in 2017 to RMB1.86 trillion (US$269.3 billion) in 2020.
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