China´s economy is growing at an annual average rate of over 10% and the Chinese business environment is undergoing rapid transformation. For insurance to provide basic financial security to support China´s many expanding commercial and economic ventures the insurance sector will need to grow and develop at an equivalent rate.
The UNCTAD secretariat, in cooperation with the Ministry of Foreign Trade and Economic Cooperation of the Peoples´s Republic of China, is organizing a high-level seminar in Beijing from 20 to 24 May for chief executive officers and top officials dealing with insurance.
Drawing on policies and practices followed by other countries the participants will seek to improve the terms and conditions of insurance and reinsurance practices in China through comparative exchange of information on practices in overseas markets. The will also seek to increase the volume and quality of insurance services in China by exploring alternative methods of diversifying and enlarging the premium and capital base. A final objective of the Seminar is to increase the competitiveness of domestic insurance transactions, and strengthen insurance companies in China so as to enable them to operate effectively in an international business environment.
The premium income of China´s insurance sector has grown from RMB 4.5 billion in 1985 to RMB 52 billion by the end of 1993 (the last year for which official figures have been published). A compound of annual growth rate of 36%.
Insurance penetration - the ratio of nominal premiums to nominal "gross national product" - varies widely between China´s different provinces. For the country as a whole it has been increasing rapidly and has moved up from 1.8% in 1992 to 3.3% in 1993. Insurance penetration is now higher than in the Philippines and in Thailand and is rapidly approaching the level in Malaysia.
As a result of the increase in China´s foreign trade, premiums from the international business of China´s insurance sector increased from US$342 million in 1992 to US$4277 in 1993.
China has allowed the formation of new insurers to compete with the Peoples Insurance Company of China (PICC). The process has, however, been slow. The Ping An Insurance Company was formed in 1988, followed by the China Pacific Insurance Company in 1991. Six other Chinese insurers compete regionally. These are: the Xianjaing Agricultural Insurance Company and five live assurance companies formed by the PICC and local governments.
The People´s Insurance Company of China still has a dominant position with about 90% of the market share, but the new Chinese insurers have been growing rapidly. During the four years to 1994 the Ping An Insurance Company has achieved a growth rate of 207%, the China Pacific Insurance Company´s growth rate has been 120%, whilst the Peoples Insurance Company of China has grown at 34%.
Only two foreign insurers, so far, have been licensed to do business in China. The American International Group received a license to write domestic business in Shanghai in 1992 and Tokyo Marine and Fire Insurance Company received a similar license to write business in the Shanghai area from 1994.
China has announced that it is ready to issue a further 10 licenses during the next year, mainly to new domestic insurers.
The participants in the Seminar include chief executive officers from major insurance companies from all regions.