Fuelled by robust economic growth and a steady expansion of the marketplace, China’s share of global insurance premiums has increased to 11 percent in 2018. But the story doesn’t stop there. With the government’s determination to open its financial markets, especially the insurance sector, growth is expected to flourish.
The China market is vast, diverse and presents a plethora of business opportunities for the insurance industry. Peak Re has been active in the market since 2012 and, over the years, we have witnessed extraordinary changes as the market dramatically increases its level of sophistication.
Waves of innovation
“Innovation” is key to understanding China’s current market situation. Riding a new wave of technology, the country has been encouraging enterprises in different sectors to employ internet technologies across various fields. In the insurance world, auto insurance continues to dominate the P&C sector, but there has been an influx of new non-auto products in the market, including health insurance, liability insurance, credit insurance and natural catastrophe insurance. These new products are providing an additional source of business growth.
Among them, health-insurance products have seen the fastest growth. Private health insurance is increasingly viewed as a supplement to the current medical security system, alleviating the pressure on China’s social safety network. Driven by rising out-of-pocket health expenditure, the aging population, urbanisation and the increasing demand from the growing middle class, as well as surging chronic and non-communicable diseases, this line’s premium volume expanded by 100 percent in 2018.
Customers in China now demand a healthcare ecosystem that addresses real needs beyond a plain insurance product. The insurance industry must listen to customers, think outside the box, and break down traditional health and medical boundaries. Reinsurers need to work closely with local insurance companies to provide tailor-made solutions, instead of simply introducing reinsurance solutions developed for western markets into China.
Peak Re has worked with our strategic partners in China to customise a reinsurance solution for Que Zhen Bao, the first service-oriented medical insurance product in China focused on the accurate diagnosis of cancer. This innovative health-insurance plan provides coverage beyond standard solutions and reflects the market’s growing demand for tailored health-insurance products.
Fuelled by new technologies, the Chinese market is evolving rapidly. Although technology-driven business has not been the biggest reason for premium growth, the traditional insurance industry is undergoing dramatic transformations in distribution, risk management, and new product development.
In just a few short years, the internet has become the main distribution channel for personal line insurance products. Aside from some digital insurance companies, a growing number of insurance companies have been collaborating with third-party technology-backed online platforms, enabling Chinese consumers to purchase policies and settle claims more efficiently. Technology is also shaping risk management in China. On the agriculture side, remote sensing technologies from satellites and drones are employed to provide continuous crop-growth monitoring and damage assessment in certain areas. Adopting modern technologies makes agriculture risk selection and management much more advanced and accurate.
According to Peak Re’s information, the market volume for 2018 stood at premiums of US$55 billion or reinsurance premiums of US$13.5 billion, making China the second-largest agricultural market after the US. That number is set to increase in the future, with support from the central Government, whose objectives are to modernise the agricultural sector and increase the resilience level of farmers.
China’s future is bright with new opportunities for the insurance and reinsurance sectors being created as the country continues to open up. On July 20, 2019, the Central Bank posted a statement outlining regulatory changes for the financial sector. The Financial Stability and Development Committee of the State Council announced 11 liberalisation measures. Previously, foreign-invested insurance companies were required to have been in operation for at least 30 years before entering the Chinese market. For insurance and insurance asset management industries, this requirement has now been abolished.
Based in Hong Kong, Peak Re is able to benefit from the China Banking and Insurance Regulatory Commission (CBIRC)’s recently renewed agreement to continue to give equivalent status to reinsurers in Hong Kong. As a result, mainland Chinese insurance companies that cede business to qualified reinsurers in Hong Kong will benefit from a generally lower reinsurance credit risk charge under the China Risk Oriented Solvency System (C-ROSS). As a qualified Hong Kong reinsurer, Peak Re believes that this will provide new development momentum for our China business. The Guangdong-Hong Kong-Macau Greater Bay Area will also spur exciting new business opportunities for the insurance sector.