China Daily Global Edition (USA)
INSURERS MAKE A BEELINE FOR MAINLAND MARKET Joint ventures and easing of curbs woo experienced players from overseas. Lin Wenjie reports from Hong Kong. H
ong Kong and overseas companies have upped the stakes in the race for a slice of the Chinese mainland’s robust life insurance market, while mainland clients continue to flock to the city to snap up insurance policies.
Industry experts still see great potential for overseas insurers on the mainland, despite the tightening of licensing regulations by the country’s insurance watchdog.
FWD Hong Kong — the insurance arm of Pacific Century Group, chaired by Richard Li Tzar-kai, younger son of HongKongtycoonLiKa-shing — has applied to the China Insurance Regulatory Commission for a life insurance license and is keeping its fingers crossed that the green light will be forthcoming.
The company believes its plan to tap the mainland market conforms with the State Council’s blueprint for promoting the development of diversified health insurance and innovative endowment, and aims to start operating on the mainland by specializing in online health insurance products and services.
“The mainland authorities have come up with a list of requirements that we need to fulfill. One of the key conditions is having a representative office up and running there (the mainland) for two years prior to winning a license. That’s the reason we didn’tapplyforthelicenseearlier. As a young company, we need to wait for some time until our Shanghai office can satisfy such a requirement,” said David Wong Tai-wai, CEO of FWD Life Insurance.
How long it will take is still up in the air, he added: “As far as we know, there are more than 200 companies queuing up for licenses, but no one knows how long it will take before approval can be obtained. We hope to get the license within two years.”
Earlier this year, the regulatory commission issued new rulesto regulate the operations of insurance companies on the mainland, with a higher market entry threshold for Hong Kong’s small and medium-sized insurance companies.
Hong Kong insurance sector lawmaker Chan Kin-por said the higher market entry rules will make it more difficult for small and medium-sized enterprises to open on the mainland, and only big multinational companies can have access to the mainland market.
“Even so, the prospects of entering the mainland market are definitely good for overseas insurers because an enormous population still lacks insurance protection,” he said.
‘Protection gap’
Accordingtoofficialstatistics, the Chinese mainland is one of thelargestinsurancemarketsin the world, with its current “protectiongap”atanestimated$18 trillion and it may exceed $46 trillion by 2020.
In January, the regulatory commission also lowered the maximum shareholding in insurers to 33 percent from 51 percent, which means overseas insurers will have to find two partners instead of one before they can start operating.
Deeper integration
Hong Kong’s insurance sector has been calling for deeper integration with the mainland for a long time. The good news for the sector is that the Office of the Commissioner of Insurance in Hong Kong and the regulatory commission signed the Equivalence Assessment Framework Agreement on Solvency Regulatory Regime in Beijing in May to conduct equivalence assessment on the insurance solvency regulatory regimes of the mainland and Hong Kong.
The regulatory commission will introduce preferential policies on the Hong Kong insurance sector based on the equivalence assessment.
Under the Closer Economic Partnership Arrangement between Hong Kong and the mainland, Hong Kong insurance companies are allowed to enter the mainland market through strategic mergers with mainland companies, subject to a number of conditions.
Those include: the group holding total assets exceeding $5 billion; more than 30 years’ establishment experience attributable to one of the Hong Kong companies in the group; and one of the Hong Kong enterprises having a representative office on the mainland for more than two years.
To date, several insurance pioneer companies have been
Estimated “protection gap” for the Chinese mainland insurance market, one of the largest in the world. The gap could exceed $46 trillion by 2020 Maximum sharholding for insurers as required by the Chinese regulatory commission, which was lowered from 51 percent in January. That means overseas insurers will have to find two partners instead of one in order to operate Prospects of entering the mainland market are definitely good for overseas insurers, as an enormous population still lacks insurance protection.” lawmaker in Hong Kong’s insurance sector
Chan Kin-por,
The regulatory commission is guided by three overriding principles in granting licenses.
Preference is given to institutions that operate in line with key national policies. TheyincludetheBeltandRoad Initiative and free trade zones, and those with a regional balance will get due consideration, with favor given to companies supporting the developmentofthemiddleand western parts of the country.
Companies focusing on professional innovation and development will be issued with licenses that are in short supply, such as those for setting up captive insurance and reinsurance companies, as well as asset management businesses.