CCIRM2011CCIRM2011

The Dilemma of Foreign Insurers The Dilemma of Foreign Insurers in Chinain China

-By Wang Maoqi, By Wang Maoqi,

Bingzheng ChenBingzheng Chen

1. Introduction1. Introduction

The open history of China’s Insurance The open history of China’s Insurance marketmarket

Performance of foreign insurers in ChinaPerformance of foreign insurers in China Potential reasons for today’s dilemmaPotential reasons for today’s dilemma SuggestionsSuggestions

2. Development of Foreign Insurers in China2. Development of Foreign Insurers in China

Life Non-Life

Restrictions upon WTO Accession Remove of Restrictions Restrictions upon WTO Accession

Remove of Restrictions

Company OwnershipPartnerships with maximum ownership of 50 percent

Restrictions still effective

Allowed to establish branches or partnerships, with a maximum ownership stake of 51 percent

Subsidiaries are allowed after years of accession (2003)

Geographic RestrictionsAllowed to operate in Shanghai, Guangzhou, Dalian, Shenzhen, and Foshan;

Allowed to operate in ten more cities: Beijing, Chengdu, Chongqing, Fuzhou, Suzhou, Xiamen, Ningbo, Shenyang, Wuhan, and Tianjin after two years of accession (2003); all regional restrictions will be removed after three years (2004)

same as life insurance same as life insurance

Business RestrictionsAllowed to provide individual (non-group) life insurance to both Chinese and foreign citizens.

Allowed to provide health, group, and retirement/annuity products to both Chinese and foreign citizens after three years of accession (2004)

Allowed to provide property coverage, related liability, and credit insurance for subsidiaries of foreign companies operating in China.

Allowed to provide nonlife products to both Chinese and foreign clients after two years of accession (2003)

Reinsurance

Statutory Reinsurance Period, 1995-2006Domestic Priority Reinsurance Period, 2006-2009

2009-present

20% of the non-life insurance premium should be transferred to reinsurance companies, which mainly referred to China Re

Domestic reinsurance companies should be considered with priority when purchasing reinsurance

All restrictions on reinsurance have been removed

2. Development of Foreign Insurers in China2. Development of Foreign Insurers in China

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New Foreign Li fe Insurers Market Share of Foreign Li fe Insurers

Cenerali China Life got 20-billion group insurance deal from PrtroChina in 2005

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New Foreign Non-Li fe Insurers , in the Form of Branches

Number of Companies Changing from Branches to Subs idiaries

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Reinsurance premium income, Foreign Reinsurance Companies

Reinsurance premium income, Domestic Reinsurance Companies

3. Measurement of Foreign Insurers’ 3. Measurement of Foreign Insurers’ Performance in ChinaPerformance in China

GroupGlobal Market Share in 2004

Market Share in China, 2010

Company in China

AIG 3.6% 0.781%American International Assurance Company (China) Limited

Metropolitan Life 3.2% 0.229% Sino-US MetLife Insurance Co.,Ltd.

AXA 3.2% 0.104% AXA-Minmetals Assurance Co., Ltd.

Allianz 3.0% 0.147% Allianz China Life Insurance Company Ltd.

ING 2.5% 0.116% ING-BOB Life Insurance Co.,Ltd.

Generali 2.5% 0.584% Cenerali China Life Insurace Co.,Ltd.

Aegon 2.3% 0.157% AEGON-CNOOC Life Insurance Co., Ltd.

Aviva 2.0% 0.465% Aviva-COFCO Life Insurance Co.,Ltd.

Manulife 1.7% 0.180% Manulife-Sinochem Life Insurance Co.,Ltd.

3. Measurement of Foreign Insurers’ 3. Measurement of Foreign Insurers’ Performance in China (Ctd.)Performance in China (Ctd.)

Declining Market ShareDeclining Market Share Losing ConfidenceLosing Confidence Selling Equity SharesSelling Equity Shares

4. The Possible Reasons for Foreign Insurers’ 4. The Possible Reasons for Foreign Insurers’ Market Share DilemmaMarket Share Dilemma

Regulatory EnvironmentRegulatory Environment The Shareholding Structure ProblemThe Shareholding Structure Problem Some Equity Transactions and Some Equity Transactions and

Bancassurance BusinessBancassurance Business

4.1 Regulatory Environment4.1 Regulatory EnvironmentLicense of Doing Business

maximum shareholding for foreign investors

limits before notification of intended participation in an insurance company

Average Market Share of Foreign Insurers (2006-2008)

Foreign companies through a branch

Foreign companies by way of cross border business

Are foreign insurers entitled to underwrite all risks?

