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Sep 2019

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Small insurers' anaemic development attributed to reinsurers' capacity

Source: Asia Insurance Review | Jul 2019

Motor business aside, local reinsurance companies in China lack the capacity to support other forms of risks, according to a senior insurance industry executive.
 
China Captive website executive chairman Cao Zhihong told Blue Whale Insurance, “This is one of the reasons why the development of non-auto insurance business by small and medium-sized property insurance companies is more difficult. They lack the necessary support.”
 
He also said that Chinese reinsurers need to develop experience and innovation ability. In general, domestic reinsurance companies have a short history of operations, suffer from management talent and face insufficient capital accumulation. “There is not enough support for special risks,” he said. 
 
However, he added that the development of the Belt and Road Initiative would facilitate the growth of Chinese reinsurers. The internationalisation of reinsurance companies is an inevitable trend. 
 
Local reinsurers are making moves to shore up capability and capacity.
 
The most prominent example is that of reinsurance giant China Re. Last year, China Re acquired a 100% stake in Chaucer, a Lloyd’s-focused international specialty business, from The Hanover Insurance Group for $950m. The Chinese reinsurer said that the deal fits its strategic positioning of ‘reinsurance as the core business’ and the pursuit of international development as part of its corporate strategy. 
Meanwhile, PICC Re announced plans for an increase of CNY1bn ($145m) in capital. After the capital increase is completed, the registered capital of PICC Re will be CNY4bn. The PICC group said that the capital increase is to enhance the capital strength of PICC Re and improve its solvency. The capital injection is being sought just over two years of the reinsurer’s establishment in February 2017 as accumulated losses totalled CNY266.1m.
 
Separately, Qianhai Re has been investing in small stakes in local insurance brokerage and InsurTech companies. A company executive said, “The company focuses on its main business of reinsurance, and its operations do not currently extend to insurance intermediary services.” He described the investments as financial in nature, rather than strategic.
 
Industry insiders also point out that such investments have little significance for Qianhai Re which was established in 2016. The reinsurer posted a net loss of CNY62m in 2017 that increased to CNY85m in 2018. “The company is still in the basic development stage, and its financial situation is basically in line with expectations,” Qianhai Re said.
 
Another domestic reinsurer in mainland China is Taiping Reinsurance (China) which was converted in 2015 to a subsidiary from a branch of the Hong Kong-based Taiping Re that was established in 1980. The latter is part of, and enjoys the support of, the Chinese government owned China Taiping insurance group. The group recently received CBIRC approval to open a branch in Shanghai. A 
 
The above news story is taken from Asia Insurance Review’s unique eWeekly China newsletter. 
eWeekly China focuses on the world’s fourth largest insurance market – in English – providing the most up-to-date news to give readers insights and overviews of the Chinese market. 
 
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