Participating Insurance Favored

Participating insurance is popular among consumers in China this year and according to statistics from the China Insurance Regulatory Commission (CIRC), the top Chinese insurance regulator, it contributed to over 70 percent of the total life insurers in the market captured from personal insurance in the first half of the year.

"It is a fact that life insurers attach more importance to such insurance currently and it should be a move they take to fight against the nation's new accounting standards," Zhang Yaokun, general manager responsible for investment at Sino-Japanese insurer Nissay-Greatwall Life Insurance Co., Ltd., said in an interview. According to the new accounting standards, premium is consisting of premium revenue and premium deposits. The revenue gained from participating insurance could be totally accounted into an insurer's premium revenue while that obtained from universal life insurance and investment-linked insurance will be partly accounted into the premium revenue.

That is to say the more it gains from participating insurance, the more market share it captures. Under such an environment, life insurers pay more attention to promoting such insurance, as a result, it becomes more and more popular among Chinese consumers. In addition, such insurance, featuring long-term security function and not bad yields, could help consumers fight against losses suffered from inflation and interest rate fluctuations to some extent.

As for the temporary rules the CIRC released on the management of insurers' investment in property and equity in early this month, Zhang confirmed that it would do good to insurers' asset allocation in the long run but stressed that in the short run, the large ones would benefit much from them. Besides investment in bonds, funds and stocks, insurers placed a large amount of capital in banks in the past. And large-amount contracted deposits, featuring low reinvestment risk and high fixed yields, was chased by them. But with the release of those rules, they will have more channels to invest. And those large ones such as China Life Insurance Co., Ltd. (SHSE: 601628 and SEHK: 2628) and Ping An Insurance (Group) Company of China, Ltd. (SHSE: 601318 and SEHK: 2318) will have more opportunities owning to large asset size and relatively more reserved projects.

Nissay-Greatwall Life, known as Nissay-SVA Life Insurance Co., Ltd. formerly, is a 50-50 joint venture between Nippon Life and China Great Wall Asset Management Corp.