for a single investor

for total participation

domestic shareholders/ investors

foreign shareholders/ investors

life non-life

Slovak Republic √ × √ 100% 100% 20% 20% 90.75 94.23Czech Republic √ × √ 100% 100% 20% 20% 90.60 92.25

Mexico √ × √ 100% 100% 5% 5% 70.09 52.57Luxembourg √ √ √ 99% 100% 10% 10% 62.56 57.78

Poland √ × √ 100% 100% 10% 10% 57.95 47.68Turkey √ × √ 99% 100% 10% 10% 34.81 35.56

Italy √ √ √ 100% 100% 5% 5% 32.43 31.33Australia √ √ √ 100% 100% 15% 15% 31.84 25.95

Netherlands √ √ √ 100% 100% 5% 5% 26.74 19.92United States √ √ √ 100% 100% 10% 10% 25.24 11.67

Sweden √ √ √ 100% 100% 10% 10% 24.19 50.70Japan √ × √ 100% 100% 5% 5% 23.56 6.28

Austria √ × √ 100% 100% 10% 10% 23.11 40.04Germany √ √ √ 100% 100% 10% 10% 22.98 18.98

Korea √ × √ 100% 100% 10% 10% 20.83 2.01Canada √ × √ 100% 100% 10% 10% 19.30 37.92

Denmark √ × √ 100% 100% 20% 20% 16.85 18.81Switzerland √ × √ 100% 100% 10% 10% 13.40 39.46

Spain √ × √ 100% 100% 10% 10% 8.82 25.15China √ × × 50%, 100% 50%. 100% 5% 5% 6.28 1.18

[1] Foreign capitals are restricted to maximum shareholding of 50% for life insurance

4.2 The Shareholding Structure Problem4.2 The Shareholding Structure Problem

4.2 The Shareholding Structure Problem4.2 The Shareholding Structure Problem

number of companies

Number of domestic insurers

Number of foreign insurers (50-50)

Number of foreign insurers (foreign majority)

Average growth rate of all companies

2004 11 4 3 4 7%

2005 21 8 9 4 15%

2006 25 9 12 4 12%

2007 30 11 15 4 22%

2008 36 15 17 4 48%

2009 38 17 17 4 11%

2010 47 27 17 3* 32%

* In 2010 AXA-Minmetals became a domestic insurer

4.2 The Shareholding Structure Problem4.2 The Shareholding Structure Problem

4.3 Some Equity Transactions and 4.3 Some Equity Transactions and Bancassurance BusinessBancassurance Business

Name of the Company

Initial Shareholders Details about the TransactionTime of the Transactions

Sun Life Everbright Life Insurance Co.,Ltd.

Sun Life Financial (Canada): 50%;China Everbright Gruop : 50%

China Everbright Gruop injected capital, which reduced the share of Sun Life Financial Services to 20%

2009.07

Tian An Life Insurance Co.,Ltd.

Manulife Financial: 50%; Tianan Insurance Company: 50%

Manulife Financial withdraw all the capital, Tianan Croup holds all the shares now

2009.09

BoCommLife Insurance Co.,Ltd.

China Life Insurance Company: 51%; Commonwealth Bank of Australia: 49%

Bank Of Communications purchased all the shares from China Life and injected more capital, holding 62.5% of the shares.

2010.01

Pacific-Antai Life Insurance Co.,Ltd.

China Pacific Insurance(group): 50%; ING: 50%

China Construction Bank purchased all the shares from ING 2010.04

ING-BOB Life Insurance Co.,Ltd.

BEIJING CAPITAL CO.:50%;ING: 50%

Bank of Beijing purchased all the shares from BEIJING CAPITAL CO. and change the name from ING Capital Life Insurance, to ING-BOB Life Insurance Co.

2010.04

AXA-Minmetals Assurance Co., Ltd.

AXA: 51%;Minmetals Group: 49%

The Industrial and Commercial Bank of China made a deal with AXA and Minmetals Group, holding 60% of the shares now, while AXA holds 27.5%

2010.10

Haier New York Life Insurance Co.,Ltd

Haier Group:50%; New York Life Insurance: 50%

New York Life Insurance sold their shares, Haier Group is holding 70.76%, while Meiji Yasuda Life Insurance is holding 29.24%

2010.12

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Percentage of Premium Income through Banks and Postal

5. Conclusion and Remarks5. Conclusion and Remarks

Current dilemmaCurrent dilemma Possible reasonsPossible reasons What should we do?What should we do?

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Thank you!Thank you!