China´s economy continues growing at a rate which far outstrips the majority of Western economies. China´s insurance sector is no exception with premium income showing a compound annual growth rate of 36 % for the ten years to 1995.
Although the People´s Insurance Company of China (PICC) is still the largest insurer, the days that it was a single state monopoly are long gone. Since 1988 not less than 9 new insurers have begun to trade in China and the number is continuing to grow.
China´s international insurance business is the fastest expanding sector with 1993 premiums of US$4277m. compared with US$342 in 1992 and China´s interaction with foreign insurers is expected to develop significantly over the next few years.
From 20 to 24 May 150 delegates from all China´s Provinces representing all sectors of the insurance industry attended a seminar in Beijing to learn of new practices from international insurance, reinsurance and information technology experts which they could introduce to benefit China´s rapidly expanding need for more sophisticated insurance products and services.
The seminar was organised as part of UNCTAD´s ongoing Programme on Insurance in co-operation with the Ministry of Foreign Trade and Economic Co-operation and the People´s Insurance Company of China and was sponsored by the Grand Duchy of Luxembourg.
Fifteen experts from top insurance, reinsurance and information technology companies , from seven countries, addressed the delegates on global developments in the world insurance industry.
The presentations concentrated on six major topics: reinsurance; insuring against catastrophe; engineering insurance; business interruption insurance; liability insurance; use of information technology in insurance. Of particular interest to China´s insurers are the current practices and the changing structure of world reinsurance markets where China will be likely to more frequently transact business to provide cover for the very large projects and the new industries whose trade with the rest of the world is growing annually at record levels.
China is a country subjected to many catastrophe perils such as earthquakes, floods, windstorms and tsunami, and the fast developing industrial areas and growing concentration of the population in major cities is resulting in far greater values being at risk to any one incident than in the past. New solutions are needed for Chinese insurers to respond to the increasing demands which will be made upon them, and the seminar included explanations of the methodology in use elsewhere in the world and the utilization of the international insurance markets in order to cover risks with very high sums insured.
Rapid growth in China´s manufacturing and industrial sectors has resulted in this area of the economy becoming the major contributor to the growth of China´s GDP. Insurance protection against business interruption with loss of production and sales due to machinery breakdown and similar causes is a way that international manufacturers protect themselves against such a contingency. At the seminar Chinese insurance personnel were able to learn from the experience of international insurers and reinsurers to help them develop similar insurances suitable for China´s economy.
China is now exporting more and more goods and services to other countries of the world and as a result Chinese companies are entering into contracts for the supply of goods and services which are subject to the laws of those countries with which they trade. When things go wrong through accident or malfunction associated with the Chinese products the law in foreign countries may hold the Chinese producer liable to pay compensation. Producers may insure against such risks by means of Liability Insurance, and the operation of such insurance and the legal requirements in different areas of the world were described.
Lastly, insurance is becoming an increasingly complex and competitive business and to maintain adequate continuous up-to-date information on the insurance company´s day to day profitability and exposure to risk is no longer possible without the use of computers and sophisticated Information Technology. International experts described how information technology is being used by insurers and reinsurers all over the world to provide a better service to customers and more efficient operation and control of insurance companies.
The experts included representatives of the following entities: American Reinsurance Company, USA; The Association of British Insurers, UK;Commercial Union Assurance Company, UK; Eagle Star, Insurance Company, UK; IBM, UK Hong Kong, PRC; Lotus, PRC;Munich Reinsurance Company, Germany; Partner Reinsurance Company, Bermuda; Risk Management Solutions Inc., USA; and Swiss Reinsurance Company, Switzerland.