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Aon: China Reinsurance Premiums Increase 70% Since 2005

Posted on 05 Dec 2011

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Aon Benfield, the global reinsurance intermediary and capital advisor of Aon Corporation, has launched its China Property & Casualty Insurance and Reinsurance Market Report, which reveals the opportunities and challenges vital for any insurer formulating a strategy in the country.

This includes exploring reasons for the slow development of catastrophe insurance and reinsurance despite China’s increasing natural hazards exposures.

The China Insurance Regulatory Commission, in planning for the next five years, has indicated that the insurance industry will continue to face major challenges. While many of these challenges are not particularly new, they are complex and amplified by the scale of the market and the speed of its development.

The key developments in the Chinese insurance and reinsurance market, highlighted in the report, include:
    •    China represents close to 4 percent of the world’s total insurance premiums at RMB1.45tn (USD226bn) for Life and P&C, which has grown from 1 percent over the last decade. The CIRC is targeting a 15 percent CAGR (compound annual growth rate) over the next five years
    •    The Chinese P&C market outpaced GDP expansion for the ten years to 2010, growing to RMB402bn (USD59.0bn), a 20 percent CAGR
    •    Government subsidies have supported annual growth in Agriculture premiums of greater than 100 percent from 2005 to 2010 to reach RMB13.6bn (USD2.0bn)
    •    Aggregate reinsurance premiums ceded by Chinese P&C insurers in 2010 were RMB44bn (USD6.5bn), having expanded by 67 percent since 2005

In terms of perils, China has suffered five of the top ten deadliest natural disasters in history, with recent events affecting over 70 percent of China’s land area and more than half the population. As such, the CIRC’s 12th five-year plan includes the creation of a national natural disaster risk transfer program as well as the improvement of loss models and underlying data. This could lead to potential growth in the purchasing of catastrophe insurance and reinsurance.

Malcolm Steingold, chief executive officer, Asia Pacific for Aon Benfield, said: “Over the past ten years, China has emerged as an insurance and reinsurance market that cannot be overlooked. However, when we look beyond the macroeconomic growth, underlying opportunities and challenges are not necessarily what they first appear to be. For example, a detailed analysis of the property market shows that growth has been more in line with Gross Domestic Product than with the faster overall market growth, which is largely driven by motor business.”

Ralph Butterworth, partner at Inpoint, Aon Benfield’s consulting division, added: “The evolution of Chinese insurance regulation is bringing the market closer to international best practice. Over time this should support increased transparency and improved profitability, potentially hand in hand with the entrance of more foreign insurers into the Chinese market and the global expansion of Chinese reinsurers. Expertise and experience accumulated and tested in the global market are still of much relevance to China as it targets further growth over the next five years.”

Henry To, chief executive officer, China for Aon Benfield, commented: “Over the years from 2001 to 2010, the Chinese insurance market (P&C and Life) was the second fastest growing national market in the world behind Malta and now represents close to 4 percent of the world’s total insurance premiums – up from about 1 percent in 2001. Given the still low insurance penetration rate and China’s comparative economic outlook, this share can only be expected to grow. Aon Benfield is committed to the Chinese market and strives to bring global expertise and capacity to facilitate the development of our clients and the general market.”