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Reuters

Why insurers want to be in China: Huaxi village, in Jiangsu province, illustrates how quickly the country’s middle class has grown. The once-tiny village is now a booming market town of 36,000 and the most affluent place in the country. Every family has at least one house, two cars and $US250,000 in savings. Businessmen from other areas have built major factories in Huaxi to earn a residence permit and the right to live there.

most notably in China, has not lessened the appeal relative to other regions. “We still see the positive there in terms of growth momentum in GDP, population growth, industrialisation and increasing property to insure whether it is infrastructure assets or vehicle and home ownership,” Mr Vine told Insurance News. The challenges for foreign insurers include competition from large existing players with established brands and market clout, restrictions on foreign involvement, cultural differences, picking the right products to offer and ensuring strong distribution.

Munich Re notes that the insurance industry must also improve risk assessment in the region, taking account of the way fast development creates new peak exposures and hot spots and can affect worldwide supply chains – a lesson learned the hard way following the 2011 Thai floods. Selecting the right country in which to set up shop is also critical in a region that is culturally and geographically diverse, in various stages of development and with differing levels of regulatory oversight. What has worked in Thailand or Malaysia may not be successful in China, Singapore or Indonesia. insuranceNEWS

Howard Dick, Professorial Fellow at the Faculty of Business and Economics at the University of Melbourne, sees the opportunity but is also aware of the pitfalls. “Without question the insurance market in Asia has enormous potential,” he told Insurance News. “It is one of those industries that expands with income, especially middle-class income, and the growing institutionalisation of financial markets. “But there are also considerable challenges, most notably the regulatory framework and legal system.” The Chinese market was opened to foreign insurers when China joined the World October/November 2013

Trade Organisation in 2001. But 12 years later, foreign insurers hold just a 1% share of the Chinese market. The country’s third-party motor market was opened up last year, fueling interest from foreign insurers seeking to participate in China’s biggest non-life business line. Zurich was the first foreign insurer licensed to operate a general insurance business in Beijing, in 2006, and now writes commercial business for multinational clients, specialty lines where Chinese companies lack expertise, and offers health and personal accident cover. The company also has a representative office in Shanghai, 39

Profile for Insurance News (the magazine)

OCT/NOV 2013 - Insurance News (the magazine)  

QBE CEO John Neal has spoken exclusively to Insurance News about his drive to turn the global insurer’s fortunes around. Our in-depth articl...

OCT/NOV 2013 - Insurance News (the magazine)  

QBE CEO John Neal has spoken exclusively to Insurance News about his drive to turn the global insurer’s fortunes around. Our in-depth articl...