Industry Analyst: Tibet Shows Promising Insurance Growth

Although Tibet is the last among the five autonomous regions in China to set up an insurance regulatory bureau, its premium growth of 44.67% from the second to the third quarters of 2010 shows the market's potential, said one insurance analyst.

Foreign insurers may keep an eye on the domestic social security reform and microinsurance development in Tibet, though the market is not developed enough for foreign attraction, according to Wenli Yuan, senior analyst at consultancy Celent.

The Tibet Autonomous Region is located in the far west of China and the north side of the Himalayas, with Lhasa as its capital. The region has total area of 1.2 million square kilometer, with a population of 2.9 million. Total gross domestic product of Tibet in 2008 was 39.49 billion yuan (US$5.95 billion), according to the National Bureau of Statistics of China.

Tibet's insurance penetration and insurance density are "still very low," but insurance is a fast-growing sector in the region, as national figures demonstrated that GDP growth in Tibet was around 12% over the past eight years, while insurance growth was around 21%, said Yuan.

She added the insurance penetration of Tibet in 2008 was 0.82%, while its insurance density was 113.2 yuan. It is far lower than China's average insurance penetration of 3.26% and insurance density of US$105.3 in the year. Yuan said she believes the domestic insurance market will continue to grow in Tibet.

In 2009, insurers in Tibet recorded total premium income of 401 million yuan, up 23.5% from 2008; while its total insurance claims in the year were 217 million yuan, according to the China Insurance Regulatory Commission.

Of the total in 2009, property insurance contributed 343 million yuan, life insurance 19.56 million yuan, accident insurance 21.7 million yuan and health insurance 17.66 million yuan, noted the regulator.

The CIRC said in September it would open an official bureau in Tibet to strengthen domestic insurance regulation and risk management, and to promote rapid insurance market growth.

The new office will map out plans for the development of Tibet's insurance industry, oversee the business activities of local insurance companies and intermediary services and maintain market order, said Wei Yingning, vice chairman of the CIRC, in a statement.

Rising Market

At present, there are three property/casualty insurers and a life insurer operating through domestic branches in Tibet. They are all Chinese companies, but some have foreign stakeholders, said Yuan.

Nonlife players include China's largest nonlife insurer, PICC Property and Casualty, along with Ping An Property and Casualty and Anbang Property and Casualty Insurance. Those three insurers contributed 92.1% of Tibet's total premium income in the first half of 2010.

China Life Insurance Co., the largest Chinese insurer and the only life player in Tibet, generated more than 22.26 million yuan in premiums in the first half, noted the CIRC.

PICC has had American International Group Inc. as a foreign investor since October 2003, and the U.S.-based insurer holds a 9.9% stake in its Chinese counterpart (BestWire, April 15, 2010). Global banking group HSBC Holdings has been invested in Ping An Insurance (Group) since May 2005.

Though the regulatory figures show the nonlife sector in Tibet is doing much better than the life sector, Yuan, as an insurance analyst focusing on the Chinese market, expects the domestic life insurance sector to have more growth potential.

The life insurance growth rate in Tibet was 277% in 2008 and 106% in 2009. Yuan said life is the fastest-growing sector, compared with property/casualty with a growth rate 15% to 20%, and health insurance with a growth rate of 35% to 40%.

Yuan said "insurance will continue to grow at a high rate in the coming year, but the business scale is still small due to a low population and low GDP in the area."

Chinese insurers have not built up strong operations in Tibet. International insurers operating in China, including AIA China, the largest in the country and the local operation of AIA Group Ltd., do not have a presence in Tibet. Foreign players who want to expand into Tibet may need to wait for market openings, according to Yuan.

"It is still too early for foreign insurers to tap into the Tibet market. We suggest that foreign insurers keep an eye on social security reform and microinsurance development in the region, as well as to seek relevant opportunities in the future," she said.

In addition to Tibet, other autonomous regions in China include Ningxia, Xinjiang, Inner Mongolia and Guangxi. All the autonomous regions together had total cumulative original premium income of 51.99 billion yuan in 2009. Among them, the CIRC said Inner Mongolia contributed the most, with 17.13 billion yuan, while Tibet contributed the least.