China’s official Xinhua news Agency announced that the gross assets owned by the country’s insurance sector reached a record high of 1.0359 trillion yuan ($126.3 billion) by the end of May. Premiums totaled 338.04 billion yuan ($40.87 billion) in 2003, a 27.1 percent increase over 2002.
The news reports quoted Wu Xiaoping, vice-chairman of the China Insurance Regulatory Commission (CIRC), as indicating that the amount of disposal capital of the country’s fledging insurance sector stood at 952.4 billion yuan ($ 116.1 billion).
The growth of the insurance sector has accompanied the equally rapid growth of China’s economy. The industry now seems to be facing a new scenario, as the accelerated increase in premium revenue has given the insurers a lot of additional capital, but they lack real choices as to where they can invest it.
Of the total premium revenue, Wu noted that around 52.5 percent has been put into banks, with bonds and funds accounting for 31 percent and 6.86 percent respectively. China’s developing financial markets offer little as yet in the way of long-and medium-term investment products. As a result many of the country’s larger insurers are seeking the CIRC’s permission to invest outside of China.
Nevertheless Wu remains optimistic about the prospects of the insurance sector as it is supported by the country’s economy and is expected to maintain rapid and healthy growth.
The reports, however, also noted that earlier this year CIRC Chairman, Wu Dingfu, had warned the industry against blind pursuit of premium increase when the government was seeking balanced and sustainable growth.
He described his fears in terms that Western companies can certainly appreciate, noting that the irrational pursuit of premium growth has led to such problems as inadequate reserves in insurance companies and increased business risk.
China’s mixed economy, much of which is still state-owned, is at least partly to blame for what Wu Dingfu characterized as inefficiency and lack of credit. Xinhua quoted him as saying that “the insurance business neither met the needs of society nor played the role it should though it grew rapidly in recent years.”
While private insurance coverage plays a major role in providing disaster relief in Western countries, while the government still shoulders the bulk of responsibility in China.
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