Chinese Insurers To Be Thirsty For Capital In 2012

Chinese insurance companies are expected to be thirsty for capital in 2012 due to the capital erosion resultant from the unrealized loss in stock market investment in 2011, analysts say.

Some life insurance companies in China have seen their solvency ratios drop over 60 percentage points from the beginning of 2011 due to the bearish stock market performance and the fast business expansion.

In 2011, the annualized yield of investment by insurers was only 3.6 per cent.

Solvency ratio of China Life Insurance (SSE:601628; SEHK:02628) fell from 2010's 211.99 per cent to 164.21 per cent by the end of June, 2011, reaching close to the bottom line of the 150-percent regulatory requirement.

In 2011, the China Insurance Regulatory Commission approved about 90 billion yuan of capital injection plans by 66 insurance companies. About 15 insurance companies announced a maximum of 60.05 billion yuan of subordinated bonds issue plans in 2011.

If the stock market continues its bearish performance in 2012, the insurance industry will still face pressure of decline in solvency ratio and investment returns, and will be in thirst for capital to shore up their solvency ratios.