China’s insurance industry is one of the fastest growing in the world with an expected compound annual growth rate of 28-30% for the 2009-2013 period. While many countries are still slowly recovering from the devastating effects of the global financial crisis, China’s insurance industry is already making headways in the country’s economic growth. In 2008, the insurance industry grew at the fastest pace since 2002 with a record year-over-year growth of over 39%. Insurance products such as life, health and personal accidents led most of this growth, accounting for over three-fourth of total insurance premium for policies written in China.
Non-life (property) insurance products are also growing at a rapid rate. The market is mainly focused in two segments: auto and commercial property insurance. The introduction of compulsory auto insurance in July 2006 has brought back much needed capacity to the Chinese non-life insurance market. Also, it is expected that by 2015, China will overtake the United States in car sales, creating tremendous opportunities in this segment. Currently, auto insurance accounts for over 70% of the premium in the non-life insurance sector.
Other non-life insurance products including product liability, credit, marine insurance are also emerging in significance as they will play a part in determining the long-term viability of the non-life insurance market.
However, the insurance market in China still remains largely untapped. With insurance penetration (in terms of GDP) at just 3.2% at the end of December 2008, China stands far behind the global average of over 7%. Although it has one of the lowest per capita spending (at US$1,399 in 2010) among emerging market economies (compared to UAE at US$22,728 for 2010), China continues to be viewed by global insurers and reinsurers as the region most likely to provide growth in the longer term as well as helping to balance global risk concentration away from Europe and North America. Taking advantage of China’s opening up its financial and insurance market, many foreign insurers and reinsurers have already expanded their operation into the region.
The outlook for the insurance industry in China is extremely optimistic due to favorable market conditions such as high economic growth (surpassing Japan to become the world’s 2nd largest economy), its rising GDP, China’s accession to the WTO and the 2004 reforms, including the CEPA agreement between Hong Kong and the Mainland that made the entry of foreign players much easier. Other factors, such as the introduction of compulsory auto insurance in 2006, increasing individual wealth and a high savings trend as well as the low insurance saturation rate of slightly more than 3% of the GDP, create immense opportunities in the most rapidly expanding and largest potential insurance market in the world.
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