China's Insurance Regulator Notes 8.1% Market Improvement in Nine-Month Premiums

China's insurance regulator said that during the first three quarters of this year, the domestic insurance sector has performed "better than market expectations" and realized total premiums of 858.03 billion yuan (US$125.69 billion), up 8.1% from the same period a year earlier.

According to the China Insurance Regulatory Commission, among total premiums, property insurance saw year-on-year growth of 21.4% to 223.39 billion yuan. Life insurance premiums rose 4.1% to 634.64 billion yuan.

By the end of September, the CIRC recorded total assets for the domestic insurance sector of 3.8 trillion yuan, up 18.9% from the beginning of 2009. Total estimated profits were 39.19 billion yuan, representing a growth of 45.77 billion yuan from the same period in 2008. The CIRC said the industry suffered an aggregate loss for the first nine months last year due to severe snowstorms and the May earthquake in Sichuan.

However, the CIRC said the Chinese insurance sector still needs to improve its discipline, reduce high operating costs and strengthen risk management, as well as strengthen corporate governance and senior executive regulations.

Market Adjustments

In reviewing market performance during the year, CIRC Chairman Wu Dingfu said the regulator has responded to the financial crisis, adjusting regulatory policies in a timely manner and effectively avoiding and reducing the impact of the crisis. The overall insurance industry has operated in a "safe, steady and healthy" environment with sufficient solvency, he said in a statement.

According to Wu, the positive results derived from "optimized risk alerts and monitoring institutions" and implementation of regulations, which prompted insurers to improve their insufficient solvency positions through limits on business scale, adjustment of business structures, issuing of subordinate bonds and increasing share capital.

By the end of September, the CIRC found that eight insurers did not reach solvency standards, compared with 13 at the beginning of 2009.

Other contributors included preventing policy-surrender risks in a timely manner, preventing capital use risks, strengthening market monitoring and product investigations and disclosing market information in a timely manner, said Wu.

The chairman said that during the year, the insurance industry has continuously enhanced services by following the country's strategy of securing growth; aiming at widening the market channel of the insurance industry to support the development of automotive and real estate industries; developing export credit insurance; and allowing insurance companies to invest in infrastructure projects in the form of equity loans, with key investments in transportation, telecommunication and energy infrastructure projects.

The insurance industry also followed the Chinese government's strategies of securing people's livelihood and securing stabilization by participating in the developments of agricultural insurance and rural individual life micro-insurance trial programs; facilitating medical, transport and education liability insurance; and implementing environmental pollution liability insurance trial programs in eight provinces.

A Growth Year

Wu said the Chinese insurance market has not only maintained steady development during the first three quarters, but also noted "positive results" in market structure adjustments.

For the property sector, non-motor insurance businesses including credit, engineering, agricultural and mortgage insurance recorded year-on-year growth of 56.9%, 39.1%, 31.4% and 63.8%, respectively, during the first nine months.

As of August, nonlife investment-linked products recorded an investment capital balance of 56.2 billion yuan, up 6.9% from a year earlier. Individual insurance agency business saw year-on-year growth of 16.1%, and accounted for 44.6% of total premiums -- up 4.7% from last year.

New business recorded year-on-year growth of 47.4% among the top seven life insurers in China in the first half of 2009.

Wu said the CIRC has strengthened its on-site investigations during the first nine months. In the property insurance sector, he said the regulator conducted comprehensive or special investigations on the headquarters of five property insurers, mainly focusing on the figures provided by the insurers, the corporate governance, solvency, institutional development and the checking systems of those companies.

For the individual life insurance sector, the regulator standardized the market discipline of the bancassurance sector, targeted misleading sales practices and the charging of additional handling fees apart from the terms and conditions stated in policy contracts.

The regulator also took the authenticity of operating figures as the starting point to strengthen investigations in the accident insurance sector, and suspended several short-term accident insurance businesses.

For the insurance intermediary sector, Wu said the CIRC has conducted special investigations as well as coordinated with police to track down and arrest several insurance intermediaries suspected of illegal operations.

During the first three quarters, the CIRC has assigned 1,836 investigation teams with 6,857 task forces to conduct on-site investigations at 786 property insurers, 661 individual life insurers and 397 insurance intermediary companies. Investigation coverage of the property sector and the individual life sector have reached 25.6% and 17.3% of the market total, respectively, said Wu.

In the first nine months, the Chinese regulator has issued 678 penalties and ordered 87 people replaced in the industry.