Page 16 - WTW Asia Insurance Market Report
P. 16


  In 2016, the Chinese insurance market saw a marginal         Though many Belt & Road construction activities will be
  increase in the total premium written. This increase         in foreign countries, insurance decisions will be taken in
  was brought about by the implementation of pricing           China by investors situated locally. With ample capacity
  regulations for compulsory Auto Liability insurance,         in the market, insurers are beginning to leverage their
  coupled with the rising ownership of automobiles in          domestic and international networks in order to harvest
  China. Due to stiff competition in the auto insurance        opportunities arising from this massive project. With USD
  market, auto insurance policies have become                  16 billion in additional premiums expected to be generated
  increasingly unprofitable, as a result of which some         by projects from now to 2030, China is definitely the
  insurers have begun to shift their focus to non-auto         market to watch for both insurers and brokers alike.
  insurance products. Most industries are facing higher
  competition for accounts with clean loss ratios except       7bUSD                80% of which will
  in the Hi-Tech, Printed Circuit Board (PCB) and                                   be placed with
  Chemical industries.
                                                               in premiums will be Chinese insurers.
  Tough competition is driving companies to cut
  costs, often through reductions in brokerage fees            generated, close to
  and commissions, and also to seek new business
  opportunities for additional sources of profit. For          Growth of Domestic Reinsurance Capacity
  example, China Pacific Property and Casualty
  Company Ltd. (CPIC), the second largest non-life             China Re and Taiping Re were the only domestic
  insurance company changed their strategy of focusing         reinsurance companies in China prior to 2016. However,
  on market share to one that was focused on profits.          the number of local reinsurers doubled in 2016 as PICC
                                                               Re and Qianhai Re were granted approval from the
  In September 2016, Typhoon Meranti hit the                   China Insurance Regulatory Commission (CIRC). The
  Fujian Province, causing direct economic loss of             registered capital of the two new reinsurers is USD 153
  approximately USD 3.2 billion. Typhoon exposure              million and USD 461 million respectively. It is believed
  coverage in China is expected to be reviewed and             that at least three other applications to set up local
  underwriting guidelines for typhoon risks may become         reinsurers are currently in the pipeline, with another 20
  stricter as a result of this catastrophe.                    companies planning to start the application process in
                                                               the coming years. This would position China to be the
“The market for Typhoon Exposure                               largest reinsurance market by 2022. The drivers behind
insurance is expected to harden                                the growth include the implementation of China’s Risk
in 2017 following large-scale                                  Orientated Solvency System (C-ROSS), continuous
destruction by Typhoon Meranti”                                growth of direct insurance market and State Council’s
                                                               2014 10-point strategy.
            One Belt, One Road Initiative
                                                               Mergers and Acquisitions
Comprising of six international economic corridors and one
maritime Silk Road, the B&R initiative will span 65 countries  The number of outbound insurance M&A deals by Chinese
accounting for 62% of the world’s total population and 30%     insurers reached USD 10.2 billion, up from USD 6.6 billion in
of global GDP. This initiative is expected to create a wave    2015. A major deal in 2016 was the acquisition of Genworth
of construction activities and trade liberalisation, driving   Financial Inc., a dominant player in the US long-term care
insurance premium growth in the local Chinese market and       insurance sector by China Oceanwide Holdings Group for
abroad. Property, Engineering and Marine insurance stand       USD 2.7 billion. Chinese insurers are increasingly looking
to benefit the most.                                           at acquiring foreign targets as these can absorb foreign
                                                               currency denominated premiums and provide long-
                                                               term cash pools that support investments. This trend is
                                                               expected to strengthen in the coming years.

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