Insurers make a beeline for mainland market

Updated 2017-06-09 09:26:58 China Daily

Joint ventures and easing of curbs woo experienced players from overseas

Hong Kong and overseas companies have upped the stakes in the race for a slice of the Chinese mainland's robust life insurance market, while mainland clients continue to flock to the city to snap up insurance policies.

Industry experts still see great potential for overseas insurers on the mainland, despite the tightening of licensing regulations by the country's insurance watchdog.

FWD Hong Kong-the insurance arm of Pacific Century Group, chaired by Richard Li Tzar-kai, younger son of Hong Kong tycoon Li Ka-shing-has applied to the China Insurance Regulatory Commission for a life insurance license and is keeping its fingers crossed that the green light will be forthcoming.

The company believes its plan to tap the mainland market conforms with the State Council's blueprint for promoting the development of diversified health insurance and innovative endowment, and aims to start operating on the mainland by specializing in online health insurance products and services.

"The mainland authorities have come up with a list of requirements that we need to fulfill. One of the key conditions is having a representative office up and running there (the mainland) for two years prior to winning a license. That's the reason we didn't apply for the license earlier. As a young company, we need to wait for some time until our Shanghai office can satisfy such a requirement," said David Wong Tai-wai, CEO of FWD Life Insurance.

How long it will take is still up in the air, he added: "As far as we know, there are more than 200 companies queuing up for licenses, but no one knows how long it will take before approval can be obtained. We hope to get the license within two years."

Earlier this year, the regulatory commission issued new rules to regulate the operations of insurance companies on the mainland, with a higher market entry threshold for Hong Kong's small and medium-sized insurance companies.

Hong Kong insurance sector lawmaker Chan Kin-por said the higher market entry rules will make it more difficult for small and medium-sized enterprises to open on the mainland, and only big multinational companies can have access to the mainland market.

"Even so, the prospects of entering the mainland market are definitely good for overseas insurers because an enormous population still lacks insurance protection," he said.

'Protection gap'

According to official statistics, the Chinese mainland is one of the largest insurance markets in the world, with its current "protection gap" at an estimated trillion and it may exceed trillion by 2020.

In January, the regulatory commission also lowered the maximum shareholding in insurers to 33 percent from 51 percent, which means overseas insurers will have to find two partners instead of one before they can start operating.

"With the new regulations coming into effect, the number of players in the market will be reduced," said Eunice Tan, director of financial services ratings at S&P Global Ratings.

She noted that many Hong Kong-related insurance companies have already entered the mainland market but, globally, overseas companies have mixed views on the mainland thrust.

"Of course, the opportunities in China are very large, but Sino-foreign joint ventures only account for a small part of the insurance market, with premiums growing in single digits each year, which means foreign players in China don't find it very profitable," Tan said, adding that mainland customers prefer to buy local brands with which they are familiar, such as China Life.

That means, the market for joint ventures is not growing as fast as that for local companies, she said.

However, she said that from the mainland's point of view, joint ventures are good for the country as experienced overseas partners can bring their advanced risk management and asset management strategies in joint ventures with their mainland counterparts.

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