Accelerating pace of change in the Chinese re/insurance market, says JLT Re

The pace of change in the Chinese re/insurance market is likely to accelerate, according to a new report from JLT Re, as a result of regulatory change, market developments, M&A activity and technology innovation. The report, Market Insight – China: A Super Regulator Emerges, states: “In many respects, the conditions and challenges in the Chinese non-life sector are similar to those confronting global insurers: capital oversupply, competition from alternative capital, and regulatory pressure in the face of margin compression. However, these impacts are even more pronounced in China due to a quicker pace of regulatory change, greater demand for product digitalisation and the technology sector emerging as a key supplier of capital and innovation.” It says this is compounded by an economic backdrop of slowing growth, debt deleveraging within state-owned enterprises and the uncertainties of a protracted and potentially acrimonious trade dispute with the US. Jeremy Fox, CEO, APAC, JLT Re, commented: “This report examines some of the more impactful regulatory changes in China, such as new asset-liability regulations and motor insurance pricing reform, alongside market developments, mergers and acquisitions (M&A) activity and technological innovation. All these point to a highly dynamic environment not only in China but also in Asia-Pacific and globally.” In the report, JLT Re says it views the establishment of the China Banking and Insurance Regulatory Commission (CBIRC) as a positive development that is particularly appropriate in China, given the entrenched linkages between insurers, banks and other financial institutions. “The CBIRC has implemented a number of key changes specific to the insurance sector in the last 12 months,” said Ernest Eng, head of analytics and strategic advisory Asia, JLT Re. “A drive for risk management, transparency, market discipline and overseas investments whilst simultaneously encouraging greater foreign direct investment into China’s financial sector are all positives for the (re)insurance industry.” He added: “While the Chinese insurance industry is currently on course to meet the government’s target of 5% of GDP by 2020, profitable growth will not be shared evenly across the market. Gaps in performance and access to capital between large and small insurers is expected to widen between the top tier of insurers and the rest of the market. In short, the industry can expect to operate in an increasingly complex and highly dynamic environment in the near to medium term.” The report concludes: “The industry should stabilise and benefit as the CBIRC adopts an increasingly transparent and more prescriptive approach to rule-making whilst, at the same time, fostering greater access to overseas capital and expertise. The opportunity that the China market could offer has been discussed for many years but it now feels like a number of positive developments that are critical for laying the foundations for a more mature and profitable market place are coming to fruition.”

Accelerating pace of change in the Chinese re/insurance market, says JLT Re

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