Foreign Property Insurers Occupy Low Market Share in China

Allianz Insurance Company Guangzhou Branch, Allianz Group's first non-life insurance operation in China, has been upgraded into a subsidiary of the German group and is set to start formal operation from July 1.

So far, a total of 14 foreign property insurers have succeeded in shifting their Chinese branches into subsidiaries with independent legal person status since 2007.

Foreign property insurers are allowed to operate in the Chinese market in the mode of branch only when initially entering the market in line with contract China inked to enter the WTO. Notably, the operation scope is limited to the registered site and provided that they want to launch transregional operation, they should establish another branch, apart from expanding registered capital by CNY 200 million.

In 2007, the China Insurance Regulatory Commission (CIRC), the top Chinese insurance regulator, loosened restrictions on them, allowing them to upgrade branches into subsidiaries and those including RSA and Mitsui Sumitomo Insurance as the first batch became the lucky dogs. After obtaining the license, they need to expand registered capital by CNY 20 million only when establishing a new branch. Provided that the registered capital reaches CNY 500 million, they are free to open branches.

The loosened restrictions not only reduce their cost in fast expansion but also strengthen their independent operation. However, their share in the market is low due to inadequate localization. Statistics form the CIRC show that the premium revenue they captured in the Chinese property insurance sector in the first four months of this year hit about CNY 1.44 billion, accounting for 1.04 percent of the total property insurers nationwide gained in the sector during the period.

In addition to expanding sales network, the most important task for them to do after such upgrade is to make known their own advantages to the public amid fierce competition with Chinese rivals. However, most of them focus on business related to their own countries, currently. For instance, Samsung Fire & Marine Insurance Co., Ltd. captures 80 percent of its underwriting business from Samsung Group and the remainder from other China-based South Korean companies, said sources.

Besides, they do not take the actual consumption power of Chinese consumers into consideration when designing products. It is a fact that they have launched a series of products in the market but most of which are designed for foreign high-end consumers. With up to CNY 10 million security risk, such products always need over CNY 10,000 premium per year.